U.S. Federal Prosecutors Launch Investigation Into Fed Chair Jerome Powell

Fed Headquarters Remodeling Project

The U.S. federal prosecutors have launched an investigation targeting Jerome Powell, Chair of the Federal Reserve (Fed), over the remodeling of the Fed headquarters. Some interpret this as a result of the escalating conflict between President Donald Trump and Chair Powell regarding the federal funds rate cut.

According to the New York Times (NYT) on January 11 (local time), the U.S. Attorney’s Office in Washington, D.C. is investigating whether Chair Powell made false reports to Congress in connection with the Fed building’s remodeling.

Prosecutors plan to analyze Chair Powell’s public statements and examine expenditure records. This investigation began last year after Janine Pirro, U.S. Attorney for Washington, D.C., approved the probe.

The NYT interpreted this investigation as President Trump applying legal pressure on Chair Powell. President Trump has repeatedly demanded that Chair Powell lower the federal funds rate, but Powell has refused. Trump has publicly attacked Powell and previously indicated his willingness to pursue legal action over the $2.5 billion Fed building remodeling project.

The main issue in the investigation is the budget overrun of the remodeling project. The Fed began work in 2022 to expand and renovate key buildings, including the Eccles Building, which was built in the 1930s, with plans to complete the project by 2027. The construction costs reportedly exceeded the original budget by $700 million.

The remodeling proposal submitted by the Fed to Congress included dedicated elevators, dining facilities, fountains, marble finishes, and a rooftop terrace for senior officials. However, Chair Powell stated during a congressional hearing that most of these facilities were not included in the proposal and were only scheduled for renovation.

The prosecution’s investigation into Chair Powell indicates that the conflict between President Trump and the Fed is intensifying. In the market, there are concerns that this could undermine the Fed’s independence. The U.S. president can only dismiss a Fed governor for just cause, such as misconduct or neglect of duty, but President Trump has publicly threatened to remove Fed Governor Lisa Cook and has continued to pressure for a rate cut.

Amid these developments, President Trump recently stated in an interview with the NYT that he has already decided on Chair Powell’s successor. Kevin Hassett is being mentioned as the most likely candidate in the market.

Chair Powell’s term as chair expires in May this year, but his term as a Fed governor lasts until January 2028. He has not yet disclosed whether he will remain as a Fed governor after his chairmanship ends.