The New York Times reported on the 11th that the U.S. Attorney’s Office for the District of Columbia has opened a criminal investigation into Federal Reserve Chairman Powell, mainly involving the renovation project of the Federal Reserve Office Building, and whether Powell made false statements to Congress about the size of the program. In a rare video statement released by the Federal Reserve on the 11th, Powell said that“This unprecedented action should be seen in the broader context of the continued threat and pressure from the U.S. government.” The charges are“Pretexts” for being investigated for the Fed’s“Failure to follow the president’s wishes” in setting interest rates. CNN described the administration’s action against the fed as“Shocking” and Powell issued an“Unusual statement” in response. The survey takes the battle between the two to a“Whole new level”. The Associated Press said the development reignited concerns that the Fed’s independence is being compromised and could undermine global investor confidence in debt. “The subpoenas to the Fed are another example of how U.S. assets are becoming less attractive,” Bloomberg quoted analysts as saying.
Federal Reserve Web Site 11 Federal Reserve Chairman Colin Powell’s video and text statement in response to the U. S. government’s criminal investigation. (screenshot from the Fed’s website)
Powell questions motives
The New York Times said the investigation involved a renovation of two major fed buildings that began in 2022 and is expected to be completed in 2027 with an initial budget of about $1.9 billion, but the budget has been increased to nearly $2.5bn because of sharp rises in the cost of building materials such as timber, steel and cement. Trump has repeatedly referred to the project’s“Cost overruns” and criticised Powell as“Incompetent”. According to reports, the investigation into Powell includes an analysis of his public statements and a review of spending records.
Powell’s video and written statement were published on the Federal Reserve’s website Monday. He confirmed that the Justice Department served a subpoena on the Fed on Friday. The New York Times said Powell described the government investigation as“Unprecedented” and questioned its motives. He warned that the investigation represents a broader struggle over the independence of the Federal Reserve, the real reason the Fed is being investigated is that it sets interest rates“In the best interest of the public rather than according to the president’s wishes”. Powell said the investigation was not just about the“Clean slate” of individuals, but whether the fed could continue to set interest rates based on what was happening in the economy, it is about whether there is“Political coercion” in the setting of US monetary policy.
“For years, Powell avoided confrontation with Trump. That’s no longer the case,” the Wall Street Journal said in an article on Tuesday, after the subpoena arrived at the Fed on Friday, Powell met with advisers over the weekend to weigh how to respond. In a roughly two-minute video statement, Powell made it clear he would not let the matter go on“In the dark.”. A criminal investigation against a sitting fed chairman is unprecedented. Powell, who is usually careful with his words, was“Unusually stern” about the development.
Asked about the investigation on Monday, Trump told NBC he had“No idea” but Powell had“Clearly not done a good job at the Fed”. The Justice Department subpoena had nothing to do with the Fed setting interest rates, he said. “I wouldn’t even consider doing it that way.”.
The New York Times reported that a spokesman for the United States Attorney General did not comment on the investigation into Powell, but said Bundy had directed prosecutors to“Prioritize the investigation of any misuse of taxpayer funds”. Launching an investigation is one thing, but gathering enough evidence to warrant an indictment by a federal grand jury is another, the report said.
Trump: the next fed chairman has been chosen
The Wall Street Journal said Monday that the investigation is either aimed at undermining public trust in Powell, or is aimed at bringing a legal case to force him to leave, or both.
In a recent interview with the New York Times, Trump said he had already decided on a successor to Powell. Hassett, director of the White House National Economic Council, is reported to be a leading candidate to lead the Federal Reserve. Trump also recently met with former fed governor Kevin Walsh, CNN said. Mr. Powell first served as FED Chairman in 2018, Mr. Trump’s first term as president, and has been re-elected ever since. His term ends in May, but his term as a governor ends in January 2028. Powell hasn’t said whether he plans to stay beyond may, Bloomberg said.
In nominating Powell, Trump publicly praised him as a“Smart economic manager.”. But Mr. Trump began publicly criticizing Mr. Powell in 2018 and discussing firing him with his staff as Mr. Powell became fed chairman and raised interest rates. After his re-election as US President last year, Trump criticised Powell for cutting rates too late or not enough.
The criminal investigation into Powell is the latest in a series of“Unprecedented” challenges to the Fed’s independence, US media said. Last August, the U.S. government fired Federal Reserve Governor Lisa Cook for alleged mortgage fraud. Cook has denied any wrongdoing and has since filed suit.
‘sell U.S. ‘ sentiment sweeping markets?
Powell will step down in four months, the Wall Street Journal said, raising questions about whether the fed can continue to make decisions without political interference. The New York Times quoted Senator Tillis, a Republican member of the Senate Banking Committee, as saying, “There should no longer be any doubt that advisers to the Trump administration are actively pushing for an end to fed independence,” he said. “What is now in question is the independence and credibility of the Justice Department.”. CNN said the Senate Democratic Leader Schumer criticized the U. S. government’s investigation, that it threatens the U. S. economy“Strong and stable.”.
The A.P. said the action represented an“Unprecedented escalation” in Trump’s fight with the Fed that could roil U.S. financial markets and, over time, drive up the cost of borrowing for mortgages and other loans. CNN quoted analysts as saying that the development was“Deeply troubling” and that it now appeared that the administration and the fed were at“Open War”.
“The sentiment of ‘selling the U.S. ‘ is sweeping through the market,” Bloomberg said in a report on the evening of the 12th Beijing time, stock index futures, the dollar and bonds weakened on concerns that the independence of the Federal Reserve in setting monetary policy will be curtailed. Spot gold and silver prices once hit record highs. Analysts say the increased uncertainty over U.S. monetary policy could reinforce the existing trend to diversify away from the dollar. Non-us assets such as European and Asian equities look more attractive, invesco says. U. S. “Barron’s Weekly” magazine 12, citing an analysis of a Swedish financial institution, said the U. S. government’s investigation of Powell triggered a long-term market concern about inflation, and may affect the U. S. credit situation.