Powell subpoena raises independence concerns

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Lawmakers and former Federal Reserve officials are defending Fed Chair Jerome Powell following a Justice Department grand jury subpoena related to his testimony about Federal Reserve building renovations in Washington. Critics view the investigation as retaliation for Powell’s cautious approach to interest rate cuts.

Former Fed chairs Ben Bernanke, Alan Greenspan, and Janet Yellen, along with 10 other Treasury and economic officials from both parties, accused President Trump of using “prosecutorial attacks” to undermine Fed independence. They warned this approach resembles monetary policy practices in “emerging markets with weak institutions” and threatens America’s economic foundation.

In a video statement Sunday, Powell said the subpoena was a pretext to harass the Fed over interest rate decisions. “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 stated.

U.S. stocks initially dropped Monday morning but recovered, with major indexes closing in positive territory as investors processed the news. The Justice Department has not disclosed investigation details, though Powell suggested prosecutors may question whether he lied to Congress about the $2.5 billion renovation project.

For months, Trump has pressured the Fed to cut interest rates more aggressively and criticized Powell over cost overruns on the renovation. The Fed attributes overruns to material and labor cost mismatches and unforeseen issues like asbestos.

Both Democrats and Republicans expressed concern. Sen. Lisa Murkowski called the investigation “nothing more than an attempt at coercion” after speaking with Powell. Sen. Thom Tillis said he would oppose any Fed nominations Trump sends to the Senate, citing interference with the central bank. Rep. French Hill called the investigation an “unnecessary distraction” that could undermine sound monetary policy.

White House press secretary Karoline Leavitt said Trump did not order the investigation but defended his right to criticize Powell, stating “Jerome Powell is bad at his job.” She added that whether Powell committed crimes is “an answer for the Department of Justice.”

Sen. Mark Warner warned that using criminal prosecution threats to pressure the Fed over interest rates “is a direct assault” on economic foundations and “puts the economic security of millions of Americans at risk.”

The situation is particularly notable since the Fed cut rates at its past three meetings, though Trump wanted more aggressive action. Powell’s term as chairman ends in May, and White House National Economic Council Director Kevin Hassett is considered the front-runner replacement. Powell vowed to serve out his term “with integrity and a commitment to serving the American people.”

Read more: Former Fed chairs, some GOP lawmakers rebuke Justice Dept. inquiry of Fed Chair Jerome Powell