Powell Says DOJ Threatened Fed With Indictment, Escalating Trump’s War on Central Bank Independence

Federal Reserve Chair Jerome Powell said Sunday that the Department of Justice has served the central bank with subpoenas and threatened it with a potential criminal indictment tied to his congressional testimony about the Fed’s building renovations — a stunning escalation in President Donald Trump’s ongoing clash with the nation’s central bank.

The move marks an unprecedented step in Trump’s long-running pressure campaign against the Fed, an independent institution the president has repeatedly criticized for not cutting interest rates as aggressively as he wants. The development is expected to rattle financial markets as soon as trading opens and could ultimately push borrowing costs higher for mortgages, auto loans, and other forms of credit.

According to Powell, the subpoenas stem from his June testimony before the Senate Banking Committee, where he addressed scrutiny surrounding the Federal Reserve’s $2.5 billion renovation of two Washington, D.C. office buildings — a project Trump has publicly labeled wasteful and excessive.

On Sunday, Powell departed sharply from his typically restrained public posture and released a video statement directly confronting the threat of criminal charges. He described the investigation as a pretext designed to undermine the Fed’s independence in setting monetary policy.

“The threat of criminal charges is a consequence of the Federal Reserve setting interest rates based on our best assessment of what will serve the public, rather than following the preferences of the President,” Powell said. “This is about whether the Fed will be able to continue to set interest rates based on evidence and economic conditions — or whether monetary policy will instead be directed by political pressure or intimidation.”

Video message from Federal Reserve Chair Jerome H. Powell: https://t.co/5dfrkByGyX pic.twitter.com/O4ecNaYaGH

— Federal Reserve (@federalreserve) January 12, 2026

The remarks represent a clear break from the Fed’s approach earlier this year, when it largely avoided public confrontation with the White House. In recent months, the central bank has even scaled back initiatives — including efforts to assess climate-related financial risks — that the administration openly opposed.

Powell’s forceful defense reignites a battle that had appeared to cool after Trump appointed him in 2017. The renewed conflict has raised alarms on Wall Street and among global investors, who worry that political interference in the Fed could erode confidence in U.S. Treasury securities and destabilize financial markets.

“We expect the dollar, bonds and stocks to all fall in Monday trading in a sell-America trade similar to that in April last year,” wrote Krishna Guha of Evercore ISI. “We are stunned by this deeply disturbing development, which came out of the blue after a period in which tensions between Trump and the Fed seemed to be contained.”

Trump, speaking briefly with NBC News on Sunday, claimed he was unaware of the investigation into Powell. When asked whether it was meant to pressure the Fed chair on interest rates, Trump replied, “No. I wouldn’t even think of doing it that way.”

Powell’s term as Fed chair ends in May, and Trump administration officials have signaled that a potential successor could be named as early as this month. The president has also attempted to remove Fed Governor Lisa Cook — another unprecedented step — though she has sued to retain her position. Courts have allowed her to remain while the case proceeds, with the Supreme Court scheduled to hear arguments on Jan. 21.

The controversy over the renovation project has been building for months. At the June Senate hearing, Banking Committee Chair Tim Scott alleged the plans included “rooftop terraces, custom elevators that open into VIP dining rooms, white marble finishes, and even a private art collection.” Powell flatly rejected those claims, saying there was “no new marble,” “no special elevators,” and that several cited features were not part of the current plan.

In July, Office of Management and Budget Director Russell Vought questioned whether Powell’s testimony aligned with previously approved renovation plans. Yet later that same month, Trump toured the construction site with Powell and publicly downplayed the issue, saying, “They have to get it done,” and adding that he didn’t view the project as grounds for firing.

The Justice Department said Sunday it could not comment on specific cases, but confirmed that Attorney General Pam Bondi has instructed U.S. attorneys to prioritize investigations involving potential misuse of taxpayer funds. The U.S. Attorney’s Office for the District of Columbia also declined to comment.

Powell now joins a growing list of individuals perceived as political adversaries of the president who have faced criminal scrutiny under the Trump administration. Legal scholars and lawmakers warn the move further erodes long-standing norms designed to keep the Justice Department insulated from White House influence.

Even some Republicans are voicing concern. North Carolina Sen. Thom Tillis, a member of the Senate Banking Committee, said he would oppose any future Fed nominee until the matter is resolved.

“If there were any remaining doubt whether advisers within the Trump Administration are actively pushing to end the independence of the Federal Reserve, there should now be none,” Tillis said. “It is now the independence and credibility of the Department of Justice that are in question.”

As markets brace for the fallout, Powell’s warning was unmistakable: the fight is no longer just about a renovation project — it’s about whether the Federal Reserve can remain free from political control.