Federal prosecutors opened a criminal investigation into Federal Reserve Chairman Jerome Powell and the central bank’s $2.5 billion renovation of its Washington headquarters, escalating a year-long confrontation between the Trump administration and the nation’s most powerful economic institution.
According to Powell, the Department of Justice served the Federal Reserve with grand jury subpoenas on Friday, threatening a criminal indictment related to his testimony before the Senate Banking Committee last June about the multi-year renovation project.
Video message from Federal Reserve Chair Jerome H. Powell: https://t.co/5dfrkByGyX pic.twitter.com/O4ecNaYaGH
— Federal Reserve (@federalreserve) January 12, 2026
In an extraordinary video statement released Sunday night, Powell said the investigation 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.”
“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,” Powell said in his statement.
What the Investigation Covers
The New York Times reported the U.S. Attorney’s Office for the District of Columbia, led by Trump appointee Jeanine Pirro, opened the inquiry in November. The investigation examines whether Powell lied to Congress about the scope and cost of the Federal Reserve’s headquarters renovation.
The renovation project, which covered the historic Marriner S. Eccles Building and the adjacent Federal Reserve East Building, has seen costs jump from initial 2021 estimates of $1.9 billion to $2.5 billion today. According to Fed records, cost increases stemmed from inflation, unforeseen construction challenges, including extensive asbestos contamination, blast-resistant security upgrades, and rising material costs.
Justice Department spokesperson Chad Gilmartin declined to comment on the investigation but said in a statement to CNN that the attorney general wants to “prioritize investigating any abuse of tax payer dollars.”
Powell defended the Fed’s transparency during the renovation project. “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,” he said. “Those are pretexts.”
The Bottom Line
Powell’s term as Fed chair ends in May 2026. Trump told The New York Times last week he has already selected Powell’s replacement, though he has not publicly announced his choice.
Powell indicated the criminal investigation would not force his departure.
“I will continue to do the job the Senate confirmed me to do, with integrity and a commitment to serving the American people,” he said in his video statement.
The investigation unfolds as the Federal Reserve navigates delicate economic conditions. Inflation has moderated but remains above the Fed’s 2% target, while the labor market has shown signs of softening.
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