DOJ's criminal probe of Fed chair called political by judge

Federal prosecutors in 🏛️Washington, D.C., opened a grand jury investigation in November 2025 into Federal Reserve Chair Jerome Powell, nominally examining whether Powell made false or misleading statements to Congress about cost overruns on the Fed's 🌲Washington headquarters renovation. The D.C. U.S. Attorney's Office under JPJeanine Pirro issued grand jury subpoenas to the Fed in January 2026, compelling the Fed to turn over documents and records. Powell and the Federal Reserve's general counsel rejected the renovation framing as a pretext, telling reporters the probe was designed to interfere with monetary policy.

Chief Judge James Boasberg of the U.S. District Court for 🏛️D.C. quashed those subpoenas on March 13, 2026, in a ruling dated March 11. Boasberg wrote that "the Government has offered no evidence whatsoever that Powell committed any crime other than displeasing the President." He found "abundant evidence" the probe's dominant purpose was to "harass and pressure Powell either to yield to the President or to resign." Boasberg's ruling is the first time a federal judge has explicitly found that the executive branch used the DOJ's criminal investigation power to coerce an independent regulatory official into changing a policy decision.

U.S. Attorney JPJeanine Pirro, a registered Republican and longtime Trump ally, called Judge Boasberg an "activist judge" at a press conference on March 13 and immediately announced an appeal to the U.S. Court of Appeals for the 🏛️D.C. Circuit. The White House said it would not oppose the appeal, giving the probe continued political backing. Attorney General Pam Bondi's office backed Pirro's position. Powell responded that he had "no doubt" about the legality of the Fed's conduct and would remain in his post until the investigation was "well and truly over."

Trump also signaled continuing support for the probe and made clear he still wanted lower rates. He nominated Kevin Warsh, a former Fed governor and Wall Street economist who has publicly argued for rate cuts, to replace Powell when Powell's term expires in May 2026. The combined criminal probe and public replacement nomination was designed to make Powell's position untenable even without a formal firing.

The Federal Reserve's independence from political control has been the legal standard since Congress passed the Federal Reserve Act of 1913. The Act gives the Board of Governors fixed 14-year terms and allows removal only "for cause" — meaning misconduct or neglect of duty, not policy disagreement. The Supreme Court first upheld "for cause" removal protections for independent agency heads in Humphrey's Executor v. United States (1935), ruling that Congress has the authority to insulate certain expert commissions from at-will presidential removal.

The Court's 2020 decision in Seila Law v. CFPB narrowed those protections for single-director independent agencies like the Consumer Financial Protection Bureau, ruling those heads can be removed at will. But the Fed's multi-member board structure keeps it within the Humphrey's Executor framework. Trump tried a direct-firing approach with NLRB and MSPB members in early 2025; courts blocked those too. The Powell probe represents a different strategy: using criminal investigation to force a resignation the law otherwise prohibits.

The closest historical parallel is President Richard Nixon's pressure campaign on Fed Chair ABArthur Burns in 1971 and 1972. Nixon, facing reelection with unemployment near 6%, privately lobbied Burns to ease monetary policy before the 1972 election. At Burns' swearing-in, Nixon joked: 'You see, Dr. Burns, that's a standing vote of appreciation in advance for lower interest rates and more money.' Burns did loosen policy. The result: inflation was already above 5% when the Fed eased, and it hit double digits by 1974 — helping trigger the worst U.S. recession since the Great Depression at that point.

The Burns episode became the textbook case for why Fed independence matters. Congress reinforced the Federal Reserve's insulation from political pressure in subsequent decades precisely because the 1970s showed what happens when a central bank prioritizes a president's electoral calendar over price stability. Economists use the term "time inconsistency" for this dynamic: a politician always benefits from lower rates now, but the inflation cost comes later, after the election. ()

Trump has argued the Iran war and tariffs slowed growth and the Fed should cut rates to offset the drag. Inflation remained above 3% as of early 2026, with the Iran war pushing oil prices higher. Cutting rates in that environment risks repeating the 1970s. Stimulus during a supply-side inflation episode accelerates price increases rather than curing them.

The Federal Open Market Committee, the Fed's rate-setting body, voted 11-1 on March 18, 2026, five days after Boasberg's ruling, to hold the federal funds rate at 3.5%–3.75%. The lone dissenter was SMStephen Miran, appointed to the board by Trump in 2025, who preferred a 0.25% cut. The FOMC cited "uncertainty" from the Iran war and continued above-target inflation. Powell said after the meeting that the Fed would keep rates where they are until it was confident inflation was on a "sustained path" back to 2%.

The federal funds rate is the overnight interest rate banks charge each other to lend reserves. It's the benchmark that cascades through virtually every borrowing cost in the economy. When the Fed holds rates at 3.5%–3.75%, a 30-year fixed mortgage runs roughly 6.5%–7%. A car loan at a dealership runs 7%–9%. Credit card rates run 20%–24%. The Fed's 2022–2024 rate-hiking cycle was the fastest since the early 1980s, and it brought inflation down from 9.1% in June 2022 to about 3.2% in early 2026. Holding rates now is the Fed doing what it was designed to do: finishing a job regardless of political pressure.

For Trump, every month the Fed doesn't cut rates is a month where his central campaign promise on affordability looks harder to deliver. Home sales have been at generational lows since 2023 because mortgage rates doubled. The Iran war's oil price spike added more inflationary pressure. From Trump's perspective, a compliant Fed would cut rates and let him claim an economic win before the 2026 midterms. From the Fed's perspective, cutting rates into active inflation and an active war would undo three years of work.

Boasberg's ruling, if it stands at the 🏛️D.C. Circuit, establishes a significant legal limit: courts will quash grand jury subpoenas when the dominant purpose of the investigation is coercion rather than genuine law enforcement. The "dominant purpose" test is a high bar. Courts generally defer to prosecutors. Boasberg found it met here because the government produced almost no evidence of a crime while the record was full of Trump and Pirro publicly complaining about Powell's rate decisions.

If the 🏛️D.C. Circuit reverses and reinstates the subpoenas, the Fed would be compelled to produce internal documents, testimony, and communications. That would give the DOJ leverage to escalate the probe or use document production as a form of ongoing disruption regardless of whether charges are ever filed. An investigation that produces no indictment can still drain the target's time, compel document production, and generate sustained uncertainty. That pressure operates regardless of the D.C. Circuit's ruling on Boasberg's order, since the DOJ retains the ability to issue new subpoenas and conduct additional investigative steps while the appeal proceeds.

Powell's term as Fed chair expires in May 2026. Even if Boasberg's ruling is upheld, Trump will get to install Kevin Warsh as the next Fed chair, giving him legal control over monetary policy without needing the probe to succeed. Warsh, who served on the Fed board from 2006 to 2011, has written that the Fed should be more responsive to "market signals" and less dependent on backward-looking inflation data, a position generally associated with lower rates. Warsh's Senate confirmation hearing is expected in April 2026.

Former Fed Chairs Ben Bernanke and Alan Greenspan, joined by former Treasury Secretaries Timothy Geithner and Henry Paulson, signed a joint statement calling the probe "an unprecedented attempt to use prosecutorial attacks to undermine" Fed independence. Former Fed Vice Chair Alan Blinder told CNN the probe was "an outrageous act which, from any other president, would be a shocker." () The Nixon-Burns episode is the reason independent central banking became a global norm after 1980. More than 30 countries adopted formal central bank independence laws in the two decades after the U.S. stagflation crisis.