Treasury Secretary Voices Concern Over Criminal Probe Into Fed Chair
Treasury Secretary Scott Bessent has privately expressed dissatisfaction with the decision to open a criminal investigation into Federal Reserve Chair Jerome Powell, warning that the move could unsettle financial markets and damage confidence in key institutions, according to people familiar with the matter.
Bessent is said to believe that pursuing legal action against the head of the central bank risks injecting unnecessary political tension into monetary policy. He has previously cautioned President Donald Trump that removing Powell from office could trigger market volatility, although recent trading showed little immediate reaction to the latest developments.
The investigation focuses on Powell’s testimony before Congress earlier this year regarding the Federal Reserve’s $2.5 billion renovation of its headquarters in Washington. Powell has responded forcefully, releasing a rare public statement in which he disclosed that the central bank has received grand jury subpoenas that could lead to criminal charges. He suggested the probe stems from his ongoing disputes with the White House over interest-rate policy.
Powell said the threat of prosecution reflects the Federal Reserve’s decision to set policy based on economic conditions rather than political pressure, emphasizing that central bank independence remains critical to the nation’s financial stability.
Within the administration, opinions appear divided. Some officials insist the Justice Department’s actions are purely procedural and not politically motivated, arguing that unanswered questions remain about the renovation project and Powell’s congressional testimony. Prosecutors have said their office repeatedly sought clarification from the Federal Reserve before turning to legal measures, maintaining that the investigation is based on merit rather than influence.
The situation has reignited long-standing tensions between President Trump and the Fed chair. The two have frequently clashed over interest rates, with Trump openly criticizing Powell’s leadership and, at times, suggesting he could remove him from office — a step that many economists warn would undermine the credibility and independence of the central bank.
Senior figures in the administration have also accused Powell of failing to comply with government oversight rules and of misleading lawmakers about the renovation’s costs, accusations that the Fed has consistently denied.
The investigation has drawn sharp reactions from lawmakers across party lines. Several senators have voiced concern that the probe could set a dangerous precedent by turning monetary policy disagreements into legal battles. Some have warned that the situation could complicate upcoming decisions over leadership at the Federal Reserve, while others have called for congressional scrutiny of the Justice Department’s actions.
Despite the political storm, financial markets have so far shown limited reaction. Major stock indexes closed slightly higher at the start of the week, suggesting investors remain cautious but not yet alarmed by the unfolding dispute.
Still, behind the scenes, the controversy is deepening anxieties over the intersection of law enforcement, politics, and economic policy. As pressure builds on both the White House and the Federal Reserve, the outcome of the investigation could carry lasting consequences for market confidence and the future independence of the nation’s central bank.
