Federal Reserve Chair Jerome Powell—a target of personal attacks and intense pressure from President Donald Trump and others in his administration—is now facing a criminal inquiry over renovations to the central bank’s headquarters.
In a highly unusual video message posted to the Fed’s website Sunday evening, Powell said that the Fed was served Friday with grand jury subpoenas “threatening a criminal indictment.”
“No one—certainly not the chair of the Federal Reserve—is above the law. But this unprecedented action should be seen in the broader context of the administration’s threats and ongoing pressure,” he said.
The DOJ’s alleged reason for the inquiry is a multi-billion dollar project to renovate the Fed’s headquarters in Washington D.C., which has gone significantly over budget. Trump and other members of his administration—including FHFA Chair Bill Pulte—have suggested without evidence that the renovation costs are fraudulent, or part of “corruption” at the central bank.
According to Powell, though, the investigation is related to his testimony before congress back in June, in which he addressed the Fed building renovations among many other things.
The move comes with Powell almost exactly four months from the end of his term as Fed chair, as Trump has honed in on housing affordability with other executive actions this year. Going all the way back to 2024, Trump has contended that interest rates should be lowered, calling Powell a “moron” and threatening to fire him multiple times as the Fed has moved slowly to bring down rates.
Last fall, Fed governor Lisa Cook was indicted on charges of mortgage fraud, and although Trump claimed he was removing her from her position based on the accusations, the Supreme Court ruled he could not fire her while the case plays out.
The big picture
Like Trump, many real estate professionals would welcome lower interest rates, which have an important but indirect connection to mortgage rates. For much of 2025, housing demand was shaky, at least partially due to long-running affordability issues with rates above 6%
But another significant headwind for demand has been uncertainty—much of it driven by Trump’s fast-moving policymaking. Consumer sentiment hovers around historic lows, and brokers told RISMedia that “economic anxiety” derailed a significant number of deals (at least through the first half of last year).
Economists warn that even the perception that the Fed is losing its independence could roil markets and further lower confidence in the economy. Stocks fell sharply Monday morning amid news of the criminal investigation into Powell.
“This is about whether the Fed will be able to continue to set interest rates based on evidence and economic conditions—or whether instead monetary policy will be directed by political pressure or intimidation,” Powell said in his video address. Trump appointed Powell to the Fed chair role during his first term, with former president Joe Biden nominating him for a second term in 2022.
Over the summer, Trump himself joined Powell for a tour of the Fed building during the renovation, spending much of that time talking about interest rates.
The larger dispute has always been interest rates, with Trump ignoring the historic independence of the Fed as he demanded massive cuts. One of his appointees, Steve Miran, has voted for slightly larger cuts—though nowhere near the hundreds of basis points Trump has lobbied for.
Asked about the DOJ’s subpoenas, Trump told NBC yesterday he had no knowledge of the investigation.
The economy
Until now, Powell has almost entirely avoided addressing pressure from Trump, or the many personal insults and accusations leveled at him over the last year. In his statement, he made it explicitly clear that he believes the criminal charges were orchestrated to force him to lower rates.
“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 said.
Other Fed governors, including Trump appointees, have defended the central bank’s independence and argued that setting monetary policy without political pressure is essential to a strong economy.
Trump has an unofficial shortlist for Powell’s replacement as Fed chair, as he reportedly wrapped up interviews with four possible candidates this week.
Powell, for his part, vowed to continue doing his job despite the looming criminal indictment.
“I have served at the Federal Reserve under four administrations, Republicans and Democrats alike. In every case, I have carried out my duties without political fear or favor, focused solely on our mandate of price stability and maximum employment,” he said.
