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President Donald Trump's criminal probe targeting Federal Reserve Chair Jerome Powell marks an extraordinary escalation in his battle with the central bank, sending a clear warning to the next Fed chair about the risks of defying the White House.
Powell confirmed the Department of Justice investigation on Sunday evening in a video statement, calling the move "unprecedented" and another example of what he described as the Trump administration's ongoing efforts to intimidate the central bank.
Powell's decision to respond so publicly, after days of private consultation with advisers, marked a sharp departure from the central banker's typically measured approach.
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The probe focuses on whether Powell was truthful during congressional testimony about the project to overhaul the Fed's two main buildings on the National Mall. No charges have been filed, and Powell has denied any wrongdoing.
The White House referred questions to the Department of Justice.
U.S. Attorney for the District of Columbia Jeanine Pirro said Monday that her office proceeded with the probe after failing to receive a response from Powell, prompting prosecutors to initiate a legal process.
"The United States Attorney's Office contacted the Federal Reserve on multiple occasions to discuss cost overruns and the chairman's congressional testimony, but were ignored, necessitating the use of legal process-which is not a threat," Pirro stated. "The word "indictment" has come out of Mr. Powell's mouth, no one else's. None of this would have happened if they had just responded to our outreach."
Powell, widely viewed as one of the most crisis-tested Federal Reserve chairs in modern U.S. history, built his career as a lawyer and investment banker in New York before entering public service in the administration of President George H.W. Bush. He joined the Federal Reserve's Board of Governors in 2012 and was tapped to lead the central bank in 2017.
Now, a criminal investigation may represent the biggest test of Powell's leadership, unfolding as Trump weighs his choice for the next Fed chair with Powell's term set to expire in May.
The next Fed chair would take on one of the most powerful economic jobs in the country, helping decide how expensive it is to borrow money for things like homes, cars and credit cards. Those decisions directly affect the cost of everyday living for Americans.
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Trump has narrowed his shortlist to four candidates as he approaches a final decision on leadership at the Fed: Kevin Hassett, Kevin Warsh, Christopher Waller and Rick Rieder.
Kevin Hassett is Trump's top economic advisor and a loyal defender of the administration's policies. He currently serves as director of the White House's National Economic Council, and held two senior roles during Trump's first term and advised the president on economic policy during the 2024 campaign.
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Meanwhile, Kevin Warsh, a former Morgan Stanley banker, has emerged as a vocal critic of current Fed leadership, sharpening his attacks as he positioned himself as a potential replacement for Powell. He became the youngest person to serve on the Federal Reserve Board of Governors in 2006.
Federal Reserve Gov. Christopher Waller has repeatedly called for rate cuts, a move that aligns, in part, with Trump's demands. Of the candidates, he is considered the veteran academic of the group. He has also reiterated the importance of maintaining an independent Federal Reserve.
And BlackRock Global Fixed Income Chief Investment Officer Rick Rieder is the last candidate to have an interview with Trump before the president makes his decision. Treasury Secretary Scott Bessent, who did pre-interviews with all the candidates, said Trump is expected to announce his decision by the end of January.
Meanwhile, some lawmakers on Capitol Hill said they would block the confirmation of Trump's Federal Reserve nominee until the legal matter is resolved.
As the investigation unfolds and a decision on the next Fed chair approaches, the episode underscores the growing political pressure surrounding a role long viewed as insulated from the White House.
