Department of Justice Fully Supports Investigation into Powell, Treasury Secretary Hints Fed Chair Should Step Down, Federal Reserve Independence Crisis Enters New Stage

The leadership of the U.S. Department of Justice is fully backing Prosecutor Pirola’s appeal against Federal Reserve Chair Powell. On the same day, Treasury Secretary Bessent hinted that Powell’s continued service as a board member would “depart from historical norms,” intensifying the debate over the Fed’s independence after subpoenas were rejected.
This article is sourced from Jin10 Data and Nick Timiraos, compiled and reported by Dongqu Dongqu.
(Previous update: Powell admits to being under criminal investigation: it’s because I refused Trump’s request to cut rates)
(Additional background: The story of Trump pressuring Fed Chair Powell: the global liquidity surge triggered by Fed renovations)

Table of Contents

Toggle

• The judge gave a way out, but the White House chose to keep climbing
• Investigation background: political pressure disguised as renovation costs
• Bessent’s sharp comment: reappointment as director “departing from precedent”
• The real dilemma of Warsh’s nomination
• Systemic noise in the crypto market

Federal Judge James Boasberg on March 14 dismissed the grand jury subpoena with “mountains of counter-evidence”—which could have marked the end of this farce. However, just seven days later, the situation has completely reversed.

The judge gave a way out, but the White House chose to keep climbing

According to U.S. media reports, informed sources say the judge’s ruling initially provided the Trump administration with a “dignified exit,” allowing the controversy surrounding the investigation to quietly fade. Trump was open to ending the investigation at that time.

However, the ruling itself provoked him. Assistants and allies say that because Trump has long believed the courts are biased against him, and due to his anger over the decision, he now supports appealing.

Federal Prosecutor Pirola immediately announced an appeal, calling the judge’s decision “absurd.” The leadership of the Department of Justice is now officially on Pirola’s side.

This timing clearly shows the issue: it’s not about new criminal evidence, but about a ruling that bruised his ego.

Investigation background: political pressure disguised as renovation costs

The investigation’s apparent focus is on the billions of dollars in overruns for the Federal Reserve headquarters renovation, and Powell’s related testimony to the Senate Banking Committee.

Judge Boasberg’s ruling was sharp, stating that “the government has essentially provided zero evidence of Powell’s criminal conduct; the reasons are so weak and unfounded that the court can only conclude they are excuses.” Powell himself has publicly stated that the true motive behind the investigation is his refusal of Trump’s rate cut request.

Bessent’s sharp comment: reappointment as director “departing from precedent”

On the same day, Treasury Secretary Scott Bessent, in an interview with Maria Bartiromo, issued a warning regarding Powell’s seat on the Fed Board (term until January 2028).

“Historically, only one former chair has continued to serve as a director, and that was at the president’s request,” Bessent said. “This would depart from past norms.” He also said that having a former chair remain on the board would cause “market chaos.”

This statement was reported by Nick Timiraos, a Fed correspondent for The Wall Street Journal, whose tone was notably stronger. Timiraos has previously forecasted shifts in Fed policy, and markets tend to react reflexively to his reports.

It’s worth noting that Powell’s term as chair expires on May 15, 2026, and he has stated he will step down at that time; but he has also explicitly said, “Until the investigation is fully concluded, transparent, and final, I have no intention of leaving the Fed.”

The real dilemma of Warsh’s nomination

Trump hopes to promote Kevin Warsh as Fed Chair, but this path is currently blocked in two ways.

First, Republican Senator Thom Tillis has vowed to block all Fed nominations until the DOJ investigation concludes. Coupled with unanimous Democratic opposition, Warsh’s nomination cannot pass the Senate Banking Committee.

Second, if Powell continues to serve on the board, even if Warsh ultimately becomes chair, the former chair would still be at the same table—precisely what Bessent referred to as “market chaos.”

Data indicates that the window of policy uncertainty at the Fed will be longer than anyone expected during this period.

Systemic noise in the crypto market

For risk assets, the noise over the Fed’s independence is not new: every time Trump pressures for rate cuts, markets have become accustomed to discounting policy uncertainty.

The difference this time is that the battleground has shifted from tweets to the courts, with participants expanding from Trump personally to the entire Justice Department machinery. This is not a controversy that can be settled within a single news cycle.

Market pricing currently views Warsh as hawkish, but support for AI-driven productivity theories leads many to believe he will ultimately lean toward rate cuts if he takes over. If Powell remains in office longer, prolonging the transition, the outlook for short-term interest rates will continue to be under pressure.

The numbers are clear: the chair position will be vacant on May 15, 2026, and the board seat expires in January 2028. The political and legal tug-of-war during this period is a systemic uncertainty that markets will have to price themselves.