DOJ investigation of Fed Chair Powell sparks backlash, support for Fed
independence
[January 13, 2026]
By CHRISTOPHER RUGABER and JOSH BOAK
WASHINGTON (AP) — The Trump administration's criminal investigation of
Federal Reserve Chair Jerome Powell appeared on Monday to be emboldening
defenders of the U.S. central bank, who pushed back against President
Donald Trump’s efforts to exert more control over the Fed.
The backlash reflected the overarching stakes in determining the balance
of power within the federal government and the path of the U.S. economy
at a time of uncertainty about inflation and a slowing job market. This
has created a sense among some Republican lawmakers and leading
economists that the Trump administration had overstepped the Fed's
independence by sending subpoenas.
The criminal investigation — a first for a sitting Fed chair — sparked
an unusually robust response from Powell and a full-throated defense
from three former Fed chairs, a group of top economic officials and even
Republican senators tasked with voting on Trump's eventual pick to
replace Powell as Fed chair when his term expires in May.
White House press secretary Karoline Leavitt told reporters that Trump
did not direct his Justice Department to investigate Powell, who has
proven to be a foil for Trump by insisting on setting the Fed's
benchmark interest rates based on the data instead of the president's
wishes.
“One thing for sure, the president’s made it quite clear, is Jerome
Powell is bad at his job,” Leavitt said. “As for whether or not Jerome
Powell is a criminal, that’s an answer the Department of Justice is
going to have to find out.”
Critics see Trump as trying to control the Fed
The investigation demonstrates the lengths the Trump administration is
willing to go to try to assert control over the Fed, an independent
agency that the president believes should follow his claims that
inflationary pressures have faded enough for drastic rate cuts to occur.
Trump has repeatedly used investigations — which might or might not lead
to an actual indictment — to attack his political rivals.
The risks go far beyond Washington infighting to whether people can find
work or afford their groceries. If the Fed errs in setting rates,
inflation could surge or job losses could mount. Trump maintains that an
economic boom is occurring and rates should be cut to pump more money
into the economy, while Powell has taken a more cautious approach in the
wake of Trump's tariffs.
Several Republican senators have condemned the Department of Justice's
subpoenas of the Fed, which Powell revealed Sunday and characterized as
“pretexts” to pressure him to sharply cut interest rates. Powell also
said the Justice Department has threatened criminal indictments over his
June testimony to Congress about the cost and design elements of a $2.5
billion building renovation that includes the Fed's headquarters.
“After speaking with Chair Powell this morning, it’s clear the
administration’s investigation is nothing more than an attempt at
coercion,” said Sen. Lisa Murkowski, R-Alaska, on Monday.
Jeanine Pirro, U.S. attorney for the District of Columbia, said on
social media that the Fed “ignored” her office’s outreach to discuss the
renovation cost overruns, “necessitating the use of legal process —
which is not a threat.”
“The word ‘indictment’ has come out of Mr. Powell’s mouth, no one
else’s,” Pirro posted on X, although the subpoenas and the White House’s
own statement about determining Powell's criminality would suggest the
risk of an indictment.
A bipartisan group of former Fed chairs and top economists on Monday
called the Trump administration's investigation “an unprecedented
attempt to use prosecutorial attacks" to undermine the Fed's
independence, stressing that central banks controlled by political
leaders tend to produce higher inflation and lower growth.
“I think this is ham-handed, counter-productive, and going to set back
the president’s cause,” said Jason Furman, an economist at Harvard and
former top adviser to President Barack Obama. The investigation could
also unify the Fed’s interest-rate setting committee in support of
Powell, and means “the next Fed chair will be under more pressure to
prove their independence.”
The subpoenas apply to Powell's statements before a congressional
committee about the renovation of Fed buildings, including its
marble-clad headquarters in Washington. They come at an unusual moment
when Trump was teasing the likelihood of announcing his nominee this
month to succeed Powell as the Fed chair and could possibly be
self-defeating for the nomination process.
While Powell's term as chair ends in four months, he has a separate term
as a Fed governor until January 2028, meaning that he could remain on
the board. If Powell stays on the board, Trump could be blocked from
appointing an outside candidate of his choice to be the chair.
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Federal Reserve Chairman Jerome Powell, right, and President Donald
Trump look over a document of cost figures during a visit to the
Federal Reserve, July 24, 2025, in Washington. (AP Photo/Julia
Demaree Nikhinson, File)
Some Senate Republicans express doubts
Powell quickly found a growing number of defenders among Republicans
in the Senate, who will have the choice of whether to confirm
Trump's planned pick for Fed chair.
Sen. Thom Tillis, a North Carolina Republican and member of the
Senate Banking panel, said late Sunday that he would oppose any of
the Trump administration’s Fed nominees until the investigation 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.
Sen. Dave McCormick, R-Pa., said the Fed may have wasted public
dollars with its renovation, but he said, “I do not think Chairman
Powell is guilty of criminal activity.”
Senate Majority Leader John Thune offered a brief but stern response
Monday about the tariffs as he arrived at the U.S. Capitol,
suggesting that the administration needed “serious” evidence of
wrongdoing to take such a significant step.
“I haven’t seen the case or whatever the allegations or charges are,
but I would say they better, they better be real and they better be
serious,” said Thune, a Republican representing South Dakota.
Powell could stay on the Fed board, possibly thwarting Trump
If Powell stays on the board after his term as chair ends, the Trump
administration would be deprived of the chance to fill another seat
that would give the administration a majority on the seven-member
board. That majority could then enact significant reforms at the Fed
and even block the appointment of presidents at the Fed's 12
regional banks.
“They could do a lot of reorganizing and reforms” without having to
pass new legislation, said Mark Spindel, chief investment officer at
Potomac River Capital and author of a book on Fed independence.
“That seat is very valuable.”
Powell has declined at several press conferences to answer questions
about his plans to stay or leave the board.
Scott Alvarez, former general counsel at the Fed, says the
investigation is intended to intimidate Powell from staying on the
board. The probe is occurring now “to say to Chair Powell, ’We’ll
use every mechanism that the administration has to make your life
miserable unless you leave the Board in May,'" Alvarez said.
Asked on Monday by reporters if Powell planned to remain a Fed
governor, Kevin Hassett, director of the White House National
Economic Council and a leading candidate to become Fed chair, said
he was unaware of Powell’s plans.
“I’ve not talked to Jay about that,” Hassett said.
A weaker Fed could mean a weaker economy
A bipartisan group of former Fed chairs and top economists said in
their Monday letter that the administration’s legal actions and the
possible loss of Fed independence could hurt the broader economy.
“This is how monetary policy is made in emerging markets with weak
institutions, with highly negative consequences for inflation and
the functioning of their economies more broadly,” the statement
said.
The statement was signed by former Fed chairs Ben Bernanke, Janet
Yellen, and Alan Greenspan, as well as former Treasury Secretaries
Henry Paulson and Robert Rubin.
Still, Trump's pressure campaign had been building for some time,
with him relentlessly criticizing and belittling Powell.
He even appeared to preview the shocking news of the subpoenas at a
Dec. 29 news conference by saying he would bring a lawsuit against
Powell over the renovation costs.
“He’s just a very incompetent man,” Trump said. “But we’re going to
probably bring a lawsuit against him.”
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AP writers Lisa Mascaro and Joey Cappelletti contributed to this
report.
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