Powell Investigation Stalled: Judge Questions Investigation's Motivation

Federal Judge Blocks Justice Department Subpoenas in Investigation of Fed Chair Jerome Powell​

Court Ruling Deals Blow to Justice Department Probe​

A federal judge on Friday dismissed subpoenas issued by the US Justice Department to the Federal Reserve in January, delivering a major setback to an investigation involving Federal Reserve Chair Jerome Powell.

The ruling by Judge James Boasberg concluded that the government failed to provide evidence suggesting Powell committed any crime in connection with testimony he gave to Congress last year. As a result, the subpoenas seeking Federal Reserve records related to a multibillion dollar building renovation were thrown out.

The investigation had already sparked criticism on Capitol Hill and has complicated the Senate’s consideration of Kevin Warsh, former President Donald Trump’s nominee to succeed Powell when his term as Fed chair ends on May 15.

Judge Says Evidence Against Powell Is Lacking​

In his ruling, Boasberg said the Justice Department presented virtually no evidence linking Powell to criminal wrongdoing. The judge described the government’s justification for the subpoenas as thin and unsubstantiated.

According to the ruling, the available evidence suggests the investigation may have been aimed at pressuring Powell to lower interest rates or step down from his role.

Boasberg wrote that the subpoenas appeared designed to harass and pressure Powell either to yield to the president or resign so that a different Federal Reserve chair could be appointed.

Investigation Focused on Fed Building Renovation Costs​

The Justice Department probe centered on testimony Powell delivered before the Senate Banking Committee in June regarding cost overruns tied to a major renovation project at the Federal Reserve.

Recent estimates from the Fed put the renovation cost at about $2.5 billion, roughly $600 million higher than a 2022 estimate of $1.9 billion.

During the hearing, Powell disputed claims that the renovation included features such as rooftop gardens and VIP elevators. However, administration officials argued that earlier construction plans contained such features and questioned whether Powell’s testimony accurately reflected the latest plans.

US Attorney Jeanine Pirro, who issued the subpoenas, said the investigation sought to examine what she described as a $1 billion cost overrun and possible fraud or false statements by the Federal Reserve and Powell.

Justice Department Plans to Appeal the Decision​

Pirro criticized the court’s decision at a press conference and said the Justice Department would appeal the ruling.

She described the judge’s action as undermining the ability of a grand jury to investigate potential crimes and argued that the decision effectively left Powell immune from scrutiny.

The ruling prevents prosecutors from obtaining Federal Reserve records related to the building project through the subpoenas issued earlier this year.

Political Tensions Around the Federal Reserve Intensify​

The investigation into Powell forms part of a broader set of actions by the Trump administration that have increased pressure on the Federal Reserve, an institution traditionally viewed as independent from political influence.

The administration has also attempted to remove Federal Reserve Governor Lisa Cook after accusations of mortgage fraud surfaced from a member of the administration, although no charges were filed. The Supreme Court has temporarily blocked Cook’s removal.

Impact on Kevin Warsh’s Nomination​

The ongoing investigation has also delayed Senate consideration of Kevin Warsh’s nomination to replace Powell as Fed chair.

Powell disclosed the probe in a video message on January 11, prompting Senator Thom Tillis of North Carolina to block movement on Warsh’s nomination until the investigation is dropped.

Following Friday’s ruling, Tillis said the decision confirmed how weak and frivolous the criminal investigation against Powell was. He warned that appealing the ruling could further delay the confirmation process for Warsh.

Tillis has pledged to block all Federal Reserve nominations until the probe is abandoned. With Republicans holding only a narrow 13 to 11 majority on the Senate Banking Committee, his opposition could prevent the nomination from advancing if Democrats vote against it.

Questions Remain Over Powell’s Future at the Fed​

Another issue highlighted in court filings is whether Powell will remain on the Federal Reserve’s governing board after his term as chair expires.

Although his leadership term ends in May, Powell’s separate term as a Fed governor runs until January 2028. While most chairs resign from the board after leaving the top role, Powell has not confirmed whether he will do the same.

Court documents referenced a meeting between a Federal Reserve lawyer and Pirro in which the Fed’s attorney suggested Powell might stay on the board if the investigation continued.

Remaining on the board would limit the ability of the administration to appoint a new governor to the Federal Reserve.

Judge Offers Chance for Additional Evidence​

In his decision, Boasberg said the government had the option to submit additional evidence directly to the court without revealing it publicly to Powell or the Federal Reserve.

However, prosecutors declined to provide further information under those conditions. As a result, the judge concluded that the court had no credible reason to believe the government was investigating suspicious facts rather than targeting an official it opposed.

Boasberg, who was appointed to the federal bench by former President Barack Obama, has previously clashed with the administration in other legal disputes since Trump returned to office last year.