WASHINGTON — Federal prosecutors have opened a criminal investigation into the Federal Reserve’s roughly $2.5 billion renovation of its Washington headquarters, a move that has dramatically escalated an already bitter standoff between Fed Chair Jerome Powell and President Donald Trump over U.S. interest-rate policy.
In a rare late-night video statement on Sunday, Powell said the Justice Department served the central bank with grand jury subpoenas on Friday, warning of a potential indictment tied to testimony he gave to the Senate Banking Committee in June. Powell described the legal threat as a “pretext” and framed the dispute as a test of whether monetary policy can remain insulated from political pressure.
According to Reuters, the probe is being handled by the U.S. attorney’s office in Washington, D.C., and was authorized in November by U.S. Attorney Jeanine Pirro, following scrutiny over whether Powell’s public statements and testimony accurately characterized the scope and cost drivers of the renovation.
The renovation—covering the Fed’s historic Marriner S. Eccles Building and an adjacent Fed office building—has become a political flashpoint after its budget rose from earlier projections. The Fed has said cost increases were influenced by design changes from consultations with review agencies, higher materials and labor costs, and unforeseen conditions such as more asbestos and other site complications than anticipated.
The investigation lands as the White House continues to criticize the Fed for not cutting rates faster, intensifying the broader debate over central bank independence. Powell’s current term as chair expires in May 2026, and the administration has been weighing potential successors, according to Reuters reporting on recent internal deliberations.
The confrontation also coincides with a separate legal fight touching the Fed’s independence: the U.S. Supreme Court is scheduled to hear arguments later this month in a case linked to whether the president can remove Fed Governor Lisa Cook.
For now, Powell has indicated he will contest the administration’s framing of the renovation and warned that using criminal process as leverage could chill independent policymaking at the central bank.
