A testimony regarding the renovation of the building has placed the Federal Reserve Chairman in the rare position of being a defendant in a criminal investigation, amid a months-long interest rate war between the White House and the central bank.
On January 11 local time, Federal Reserve Chairman Powell issued a statement confirming that the U.S. Department of Justice had served a grand jury subpoena to the Federal Reserve, threatening to bring criminal charges related to his testimony before the Senate Banking Committee in June of last year.
In his statement on the Federal Reserve's official website, Powell directly pointed out: "This unprecedented action occurs against the backdrop of government threats and ongoing pressure."
The investigation launched by the U.S. Attorney's Office for the District of Columbia has escalated tensions between the world's most influential central bank and the White House.
1. The Trigger for the Investigation
● On January 9, the U.S. Department of Justice delivered a subpoena to the Federal Reserve, investigating Powell's testimony in June 2025 before the Senate Banking Committee, which involved the renovation project of the Federal Reserve building.
● The U.S. Attorney's Office for the District of Columbia is responsible for this investigation, focusing on the renovation of the Federal Reserve's Washington headquarters and whether Powell lied to Congress about the scope of the project.
● The investigation was approved last November, led by U.S. Attorney Janine Pirro, a long-time ally of Trump, who was appointed to head the office last year.
2. The Root of the Conflict
● Powell candidly pointed out that the U.S. government's threat of criminal charges against the Federal Reserve is because the Fed sets interest rates based on the best assessment of public interest, rather than following the President's wishes.
● Since taking office in January 2025, President Trump has pressured the Federal Reserve multiple times to cut interest rates, criticizing Powell's actions as always "too late and wrong." He has publicly referred to Powell as "Mr. Too Late." In an interview last June, Trump stated that the announcement of the next Federal Reserve Chairman would come soon. He also posted on social media, stating: "The Federal Reserve's 'Mr. Too Late' is a disaster."
● Powell insists that the Federal Reserve's monetary policy must be "completely non-political." In his statement on January 11, he emphasized that the threat of criminal charges arises because the Federal Reserve does not set interest rates according to the President's preferences.
3. Controversy Over the Renovation Project
● The focus of this criminal investigation—the renovation of the Federal Reserve's Washington headquarters—is, in fact, an "old issue." The project began during the Biden administration, with an initial budget of about $1.9 billion, but due to a significant rise in construction material costs, the budget has increased to nearly $2.5 billion, exceeding the budget by about 32%.
● The U.S. government has repeatedly criticized Powell in 2025, claiming that the project has significant violations. Republicans have even questioned whether the building resembles the "Palace of Versailles," accusing it of being filled with lavish sculptures and luxurious facilities.
● Powell admitted during a congressional hearing in June 2025 that the spending on the Federal Reserve headquarters renovation project exceeded the budget, but denied the accusations of luxury renovations, arguing that the renovations were to meet "safety and modernization" requirements.
4. Term and Succession
● Powell first became Chairman of the Federal Reserve in 2018 and was reappointed in 2022. His current term will end in May 2026. Although Powell's term as Chairman of the Federal Reserve will end this May, his term as a Federal Reserve Governor will continue until January 2028. Powell has not disclosed whether he plans to remain at the Federal Reserve.
● Trump stated on December 29 last year that he expects to announce Powell's successor as Federal Reserve Chairman in January 2026. In an interview last week, he indicated that he has already decided on a candidate to succeed Powell.
● Analysts point out that regardless of who the Federal Reserve Chairman candidate is, Trump values whether the person is loyal to him in order to achieve his goal of having the Federal Reserve cut interest rates.
5. Heightened Market Concerns
● This incident has raised deep concerns in the market about the independence of the Federal Reserve. Powell stated that this investigation concerns whether the Federal Reserve will continue to set interest rates based on actual economic conditions or be swayed by political pressure or intimidation.
● Mohamed El-Erian, Chief Economic Advisor at Allianz, stated that the current situation may expose deeper issues, further undermining the already fragile public credibility of the Federal Reserve[citation: user question].
● A UBS analysis report pointed out that the independence of the Federal Reserve is the cornerstone of the dollar's credibility. If monetary policy is successfully intervened, it could trigger a triple crisis: a decline in investor confidence in dollar assets, capital outflows, and a depreciation of the dollar; rising long-term borrowing costs; and accelerated de-dollarization globally.
6. Escalation of Political Gamesmanship
● Since the Trump administration took office, there have been multiple pressures on the Federal Reserve. In August 2025, the government removed Federal Reserve Governor Lisa Cook from her position, but a federal appeals court subsequently ruled to prevent Trump from dismissing Cook.
● Trump has also attempted to further influence Federal Reserve decisions by "placing his own people." In August 2025, he nominated Stephen Moore, Chairman of the White House Council of Economic Advisers, to serve as a Federal Reserve Governor.
● Some analysts believe that Trump is actively reshaping the Federal Reserve. He could appoint a new chairman when Powell's term ends in May 2026, as well as have the power to appoint at least one more governor and potentially influence the selection of some regional Federal Reserve Bank presidents.
● If Trump successfully replaces and appoints Cook, he will control four of the seven seats on the Federal Reserve Board. When Powell's term ends in May 2026, following past practices, he will leave the Board, which will provide Trump with an opportunity to appoint a fifth governor.
With the initiation of the criminal investigation, the issue of the Federal Reserve Chairman's succession is no longer a simple technical transition, but a fierce contest over the soul of the central bank.
UBS analysts warned in a 2025 report: "If substantial changes occur as a result, it could undermine the credibility of the Federal Reserve." When political pressure penetrates the last line of defense of central bank independence, Powell's statement on the Federal Reserve's official website may not just be a defense.
The statement concluded: "I will continue to fulfill my Senate-confirmed duties with integrity." Today, this commitment is undergoing an unprecedented test.
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