The Powell Investigation: Federal Reserve Independence

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Federal prosecutors announced on April 24, 2026, that they had closed their criminal investigation of Jerome Powell, then the Federal Reserve’s chair, while reserving the option to restart it. A federal judge had already thrown out their subpoenas in March, finding that their dominant purpose was to pressure Powell to yield to President Donald Trump, who was pressing him to lower interest rates, or to resign.

Prosecutors had demanded records about the renovation of two Fed buildings, a project budgeted at $2.46 billion, and information about Powell’s testimony to Congress on it. On September 29, 2026, the Fed’s inspector general found numerous deficiencies in the project’s management but no reasonable grounds to believe a federal crime had occurred. The judge’s ruling and the inspector general’s findings do not conflict: the Fed’s independence on interest rates does not excuse poor management, and poor management of a building project is not by itself a crime.

How renovation questions became a criminal probe

In a public statement on January 11, 2026, then-chair Powell said the Department of Justice had served the Fed with grand jury subpoenas the preceding Friday. He said the demands concerned his June 2025 Senate Banking Committee testimony, which addressed the renovation of historic Fed buildings.

Powell argued that the testimony and renovation were pretexts for pressure over the Fed setting interest rates according to its own assessment rather than President Donald Trump’s preferences. In the same statement, he said that no one, including the Fed chair, was above the law.

U.S. Attorney Jeanine Pirro said on April 22, 2026, that her office needed to find out why the renovation had gone so far over budget. Independence in setting interest rates does not shield the Fed from questions about a building contract, but a cost overrun alone does not settle the separate question of criminal wrongdoing.

A federal court that later reviewed the subpoenas explained that a criminal subpoena can impose legal expenses, compliance burdens and anxiety even if it never leads to prosecution. A demand for records can therefore have consequences before any accusation is tested in a criminal trial.

As of April 22, 2026, no criminal charges had formally been filed against Powell, United Press International reported, and Pirro announced two days later that she was closing the case. A subpoena is a demand for records or information, not a charge.

What the construction review actually found

The project concerns the Eccles building and the 1951 Constitution Avenue building. The Fed says the work replaces obsolete plumbing, electrical, fire-suppression and other building systems, removes hazardous materials including asbestos and lead, and brings the buildings up to modern code.

In his June 25, 2025, Senate Banking Committee testimony, Powell said there was no VIP dining room, no special elevators and no new water features, and that existing marble would be reused with replacements where pieces had broken.

On July 17, 2025, Powell answered a July 10 letter about the project from Office of Management and Budget director Russell T. Vought. Powell said no VIP dining rooms were being built, existing conference and mealtime rooms were being preserved, and the garden terrace described in the plans was a ground-level lawn above parking. He described restoration of existing elevators and fountains, elimination of proposed new water features, and use of new marble where original stone was damaged or preservation requirements called for it.

Powell also said that since the National Capital Planning Commission approved the plans in September 2021, the Fed’s Board of Governors had scaled back or eliminated a small number of design elements and had added no new ones, aiming to simplify construction and reduce delay and cost risks. The commission is the federal government’s central planning agency for the National Capital Region, reviewing federal and certain local project designs.

Senate Banking Committee Chair Tim Scott said in a July 23, 2025, letter that Powell’s testimony and the Fed’s online answers differed from the plans the commission approved in September 2021. The objection centered on whether Powell’s account matched the planning documents. A difference between an earlier plan and a later description can have more than one explanation, so the sequence of revisions matters.

The Fed’s published Board-approved budget for the two-building renovation is $2.46 billion. The inspector general separately measured the construction portion of the budget, which increased from $921 million in February 2020 to $2.018 billion in the 2024 budget. The two figures measure different things: the whole project and its construction portion.

The Fed attributes cost increases to design changes following outside review, differences between estimates and actual material, equipment and labor costs, and unforeseen conditions such as additional asbestos, contaminated soil and a higher water table. Those explanations address pressures on the project’s price, but they do not answer whether available safeguards were used.

The Board chose a construction manager at risk contract for the renovation. Under that kind of contract, the owner and the construction manager agree on a guaranteed maximum price, which shifts specified cost and schedule risks from the owner to the construction manager. Once that maximum is agreed, the construction manager generally absorbs costs above it, with limited exceptions including owner-directed changes.

The inspector general’s report, issued September 29, 2026, found that the Board had not effectively managed that contract, had repeatedly departed from its cost-management provisions and had insufficient project governance.

As of July 2026, more than four years after construction began and after $2 billion in construction awards, the Board still had not established a guaranteed maximum price, the report found. The inspector general concluded that the Board consequently lacked cost certainty and had not transferred material risk to the construction manager.

The report also found that marble, water features and a garden terrace did not materially contribute to subsequent construction cost increases. That finding directs attention away from conspicuous finishes and toward the less visible decisions that determine how a project is controlled.

Despite its management findings, the inspector general found neither reasonable grounds to believe federal criminal law had been violated nor Board-policy violations warranting an administrative misconduct finding.

Why a judge blocked the subpoenas

The court fight, In re Grand Jury Subpoenas, involved two demands: one for renovation records and another for information about Powell’s related congressional testimony. In an opinion filed March 11, 2026, the district court found that the subpoenas’ dominant purpose was to pressure Powell to yield to the president or resign, and that the government had offered no evidence of a crime beyond displeasing the president. The court granted the Board’s motion to quash, setting aside the subpoenas, and allowed partial unsealing of the litigation materials.

The court explained that grand jury subpoena power is broad but that courts may quash demands whose compliance would be unreasonable or oppressive. The ruling was about the subpoenas; it did not decide every question about the renovation.

Pirro announced the case’s closure on April 24, 2026, while reserving the possibility of restarting a criminal investigation if the facts warranted it. That reservation was a statement about possible future action, not proof that the probe continued.

On June 11, 2026, Chief Judge James E. Boasberg, who had quashed the subpoenas, refused the government’s request to vacate, or erase, his earlier opinion and order. The government had argued that using the president’s statements to infer prosecutors’ motives raised First Amendment issues. It also said it had not ended the case in order to avoid an appeal. A dispute over whether an opinion should remain in place is different from an active investigation seeking new records.

Boasberg described his earlier ruling as dependent on the particular facts and said changed evidence could present issues the court had not already decided. The subpoena ruling did not create immunity for Fed officials or predetermine how genuinely new evidence would be treated.

The June 11 opinion said the government closed its investigation instead of appealing the subpoena ruling. As of September 29, 2026, a public copy of the docket listed June 11 as the date of the last known filing and June 12 as the date the case was terminated; the site warns that its entries may not be up to date.

Check the public district-court docket for later orders and the inspector general’s reports for corrective-action updates.

What independence protects, and what it does not

Congress gave the Fed the monetary-policy goals of maximum employment, price stability and moderate long-term interest rates, while giving it independence in achieving them. The Fed says that arrangement permits decisions based on evidence and analysis without taking politics into consideration.

The Fed remains accountable to the public and Congress: its chair and staff testify, and the Board submits a Monetary Policy Report twice a year. It also publishes independently audited financial statements and policy-meeting minutes.

The inspector general conducts independent oversight through audits, investigations and other reviews of the Board’s operations, including legal compliance and the prevention of fraud, waste and abuse. The Fed says the watchdog audited renovation management in 2021 and contract modifications in 2022, and that Powell requested a fresh review in 2025. This provides a route to examine spending decisions without making agreement on interest rates the test of acceptable conduct.

Senator Thom Tillis, a Republican member of the Senate Banking Committee, called the criminal investigation a serious threat to Fed independence while welcoming the inspector general’s inquiry as necessary and appropriate. In a January 13, 2026, joint statement, international central bankers expressed solidarity with Powell and called central-bank independence a cornerstone of price, financial and economic stability, alongside respect for the rule of law and democratic accountability.

Replacing a chair differs from removing a governor

Kevin Warsh became Fed chair on May 22, 2026. Powell’s term as chair ended that day; the Fed lists his separate term as a Board member as ending January 31, 2028. Powell remained on the Board after his chair term ended.

Under 12 U.S. Code section 242, Board members generally serve fourteen-year terms unless the president removes them for cause, while the president designates the chair from the Board for a four-year term with Senate confirmation. The chairmanship and membership on the Board are separate positions, so the end of one does not by itself answer whether the other continues.

Warsh also chairs the Federal Open Market Committee, the Fed’s principal monetary-policy body. The committee has twelve members: the seven Board governors, the president of the Federal Reserve Bank of New York and four other Reserve Bank presidents serving on rotation.

In August 2025, President Trump tried to fire Fed governor Lisa Cook, telling her in a letter that he had “reason to believe” that she “may have made false statements on one or more mortgage agreements.” Cook sued, alleging that the attempted removal was not “for cause” as the statute requires. In Trump v. Cook on June 29, 2026, the Supreme Court denied the government’s request to suspend a lower court’s preliminary injunction preventing her removal. A stay would have suspended the protection while litigation proceeded; denying one did not finally decide every question about whether Cook could be removed.

The Court’s majority said the Fed’s independence means the bar for removing a governor for cause should be high. Whether cause exists depends at least in part, it said, on how serious the alleged misconduct is and how closely it relates to the governor’s professional duties. The key issue, the majority said, is whether the reason given truly implies unfitness for the job or is simply an effort to secure a more agreeable replacement.

The case has returned to the district court, which on September 22, 2026, ordered the parties to propose further proceedings in a joint status report by November 6, 2026. Those next steps concern Cook’s removal, not Powell or the renovation inquiry.

The consequence for borrowers, savers and oversight

The Fed’s policy rate concerns overnight bank borrowing, but changes filter through to rates lenders charge households and businesses and to interest paid on deposits. Expectations about future policy can also affect longer-term interest rates. That is why the Fed’s independence matters outside Washington, even though a renovation inquiry does not itself set anyone’s loan rate.

The inspector general made seven recommendations, reported that the chair concurred with the findings and recommendations, and promised quarterly follow-up on corrective action. That follow-up supplies a concrete test of accountability after the criminal probe’s closure: whether the Board corrects the management weaknesses identified in the review.