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DOJ TARGETS Fed Chairman – FOR THE FIRST TIME

January 13, 2026

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Seal of the Department of Justice on an American flag background.

The Justice Department has taken the unprecedented step of subpoenaing Federal Reserve Chairman Jerome Powell to the grand jury, marking the first time in history that a Fed chairman has faced potential criminal charges for his congressional testimony.

Story Overview

The DOJ subpoenaed the Fed to appear before a grand jury on January 9, 2026, threatening criminal charges for Powell’s Senate testimony in June 2025.
Powell says the investigation is a pretext to exert political pressure to lower interest rates, thereby compromising the independence of the Fed.
The investigation focuses on the controversial renovations to the Fed headquarters, which were increased from $1.9 billion to $2.5 billion.
Markets reacted negatively with the fall of the dollar and the rise of gold, as investors feared a politicization of monetary policy.

The first shot in the Fed’s bow

Powell released a strongly worded video statement on Jan. 11, saying the subpoenas were an “unprecedented” action related to the administration’s pressure on interest rates rather than legitimate oversight. The Fed chairman emphasized his commitment to the central bank’s dual mandate of price stability and maximum employment, refusing to give in to political intimidation. It marks an extraordinary escalation in the ongoing battle between Trump and Powell, whom Trump initially nominated in 2018 but now views as incompetent.

The timing reveals the administration’s strategic intent. Powell’s term expires in May 2026, leaving Trump a narrow window to replace him with a more compliant president. The subpoenas came just days after Trump renewed his public demands for aggressive rate cuts, despite the Fed’s recent modest cuts at the end of 2025.

Behind the controversy over a billion-dollar renovation

The investigation targets Powell’s testimony before the Senate Banking Committee in June 2025, defending the Fed headquarters renovation plan. Powell disputed accusations of extravagance, specifically denying claims about new marble fixtures, elevators, water features and gardens that critics called “ostentatious.” OMB Chairman Russell Vought previously accused Powell of potential violations of law in his handling of the taxpayer-funded project.

Attorney General Pam Bondi’s DOJ says it prioritizes investigations into “abuse of taxpayer dollars,” positioning the probe as fiscal accountability rather than political retaliation. However, the unprecedented use of grand jury subpoenas against a Fed chairman to testify in Congress suggests deeper motivations. FHFA Director Bill Pulte, initially reported as the instigator of the investigation, has denied involvement as he faces his own GAO investigation into unsubstantiated claims of fraud.

Market unrest and political calculations

Financial markets were immediately alarmed by the threats to the independence of the Fed. The dollar weakened while gold prices rose on Monday (January 12), as investors considered the implications of politicized monetary policy. Mohamed El-Erian of Wharton and Allianz warned that Powell’s response would amplify market attention beyond the subpoenas themselves, creating lasting uncertainty about the Fed’s autonomy.

Congressional Republicans find themselves in a difficult position. Sen. Thom Tillis questioned whether the investigation damaged the DOJ’s credibility, while Democrats like Chuck Schumer and Elizabeth Warren denounced it as institutional “harassment.” The 13-11 Republican majority on the Senate Banking Committee will ultimately decide Trump’s nominee, but the controversy complicates confirmation politics and raises questions about conservative principles on institutional independence.

The challenges of American economic independence

This confrontation transcends partisan politics and strikes at the heart of American economic governance. The Fed’s independence exists precisely to protect crucial decisions like raising inflation rates to combat inflation from short-term political pressures that could destabilize the economy. Powell’s defiant stance reflects decades of bipartisan consensus that monetary policy requires long-term thinking beyond election cycles.

The broader implications extend beyond interest rates and extend to fundamental questions about accountability versus autonomy of government institutions. While legitimate oversight of taxpayer spending is worth supporting, the use of criminal prosecutions as leverage to overcome political disagreements crosses dangerous lines. Conservative principles traditionally champion both fiscal responsibility and institutional constraints on political power, creating tension around this unprecedented action by the DOJ against the nation’s central banker.