Trump-Fed war erupts: Federal prosecutors investigate Jerome Powell for cost overruns on a million-dollar project

The tension between the White House and the Federal Reserve has officially become a political war, after it was revealed that federal prosecutors in Washington opened a criminal investigation against Jerome Powell, the Fed's current chairman, in connection with costly renovations to the agency's headquarters and possible inconsistencies in his congressional testimony.

The probe, prompted by the District of Columbia, allegedly aims to determine whether Powell provided misleading information about the scope and costs of the Fed's Washington complex modernization project. The New York Times initially reported, and Powell later confirmed in a video response posted on social media. According to sources close to the process cited by the NYT, investigators are reviewing public statements by the official and documentation linked to the spending.

The renovation project, begun in 2022 and scheduled for completion in 2027, has incurred an estimated cost overrun of nearly $700 million. The work includes modernizing the historic Marriner S. Eccles Building and another structure on Constitution Avenue, both built in the 1930s. The Fed contends that the buildings had never been comprehensively renovated and had structural problems, asbestos and lead contamination, as well as non-compliance with accessibility standards.

However, in a video response to the investigation, Powell claimed that the investigation has nothing to do with the renovation of the buildings or his testimony to Congress, but rather his refusal to cut interest rates, an explicit request from President Donald Trump.

"I have deep respect for the rule of law and for accountability in our democracy. 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," Powell said after explaining that on Friday, the Department of Justice notified the Fed with grand jury subpoenas, "threatening a criminal indictment."

"This new threat is not about my testimony last June or about the renovation of the Federal Reserve buildings. It is not about Congress's oversight role; the Fed through testimony and other public disclosures made every effort to keep Congress informed about the renovation project. Those are pretexts. 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."

The case undoubtedly took on an unavoidable political dimension. President Trump has for years maintained an open confrontation with Powell, whom he accuses of harming the economy by refusing to implement aggressive interest rate cuts. Trump has even publicly suggested the possibility of impeaching Powell or initiating legal action against him for what he described as "incompetence" in managing the project.

Although Powell's term as central bank chairman ends in May, his tenure as governor runs through 2028, which limits the White House's legal tools to oust him. The law only allows for the removal of Fed authorities "for cause," a standard historically reserved for serious cases of misconduct.

So far, neither the formation of a grand jury nor the issuance of formal subpoenas has been confirmed, although prosecutors have already requested documentation from Powell's team, the NYT reported.