U.S. Prosecutors Investigate Fed Chair Powell
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What is the investigation into Fed Chair Jerome Powell about?
The Justice Department threatens Fed Chair Jerome Powell with a criminal indictment in what he calls an attack on the central bank's independence. Plus, President Trump molds intervention in Iran as protest deaths rise.
We're looking at it very seriously. The military is looking at it, and we're looking at some very strong options. We'll make a determination.
And the latest from Minnesota, as more federal agents head to the state. It's Monday, January 12th. I'm Luke Vargas for The Wall Street Journal, and here is the AM edition of What's News, the top headlines and business stories moving your world today. U.S. prosecutors have launched an investigation into Fed Chair Jerome Powell, threatening a criminal indictment over his testimony last year concerning the bank's building renovation project.
How is the market reacting to Powell's potential indictment?
We report the investigation is being run out of Washington's U.S. Attorney's Office, overseen by close ally of the president, Jeanine Pirro, and concerns the Fed's spending records. Trump last month threatened a lawsuit against Powell, alleging incompetence over the renovation of two historic buildings that's been hit by cost overruns. In a video posted by the Federal Reserve, Powell denied any wrongdoing and called the renovation project pretext for an attack on the central bank's independence.
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 said potential criminal prosecution wouldn't affect his ability to serve out his term as Fed chair, which ends May 15th. But that doesn't mean investors will be ignoring these developments, as Journal of Finance editor Alex Frangos is here to discuss. Alex, you've seen Powell's comments. Many have.
What are the implications of the Fed's independence for future leaders?
What was your reaction? It was definitely stronger than he usually is. He's a very technocratic, careful guy, you know, tends not to try to make waves in what he says. I mean, Fed chair is like the consummate kind of person who goes before Congress and says nothing for four hours. So for him to come out and do a video, put it on X, put it out at 730, just as the NFL games are ending, knowing who the audience is, it's a pretty strong statement.
Alex, we've still got a few hours until markets open, but I'm assuming we're seeing a reaction. What are you hearing?
Yeah, so far, negatively. It's not massive so far, but the dollar's definitely weaker. Gold is at a record, went up another 2%.
What options is President Trump considering in response to the Iran protests?
You're seeing long-term bond yields rise, which is an indication that investors are nervous about the far future, and stock futures are down. So generally, it's a negative reaction. This definitely makes people worried, not just about the short term. Powell's term's up in May. I mean, what's the difference, right? But he would continue to serve on the board as a board member for another two years. So there's the possibility that gets undone. The big implication is for his successor, whether it's one of the Kevins, Kevin Hassett or Kevin Warsh, who are the top candidates to replace him. They now have to go in thinking, well, I want to be independent. But look what happened to the guy before me.
How might U.S. intervention affect the protests in Iran?
Exactly.
You're turning our attention to the distant future, which is helpful. But we do have a Fed meeting later this month and two more, assuming Powell serves out his term till May 15th. I mean, how does this change the context heading into those meetings?
Well, he's not fired. They didn't say he's fired and he's not indicted. This was questions from a grand jury. Powell came out fighting, put out the statement saying he's not going anywhere. So there's no indication that this is going to make a change for the meetings upcoming. But over all of this is that there's the Lisa Cook case.
What is the significance of the criminal investigation for Powell's term?
There's the other Fed member who Trump is trying to fire, whose case is going before the Supreme Court.
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Chapters
8 chapters
1
What is the investigation into Fed Chair Jerome Powell about?
0:02–0:51
2
How is the market reacting to Powell's potential indictment?
0:51–1:59
3
What are the implications of the Fed's independence for future leaders?
1:59–2:38
4
What options is President Trump considering in response to the Iran protests?
2:38–3:15
5
How might U.S. intervention affect the protests in Iran?
3:15–3:47
6
What is the significance of the criminal investigation for Powell's term?
3:47–4:27
7
Why are bank stocks reacting negatively to Trump's credit card interest cap proposal?
4:27–5:13
8
What are the potential consequences of Trump's actions on the economy?
5:13–11:25
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