Federal Reserve Chair Jerome Powell has revealed that the Department of Justice has served the central bank with subpoenas and threatened it with a criminal indictment over his testimony about the Fed’s building renovations. The move is seen as a major escalation in President Trump’s battle with the Fed, an independent agency that he has repeatedly attacked for not cutting interest rates as quickly as he prefers. The subpoena relates to Powell’s testimony before the Senate Banking Committee in June, where he defended the Fed’s $2.5 billion renovation of two office buildings, a project that Trump had criticized as excessive.
Powell has maintained a restrained approach to Trump’s criticisms and personal insults until now, but he has issued a video statement characterizing the threats of criminal charges as “pretexts” to undermine the Fed’s independence. He stated that the issue is about whether the Fed will be able to continue setting interest rates based on evidence and economic conditions, or whether monetary policy will be directed by political pressure or intimidation.
The central bank had attempted to placate the administration by dialing back some policies, such as efforts to consider the effect of climate change on the banking system, that Trump and his economic advisors opposed. However, the Justice Department’s actions have drawn concern from Republican Senator Thom Tillis, who said he will oppose any future nominee to the central bank, including any replacement for Powell, until the legal matter is fully resolved.
The potential indictment has raised questions about the independence of the Department of Justice, with Tillis stating that it is now the independence and credibility of the Department of Justice that are in question. The move is seen as part of a larger pattern of Trump’s efforts to exert pressure on the Fed and other independent agencies. The White House has not commented on the matter, while the Justice Department has stated that it cannot comment on any particular case.
The incident has sparked concerns about the politicization of the Justice Department and the potential erosion of the Fed’s independence. Powell’s testimony and the subsequent subpoena have highlighted the ongoing tensions between the Trump administration and the Fed, with the central bank’s independence and credibility hanging in the balance. The situation is being closely watched by lawmakers and economists, who are concerned about the potential implications for the economy and the rule of law.