A new legal motion from a top U.S. prosecutor threatens to reignite a politically charged investigation into the Federal Reserve, challenging the recent confirmation process for its next chair.
Back
Back
Will a new legal filing restart the Fed's 8-month Powell probe?
A U.S. Attorney has formally asked a federal judge to reverse a decision that halted a criminal probe into Federal Reserve Chair Jerome Powell, a move that injects fresh uncertainty into the central bank's leadership transition. The filing on Monday by Jeanine Pirro, the U.S. Attorney for the District of Columbia, directly challenges a March ruling that blocked subpoenas and effectively paused her eight-month investigation into the Fed's building renovations.
"I want to see what's there. If there's something there, great. And if there isn't, I'll go home," Pirro said on CNN's "State of the Union" just one day before the filing, signaling her intent to pursue the matter despite previously deferring to an internal Fed watchdog.
The legal maneuvering represents a sharp escalation after a brief détente. In late April, Pirro had suspended the criminal probe, a decision that prompted Republican Senator Thom Tillis to drop his hold on the Senate confirmation of Kevin Warsh, President Donald Trump’s nominee to succeed Powell as chair. The new motion to vacate the prior court order, however, suggests the investigation is far from over and could complicate Warsh's final confirmation by the full Senate.
This renewed legal pressure comes at a difficult time for the central bank. Powell has pledged to remain a Fed governor until the investigation concludes, citing "unprecedented" legal attacks on the institution's independence. This creates the potential for an awkward dynamic, with an incoming chair leading a board on which his predecessor, who is under active investigation by the president's own Justice Department, still sits. Powell's term as a governor does not end until 2028.
A Divided Fed
The external pressures are mounting on an already fractured Federal Reserve. The central bank's last policy decision in late April included four dissents, the most since 1992. While the committee held its benchmark interest rate in the 3.5% to 3.75% range, the vote revealed deep disagreements on the future path of monetary policy. Three officials dissented because they disagreed with the "easing bias" in the policy statement, which implies a preference for future rate cuts.
Powell himself acknowledged the shifting sentiment in his final press conference as chair. "I think that the center is moving toward a more neutral place," he said, a nod to members who believe the next rate move is as likely to be a hike as a cut, particularly with inflation remaining persistent.
The investigation has been a persistent focus for President Trump, who has publicly criticized Powell for not lowering interest rates more aggressively. The probe, which began in January, examines cost overruns in a multi-billion dollar renovation of the Fed's headquarters. Judge James Boasberg, in his March ruling to block the subpoenas, noted that a "mountain of evidence" suggested the investigation was intended to pressure Powell. Pirro's latest filing seeks to dismantle that judicial roadblock, arguing for her office's right to pursue the inquiry through a grand jury.
This article is for informational purposes only and does not constitute investment advice.
[1] Pirro abandons plan to appeal Powell subpoenas in Fed investigation[2] US attorney doesn’t rule out continuing to investigate Federal Reserve Chair Pow...[3] Jerome Powell Probe May Resume Pending Inspector Report, Signals Trump Attorney:...[4] US Attorney Pirro says Fed IG's findings will dictate future of her Powell probe[5] Federal Reserve holds interest rates steady as divisions emerge, Powell...
