Fed Chair Powell Under Criminal Investigation: Markets Reel as Treasury Yields Surge

WASHINGTON — Federal Reserve Chair Jerome H. Powell is facing an unprecedented criminal investigation by federal prosecutors in Washington, D.C., thrusting the central bank into a political maelstrom and rattling global financial markets. The probe, which centers on Powell’s testimony to Congress regarding the Fed’s $2.5 billion renovation project at its Washington headquarters, has triggered a historic debate over central bank independence and the politicization of monetary policy.

According to multiple reports, the Department of Justice has issued grand jury subpoenas to the Federal Reserve and threatened Powell with potential criminal charges for allegedly providing false or misleading testimony before the Senate Banking Committee. Powell publicly described the threat as politically motivated, framing the investigation as an attempt to pressure the Fed into making favorable monetary policy decisions.

Details of the Criminal Probe

The investigation reportedly scrutinizes whether Powell misrepresented specific details regarding the renovation costs, project timelines, and administrative approvals during his June 2025 testimony. While no formal charges have been filed, the subpoenas signal an active inquiry and a potential indictment. Legal analysts describe this as a rare instance in US history where the executive branch’s legal apparatus directly challenges the leadership of the nation’s central bank.

“This is a pretextual legal maneuver aimed at influencing Federal Reserve policy,” Powell said in a statement issued through the Fed. “It threatens the institutional independence of the central bank and undermines public confidence in its ability to operate free from political interference.”

Market Reaction: Volatility Across Assets

Financial markets reacted sharply to the news, signaling deep uncertainty about US monetary stability. The US dollar weakened against major currencies, including the euro and Swiss franc, as traders reevaluated the predictability of Fed actions. Treasury yields surged modestly, reflecting increased risk premiums and market concerns about potential policy shifts.

Safe-haven assets saw unprecedented demand. Gold surged to record highs, surpassing previous inflation-adjusted peaks, while silver and other precious metals also rallied. Equity markets fell sharply, with S&P 500, Nasdaq, and Dow Jones futures all opening lower. Investors are seeking refuge amid what analysts describe as “a historic intersection of politics and central banking.”

Political Fallout and Institutional Tension

The investigation has intensified tension between the White House and the Federal Reserve. While President Donald Trump has denied direct involvement, he criticized Powell for not cutting interest rates aggressively and for what he calls “excessive renovation spending.” Some Republican lawmakers, including Senator Thom Tillis, have vowed to block future Fed nominees until the issue is resolved, escalating a standoff between Congress and the Fed.

Financial and legal experts warn that this development sets a dangerous precedent. The Fed’s independence has long been a cornerstone of US economic stability, allowing policymakers to make interest rate and monetary decisions insulated from short-term political pressures. The criminal probe threatens to politicize monetary governance in a manner unprecedented in modern American history.

Global Implications of the Crisis

Markets outside the US have reacted as well. Investors in Europe and Asia are closely monitoring the unfolding situation, with capital flows shifting toward safer assets and away from US-denominated investments. Analysts caution that prolonged uncertainty regarding the Fed’s autonomy could impact global lending, cross-border investments, and confidence in US financial leadership.

The gold rally has been particularly pronounced, with bullion prices surpassing $3,000 per ounce. Analysts attribute this surge to fears that US fiscal and monetary policy could be influenced by political motives rather than market fundamentals, prompting investors to seek tangible stores of value.

Historical Context: Central Bank Independence at Risk

The US Federal Reserve has operated with a high degree of independence since its creation in 1913, and more formalized independence was codified in the 1970s to prevent political interference in monetary policy. Past crises, including the 2008 financial collapse and the COVID-19 pandemic, reinforced the importance of an autonomous Fed capable of acting decisively without political obstruction.

Experts warn that Powell’s criminal investigation, regardless of outcome, erodes this precedent. “This could be the first time in history where a Fed Chair faces potential criminal liability for congressional testimony,” said Dr. Sarah Mendel, a professor of economics at Georgetown University. “It sends a chilling signal about the ability of central banks to operate free from political influence.”

Next Steps and Outlook

The Department of Justice has not indicated a timeline for any potential indictment. Powell continues to lead the Federal Reserve while asserting his commitment to the institution’s independence. Market analysts anticipate heightened volatility in the coming weeks as additional details emerge.

For global investors, the immediate concern is the intersection of legal risk and monetary policy uncertainty. Some analysts suggest that Treasury yields may continue to fluctuate in response to news about the investigation, while gold and other safe-haven assets could maintain elevated levels until the legal and political situation stabilizes.

The criminal investigation into Federal Reserve Chair Jerome Powell marks an unprecedented challenge to US central banking. It has prompted volatility across currencies, equities, and precious metals, while igniting political tensions between the executive branch, Congress, and the Federal Reserve itself. Beyond markets, the episode raises profound questions about the integrity of institutions designed to be insulated from political pressures.

As this story develops, investors, policymakers, and global economic observers will be closely watching the intersection of law, politics, and monetary governance, recognizing that the outcome could reshape the future of central banking in America.