Probe Into Fed Chair Powell Triggers Political, Market Tensions

Senior officials inside the White House have been left stunned and increasingly frustrated by a criminal investigation targeting Federal Reserve Chair Jerome Powell, an inquiry they say blindsided the administration and forced it into a prolonged damage-control effort, according to CNN.

At the center of the controversy is Washington, D.C. U.S. Attorney Janine Pirro, whom White House officials privately blame for launching the investigation without warning, igniting political fallout that has rattled markets and reignited concerns over the independence of the Federal Reserve.

The emergence of the probe earlier this week sparked immediate alarm among top administration officials, who rushed to reassure lawmakers and investors that President Donald Trump had no involvement in the investigation, despite Trump’s long history of public criticism of Powell.

Powell himself escalated the standoff by issuing an unusually forceful statement confirming that his office had received grand jury subpoenas, characterizing the investigation as an attempt by Trump allies to pressure the central bank into cutting interest rates.

The probe has drawn sharp criticism not only from Democrats but also from prominent Republicans. Treasury Secretary Scott Bessent has privately expressed dismay over the investigation, while several GOP senators have publicly condemned it. Senator Thom Tillis of North Carolina went so far as to vow he would block any nominee to succeed Powell as long as the investigation remains open.

Trump, for his part, denied any knowledge of the probe in an interview with NBC News.

“I don’t know anything about it,” Trump said. “But he’s certainly not competent at running the Federal Reserve, and not competent at building buildings.”

While Trump has not openly rebuked Pirro since the investigation became public, he delivered a pointed critique of U.S. attorneys during a White House event last week, suggesting that some prosecutors are weak and ineffective, remarks made just days before news of Powell’s subpoenas broke.

Behind the scenes, Trump aides and allies have expressed deep irritation with Pirro, arguing that her actions undermined months of quiet efforts to restrain the president’s attacks on Powell.

Officials have also pointed to Bill Pulte, a senior housing official and outspoken Powell critic, who had reportedly been pushing aggressively for an investigation. According to a White House official and another source familiar with the matter, Pulte recently presented Trump with a “Wanted for Justice” poster bearing Powell’s image.

Pirro, however, has defended her office’s actions. Speaking Monday, she said prosecutors had previously attempted to engage with the Federal Reserve but were ignored, leaving subpoenas as the only option.

“This is not a threat,” Pirro said. “We’re talking about a billion dollars in cost overruns. That falls squarely within my authority as U.S. attorney to investigate. If they had responded, we wouldn’t be here.”

Trump has long complained that Powell moved too slowly to cut interest rates, accusing him of suppressing economic growth and at times openly questioning whether he could be fired. Senior officials, including Bessent, have repeatedly talked Trump out of taking action, warning that removing Powell would trigger market turmoil. Powell’s term as chair is set to expire in May.

Since then, Bessent has played a key role in guiding the selection of Trump’s next nominee to lead the Fed, with an announcement expected in the coming weeks.

The investigation now threatens to complicate that timeline, casting doubt on the administration’s insistence that it respects the Federal Reserve’s long-standing independence.

According to a source familiar with the matter, Pirro’s office sent two emails to Federal Reserve staff over the December holiday period, on December 19 and 29, requesting discussions. When no response was received, prosecutors moved quickly to issue subpoenas.

Powell responded with a recorded video message, calling the investigation “unprecedented” and asserting that it stemmed from the Fed’s refusal to set interest rates based on presidential preferences rather than what policymakers believe serves the public interest.

Stephen Moore, a former Trump economic adviser who remains close to the White House, questioned the timing.

“If there’s fraud, maybe it deserves investigation,” Moore said. “But why not wait until he leaves office? This level of bitter rivalry between Trump and Powell is unhealthy.”

The subpoenas gave Powell an opening to go on the offensive. Concluding the situation was serious enough to warrant public disclosure, he chose to reveal the investigation himself, according to a person familiar with his decision-making.

That move triggered an immediate wave of bipartisan support and put the White House on the defensive. Current and former Federal Reserve officials, along with former Treasury secretaries and economic advisers from both parties, coordinated a public rebuke of the probe.

On Monday, a joint statement backing Powell was released, signed by every living former Fed chair, as well as multiple former Treasury secretaries and former heads of the Council of Economic Advisers.

Amid the growing backlash, some Trump officials are now openly questioning whether Powell might remain on the Federal Reserve Board after his term as chair expires, a move that could prevent Trump from filling his seat until 2028, according to two people familiar with internal discussions.