Powell revealed the investigation on Sunday night, an unprecedented step by the Justice Department, following accusations that Powell had lied during testimony before Congress last year.
POWELL DEFENDS HIS RECORD IN VIDEO STATEMENT AFTER DOJ CRIMINAL INQUIRY DROPS
It also comes after months of President Donald Trump pushing Powell to cut interest rates, pressure that has countered decades of precedent, which holds that the Fed is insulated from White House and political influence.
However, major questions remain about the exact allegations, the current status of the Justice Department investigation, and what might happen next.
The basics
The Fed chairman announced Sunday night in a video statement that the Justice Department was investigating him. Powell revealed the Fed recently received grand jury subpoenas related to testimony he gave to the Senate last year about renovation cost overruns of the Fed headquarters building in Washington, D.C.
Powell is known for staying far from politics and often goes to great lengths to ensure that any statements or responses to questions about pressure from the White House regarding monetary policy remain neutral and staid.
However, in the 2-minute video message the Federal Reserve released on Sunday, Powell was far more direct and called the accusations mere “pretexts” and said the real reason for the investigation is tied to the White House’s pressure campaign to lower interest rates.
“This new threat is not about my testimony last June or about the renovation of the Federal Reserve buildings,” Powell said. “It is not about Congress’s oversight role; the Fed, through testimony and other public disclosures, made every effort to keep Congress informed about the renovation project. Those are pretexts. 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.”
The accusations
At the heart of the controversy are accusations that Powell misled Congress when answering questions about expensive renovations at the Federal Reserve’s headquarters in Washington.
The buildings at the center of the renovation, the Eccles Building and 1951 Constitution Avenue, had an estimated budget for renovations of $1.9 billion in 2023. By 2025, though, those costs had ballooned to $2.5 billion. Both are located near the National Mall in Washington.
In the video message, Powell stated that the grand jury subpoenas are directly related to his testimony before the Senate Banking Committee in June 2025, during which he was probed about the cost overruns.
HOW A FORMER FED STAFFER GOT THE FED’S RENOVATION COST OVERRUNS ON TRUMP’S RADAR
During the hearing, Powell responded to questions about the added costs, including the fact that the remodeling included opulent touches, such as special dining rooms and luxurious marble.
“I would just point to it there’s no VIP dining room,” Powell said. “There’s no new marble. We took down the old marble. We’re putting it back up. We’ll have to use new marble where some of the old marble broke. But there’s no new — there are no special elevators. They’re just — they’re old elevators that have been there. There are no new water features. There’s no beehives and there’s no — and there’s no roof terrace gardens.”
Sen. Tim Scott (R-SC), chairman of the Senate Banking Committee, later followed up with Powell in a letter, saying that the only available construction plans for the building appear to contradict some of Powell’s statements and requested further clarification.
In July, Rep. Anna Paulina Luna (R-FL) submitted a referral to Attorney General Pam Bondi requesting that the Justice Department investigate Powell for accusations of perjury and making false statements to federal officials over his testimony before the Banking Committee.
Luna said at the time that while Powell testified that the renovations were free of luxury features, official project documents contradict the statements.
“These are not minor misstatements,” Luna said in a statement. “Chairman Powell knowingly misled both Congress and executive branch officials about the true nature of a taxpayer-funded project. Lying under oath is a serious offense — especially from someone tasked with overseeing our monetary system and public trust.”
Office of Management and Budget Director Russ Vought also sent a letter to Powell in July, accusing him of having “grossly mismanaged” the central bank.
Vought called the renovations “ostentatious” and said that Powell’s claims in the testimony clashed with details about the project laid out in plans that the Fed had submitted to the National Capital Planning Commission.
“Now up to $2.5 billion, roughly $700 million over its initial cost,” Vought said on social media. “These renovations include terrace rooftop gardens, water features, VIP elevators, and premium marble. The cost per square foot is $1,923 — double the cost for renovating an ordinary historic federal building. The Palace of Versailles would have cost $3 billion in today’s dollars!”
It is unclear if the current Justice Department investigation is tied to Luna’s referral.
How big a deal is this?
This is the first time that the chairperson of the Federal Reserve has ever been under criminal investigation.
Mark Hamrick, senior economic analyst at Bankrate, told the Washington Examiner that the intervention was “unprecedented.”
“To me, this is a chilling escalation of a president’s confrontations with the Federal Reserve chair, all of course at the president’s own choosing,” he said. “There’s no positive outcome where the credibility of the Federal Reserve is undermined, and yet it seems as if the president is doing everything that he can, including now using essentially the justice system, to undermine the credibility of the institution and the chair who he initially nominated.”
Hamrick predicted that the move might backfire and cause other members of the Fed’s monetary policy committee to rally around Powell, as they could see the Fed’s independence as under attack.
Also, Powell’s term as chairman is set to expire in a few months. Still, he can remain on the board until 2028, as the Fed board is comprised of multiple governors. He could make the decision to stay on instead of retiring in May.
What lawmakers are saying
While Republicans are often reticent to push back on Trump, some in the GOP have come out against the investigation.
Rep. French Hill (R-AR), the chairman of the House Financial Services Committee, called the investigation a “distraction” and said that, despite past policy disagreements, he has found Powell “to be forthright, candid, and a person of the highest integrity.”
“Pursuing criminal charges relating to his testimony on building renovations at a time when the nation’s economy requires focus and creates an unnecessary distraction,” Hill said. “The Federal Reserve is led by strong, capable individuals appointed by President Trump, and this action could undermine this and future Administrations’ ability to make sound monetary policy decisions.”
Retiring Sen. Thom Tillis (R-NC), a member of the Senate Banking Committee, vowed to block Trump’s nominees to the Fed and whoever he nominates to replace Powell until the legal matter has concluded.
“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.”
Sen. Lisa Murkowski (R-AK) joined Tillis in a full-throated denunciation of the move and suggested an investigation into the Department of Justice. Murkowski said she spoke with Powell on Monday and called the investigation “nothing more than an attempt at coercion.”
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Senate Majority Leader John Thune (R-SD) said Monday that the situation needs to be “resolved quickly.”
“Because the Fed’s role and the Fed’s independence in shaping monetary policy in the country is something that we need to ensure proceeds and without political interference,” Thune said.
What the White House is saying
The White House has defended the investigation into Powell. White House National Economic Council director Kevin Hassett, who is a front-runner to replace Powell, stated that he valued the Fed’s independence, but emphasized transparency at the central bank.
“I guess the question is, if you think the building cost $20 billion, or $10 billion, do you think at some point that it’s appropriate for the federal government to investigate?” Hassett said during a press conference. “And it seems like the Justice Department has decided that they want to see what’s going on over there with this building that’s, you know, massively more expensive than any building in the history of Washington.”
Federal Housing Finance Agency Director Bill Pulte, an attack dog for Trump who has been one of Powell’s most vociferous critics, said the Justice Department is outside of his purview when asked about it on Monday.
Pulte was one of the top figures drawing Trump’s attention to concerns about the building renovations and has also accused Powell of lying to Congress about the renovations. Trump ended up touring the building at the center of the controversy last year.
The Washington Examiner reached out to Pulte on Monday morning, but did not receive a response.
