Federal investigation complicates Trump’s plans for Federal Reserve Chair

President Donald Trump has spent months attacking Federal Reserve Chair Jerome Powell for not cutting interest rates as quickly as the White House wants. Now a Department of Justice criminal investigation into Powell has created a political problem for Trump that could help Powell stay in Washington long after his term as chair ends on May 15, 2026.

Powell holds two jobs at the Fed. He leads the central bank as chair, a role that carries a four-year term. He also serves as one of seven governors on the Fed’s Board of Governors, where he holds a separate term that runs until Jan. 31, 2028. That structure matters because it gives Powell options after May 15. If he steps down as chair, he can still remain a governor and keep a vote on monetary policy — unless he chooses to resign outright. Powell has declined to say what he plans to do.

On Jan. 11, 2026, Powell said the Justice Department served the Fed with grand jury subpoenas on the previous Friday and threatened a criminal indictment related to his testimony before the Senate Banking Committee in June 2025 about a multiyear renovation of historic Fed office buildings in Washington. He called the threat “unprecedented” and said it fit into “the broader context of the administration’s threats and ongoing pressure.”

The government has not publicly detailed any charges against Powell. Reuters reported on Jan. 16, 2026, that the probe centers on cost overruns for the renovation project, which has risen from an initial $1.9 billion estimate to about $2.5 billion, and that officials have cited issues such as asbestos, lead contamination and higher labor and materials costs. Trump has framed the dispute as both an economic and personal fight. On Jan. 13, 2026, Trump highlighted that mortgage rates had declined over the past year and complained that lower rates would come faster if the Fed cooperated. “If I had the help of the Fed, it would be easier,” he said. “But that jerk will be gone soon.”

The investigation has complicated Trump’s path to replacing Powell. A Fed chair nomination requires Senate confirmation. Subpoenas related to Powell’s June testimony came from Jeanine Pirro, the U.S. attorney for the District of Columbia, and several Republican senators have questioned whether Powell committed crimes.

Sen. Thom Tillis, a North Carolina Republican and a member of the Senate Banking Committee, said he would not vote for any Fed nominees until the “legal cloud” around Powell clears. With Republicans holding a narrow committee majority, Tillis’ stance alone could stall a nomination before it reaches the full Senate. This creates an immediate, practical consequence: If the Senate does not confirm a successor by May 15, Powell can remain chair until the Senate confirms someone else, the AP reported.

The longer-term question runs deeper. Congress built the Fed to resist political pressure by staggering governors’ 14-year terms so that no president can quickly install a majority on the Board of Governors. Five of the 12 regional Fed bank presidents also vote on interest rates on a rotating basis, which further spreads power beyond Washington.

If Powell stays on the board after May 15, Trump could still nominate a new chair, but Powell would keep his vote as a governor through Jan. 31, 2028. Reuters noted that Trump’s campaign against Powell could backfire in part because Powell can delay the White House’s opportunity to reshape the board by simply remaining in his seat.

Some economists say the legal pressure may increase, not decrease, Powell’s willingness to stay. David Wilcox, a former top Fed economist and senior fellow at the Peterson Institute for International Economics, told the AP he found it “very difficult” to see Powell leaving before his governor term ends in 2028, calling the situation a threat to the Fed’s governance structure.

History offers limited guidance because most Fed chairs have resigned from the board when they stop serving as chair. Arthur Burns stayed on the board for about three weeks after his chairmanship ended in 1978. Marriner Eccles remained as a governor for three years after he stopped serving as chair in 1948, in part because President Harry Truman asked him to stay. Eccles later played a role in the 1951 Fed-Treasury Accord, an episode that helped cement the modern idea of Fed independence.

Trump’s advisers have tried to tamp down the political fallout. On Jan. 16, 2026, White House National Economic Adviser Kevin Hassett called Powell “a good man” and said he expected “nothing to see here,” while also saying he wished the Fed had provided more transparency on renovation cost overruns. Reuters reported that Hassett has emerged as a potential candidate to replace Powell.

The investigation also arrives as other legal fights test the limits of presidential power over the central bank. Reuters reported that Trump attempted to remove Fed Governor Lisa Cook and that the Supreme Court is scheduled to hear her case on Jan. 21, 2026 — a decision that Reuters said could carry major implications for Fed independence. For now, Powell has offered his clearest public message through the Fed itself. In his Jan. 11 statement, he said the central bank should set interest rates based on evidence and economic conditions, not intimidation.