Federal Reserve Chair Jerome Powell revealed on Sunday that the U.S. central bank has been served subpoenas by the Department of Justice that threaten criminal charges, raising concerns that the Trump administration is trying to undermine the institution’s independence.
“On Friday, the Department of Justice served the Federal Reserve with grand jury subpoenas, threatening a criminal indictment related to my testimony before the Senate Banking Committee last June,” Powell said in a video statement released by the Fed on Sunday. “That testimony concerned in part a multi-year project to renovate historic Federal Reserve office buildings.”
U.S. media reports said Federal prosecutors have launched a criminal investigation of Powell over his June testimony to Congress regarding the $2.5 billion renovation project for three buildings, including the Eccles building that serves as the headquarters of the Fed.
Concerns over central bank independence, which is considered sacred in the financial world, has rattled markets as investors latched onto the “Sell America” sentiment. Gold, a safe haven, hit a new record as investors scurried for cover.
Powell termed this action “unprecedented” and ascribed it to President Donald Trump’s ongoing threats and pressure on the Fed to lower interest rates. The top official expressed his deep respect for the rule of law and for accountability in our democracy, adding that the Fed chair was not above the law.
“This new threat is not about my testimony last June or about the renovation of the Federal Reserve buildings,” the Fed chief said.
He asserted that the new action was not about Congress’s oversight role as the Fed had made every effort to keep Congress informed about the renovation project through testimony and other public disclosures.
“Those are pretexts,” Powell said. “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.”
“This is about whether the Fed will be able to continue to set interest rates based on evidence and economic conditions—or whether instead monetary policy will be directed by political pressure or intimidation,” Powell added.
Powell, whose term ends in May, has served under four administrations. He said he has worked without political fear or favor and was focused solely on the central bank’s mandate of price stability and maximum employment.
He affirmed that he would stand firm in the face of threats and will continue his job with integrity and the commitment to serve the American people.
The action against Powell is also seen as a message from the Trump administration to whomever succeeds him to toe the line.
Trump has been highly vocal in criticizing the Fed as he seeks a drastic lowering of interest rates and even threatened to remove Powell as well as sought a say in interest rate decisions. Trump’s budget watchdog chief Russel Vought has also accused Powell of gross mismanagement of the Fed.
Powell is among the several top bureaucrats who have fallen out of favor with Trump. In August last year, Fed Governor Lisa Cook, who is the first black woman to hold the post, was fired by Trump on allegations of mortgage fraud.
However, the Supreme Court temporarily blocked the dismissal and allowed Cook to continue in her position until January when justices will commence hearing oral arguments in the case. She has challenged the president’s authority in the removal of Fed governors as the central bank is established as independent from the government.
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