Federal Prosecutors Open Criminal Investigation Into Fed Chairman Over $2.5 billion Renovation; Powell Calls It A Political “Pretext” Tied To Interest Rates
Monday, January 12, 2026, 7:30 A.M. ET. 4 Minute Read, By Jennifer Hodges, Political Editor, & Art Fletcher, Executive Editor: Englebrook Independent News,
WASHINGTON, DC.- Federal prosecutors have launched a criminal investigation into Federal Reserve Chair Jerome H. Powell centered on the Federal Reserve’s $2.5 billion renovation of its Washington, D.C., headquarters and his testimony to Congress about the project, in an extraordinary escalation that has drawn sharp political and economic scrutiny.
The inquiry, spearheaded by the U.S. Attorney’s Office for the District of Columbia under the Department of Justice, involves grand jury subpoenas served to the Federal Reserve and Powell’s office. Prosecutors are examining whether Powell made false or misleading statements during his June 2025 testimony before the Senate Banking Committee regarding the scope, cost, and features of the extensive renovation of the Marriner S. Eccles Building and adjoining Federal Reserve facilities.
According to reports, the investigation is focused on whether Powell’s congressional testimony accurately reflected project details and cost overruns, which have become a major source of controversy among lawmakers who have criticized the renovation as excessive and unjustified for a government institution charged with stewarding economic stability.
Powell Denounces Probe As “Pretext” Over Interest Rates;
In a video statement released Sunday evening, Powell strongly denied any wrongdoing and framed the investigation as politically motivated.
He said the legal action was not genuinely about the renovation or his testimony, but instead was being used as a “pretext” to pressure the Federal Reserve over interest rates.
“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.
Powell warned that criminalizing Federal Reserve decisions would undermine the central bank’s independence, which is designed to protect the U.S. economy from political interference.
He reiterated that interest-rate policy must be driven by economic data, inflation, and employment conditions, not political demands from elected officials seeking short-term economic boosts.
Political And Institutional Fallout;
The investigation comes amid years of tension between Powell and President Donald Trump, who has repeatedly criticized the Federal Reserve for not cutting interest rates more aggressively to stimulate economic growth.
Trump has publicly attacked Powell’s leadership and has at times threatened to replace him, though he has denied having any role in directing the Justice Department’s investigation.
Legal experts note that launching an investigation does not automatically mean criminal charges will follow. Prosecutors must prove that any false statements were knowingly, materially, and willfully made, a high legal bar.
Still, the probe has triggered deep concern in Washington, with lawmakers in both parties warning that criminalizing Fed leadership could destabilize the world’s most important central bank and weaken confidence in U.S. financial governance.
Senator Thom Tillis (R-NC), a member of the Senate Banking Committee, said the investigation risks damaging both the Justice Department and the Federal Reserve, and he has vowed to block future Federal Reserve nominees until the matter is resolved.
Market Reaction;
Financial markets have responded sharply to the political uncertainty. The U.S. dollar weakened, while gold and other safe-haven assets rose, reflecting investor concern that the probe could lead to instability in monetary policy and higher geopolitical risk.
Wall Street analysts warn that if the Federal Reserve’s independence is called into question, it could lead to higher borrowing costs, reduced global confidence in U.S. markets, and increased volatility across stocks, bonds, and currencies.
What Happens Next;
As of mid-January 2026, it remains unclear whether the Justice Department will pursue formal charges.
Powell’s term as Federal Reserve Chair expires in May, though he may remain in office while the investigation proceeds. Federal Reserve officials have stated they will fully cooperate with prosecutors while continuing their policy work.
The case now stands at the intersection of law, politics, and global finance, with the outcome likely to shape not only Powell’s future but the credibility and independence of the Federal Reserve itself.
Editor’s Note:
Verified by Jennifer Hodges and Art Fletcher. This report is based on confirmed statements from Federal Reserve Chair Jerome Powell and multiple news sources, with attention to documented developments in the criminal investigation and responses from federal officials.
