Wall Street Reacts to Investigation of Fed Chairman
Wall Street faced turbulence early Monday when federal prosecutors announced a criminal investigation into Federal Reserve Chairman Jerome Powell. This move sent waves of concern through the markets, raising fears of potential political interference at the central bank.
In premarket trading, Dow futures plunged over 350 points, translating to a 0.72% drop, while S&P 500 futures fell by 39.75 points, or 0.57%, and Nasdaq futures decreased by 201.25 points, around 0.78%. Investors seemed nervous about the Justice Department’s actions against Powell.
As a reaction to this unsettling news, gold prices surged, hitting record highs with spot prices climbing nearly 2% to around $4,595 per ounce at one point, and U.S. gold futures for February delivery also rising more than 2%, nearing $4,606.
The U.S. Attorney’s Office for the District of Columbia is investigating Powell over his June 2025 testimony to Congress regarding the considerable $2.5 billion renovation of the Federal Reserve’s headquarters in Washington, D.C., according to reports from people familiar with the case.
The Post originally reported on this renovation last April, indicating that the project is over budget by more than $700 million, which has drawn scrutiny. The newly launched investigation, approved back in November by federal prosecutor Jeanine Pirro, includes reviewing Powell’s public statements and examining the Fed’s internal spending records based on briefings from officials.
Late Sunday, Powell confirmed that the Justice Department had issued a grand jury subpoena to the Fed, warning that criminal charges could arise from his testimony. He referred to this investigation as an unprecedented strike against the independence of the central bank.
Powell characterized the investigation as politically motivated revenge for the Fed’s refusal to yield to White House pressure to reduce interest rates. He suggested that the looming threat of prosecution aimed to pressure policymakers into conforming monetary policy decisions with President Trump’s wishes.
In a statement, Powell remarked, “The threat of criminal charges stems from the Federal Reserve making decisions based on what it believes serves the public, rather than the preferences of the president.” He highlighted his experience on the Fed Board under both Republican and Democratic administrations, underscoring his commitment to fulfilling his duties without political influence.
The newspaper has reached out to both the White House and the Justice Department for comment.
Powell, a former private equity executive and lawyer, was appointed to lead the Federal Reserve by Trump in 2017 and was confirmed the next year. He took charge of an institution intended to operate independently of any presidential influence. His chairmanship is set to expire in May 2026, but he remains Fed president until January 2028, barring any removal for just cause.
Since Trump resumed office, tensions around interest rates have arisen, with the president publicly criticizing Powell’s performance and suggesting that he would terminate him for not lowering rates, even amid relatively low inflation.
Trump has hinted at plans for a successor and has indicated that legal action related to the Fed’s headquarters renovations is part of a broader strategy to exert pressure.
The $2.5 billion renovation project is expected to begin in 2022 and will be funded solely through the Fed’s interest income and fees, avoiding Congressional or taxpayer funding. Planning documents from 2021 outlined features like a private dining room, special elevator, and marble enhancements, though many of these were later dropped as plans evolved.
The Fed attributes the substantial cost overruns—currently estimated around $700 million—to various factors, including inflation, labor and materials expenses, contamination issues, and necessary upgrades to meet safety and accessibility standards.
