In one of the outlandish moves by the Trump Administration, it emerged this past weekend that the US Department of Justice was investigating Fed Chair Jerome Powell over cost overruns for renovations at the US Federal Reserve.
Powell took to X to declare he would fight any allegations and potential indictment. The video has now been viewed over 84.3 million times.
The heads of multiple central banks have come to Powell’s defense. This includes the leaders at the Bank of England, the Bank of Canada, the European Central Bank, and a handful of other institutions.
The US Federal Reserve operates independently of the government and justly so. To have politics enter monetary policy is terrifying. Many elected officials have little understanding of the economy or markets. The investigation also undermines trust in the entire US economy and in the Fed’s ability to make impartial decisions based on data, rather than on ever-changing political opinion.
Yesterday, US Attorney Jeanine Pirro, a Trump loyalist who is leading the investigation, declared that 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.”
Pirro claimed her office had contacted the Fed multiple times to inquire about the cost overruns, only to be rebuffed, thus necessitating the use of a subpoena. Of course, any observer would recognize that an inquiry from the US Department of Justice would be rather intimidating.
Pirro stated:
“This office makes decisions based on the merits, nothing more and nothing less. We agree with the chairman of the Federal Reserve that no one is above the law, and that is why we expect his full cooperation.”
Meanwhile, it has emerged that Treasury Secretary Scott Bessent was blindsided by the revelation of an investigation into Powell. Reportedly, Bessent immediately hopped on the phone with the President to express his concern that a legal action against the Fed could undermine economic policy and harm the Trump administration’s global reputation. Bessent has emerged as one of the most respected members of the Trump administration, having adroitly managed the Treasury and the administration’s financial policies.
Lumida Wealth founder Ram Ahluwalia said the chatter was that Trump was distancing himself from the DOJ subpoenas. He added that Trump will not die on the sword of ideology, and the President is pragmatic and will shift course quickly. Ahluwalia added:
“It’s going to be hard for the nation’s top bond salesman to sell US government debt if investors don’t trust the full faith and credit of our money.”
Multiple Republicans publicly expressed concerns about the DOJ’s investigation. Obtusely, the legal action arrives at a time when Powell’s tenure as the Chair of the Fed is just about finished and scheduled to hand over the reins of the central bank in May. While Powell could remain as a board member of the Fed until 2028, the punditry believes Pirro’s clumsy actions could push Powell to stay.
Powell and Trump have publicly feuded, with the President arguing that the Fed has moved too slowly in reducing interest rates. Trump is always quick to compliment those who agree with him, but equally quick to hammer someone he believes does not support him or his policies.
While the DOJ investigation makes no sense and is harmful to the Trump Administration, it would be best for everyone if the administration publicly backed away from Pirro. Some have claimed she has gone rogue. At the same time, rumors are that Trump is unhappy with Attorney General Pam Bondi, who may end up being the fall guy for the PR disaster.