Powell probe and Cook case put Fed independence and mortgage rates in the crosshairs
Federal Reserve chair Jerome Powell faces a criminal investigation, a hostile White House and open talk of his removal. Yet the same pressure that put him under scrutiny also appears to make it harder for president Donald Trump to actually push him out.
Under the Federal Reserve Act, a chair can be removed only for cause tied to misconduct. Legal scholars noted that presidents have rarely tested that boundary with the Fed, and that courts have treated the central bank as a special case, a “uniquely structured, quasi-private entity” with deep constitutional roots.
Any attempt to fire Powell outright would almost certainly have ended up at the Supreme Court, where justices already signaled greater deference to the Fed’s independence than to other agencies.
Even international central bankers issued an unusually blunt statement backing Powell and the institution he led.
“We stand in full solidarity with the Federal Reserve System and its Chair Jerome H. Powell. The independence of central banks is a cornerstone of price, financial and economic stability in the interest of the citizens that we serve. It is therefore critical to preserve that independence, with full respect for the rule of law and democratic accountability.
"Chair Powell has served with integrity, focused on his mandate and an unwavering commitment to the public interest. To us, he is a respected colleague who is held in the highest regard by all who have worked with him,” the statement said.
The message came from a roster that included Christine Lagarde of the European Central Bank, Andrew Bailey of the Bank of England, Michele Bullock of the Reserve Bank of Australia, Tiff Macklem of the Bank of Canada and other senior policymakers across Europe, Asia and the Americas.
“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 a video statement confirming that the Justice Department has served the Fed with grand jury subpoenas over his testimony on a $2.5 billion renovation of the central bank’s headquarters.
Critics inside and outside markets doubted that disagreements over “roof terrace gardens” and “vegetated roof spaces” amounted to the kind of gross misconduct that would justify dismissal, even if investigators concluded his congressional testimony has been imprecise. Mismanaging a construction project, they pointed out, was not in itself a crime.
Trump’s allies argued that Powell’s comments about changes to the building plan might have violated federal planning rules. The Fed countered that Congress has given its board “sole control” over its own buildings and that design tweaks to remove rather than add features did not require fresh approval.
Why Lisa Cook’s case matters more
The more immediate test of presidential power sat with Fed governor Lisa Cook. Trump has already tried to fire Cook over contested allegations of mortgage fraud; she denied wrongdoing and sued to keep her job. Lower courts blocked her removal, and the Supreme Court scheduled arguments on whether Trump could oust her “for cause”.
If the justices ultimately side with Cook, it would strengthen the shield protecting all Fed governors, including Powell, from politically tinged dismissals. Even a narrower ruling that raised the bar for “cause” would make it riskier to use an unfinished investigation as a pretext for firing the chair.
What it all means for money and mortgages
The Fed’s benchmark rate still sets the tone for funding costs up and down the curve, from warehouse lines to consumer home loans. Originators watched Powell’s press conferences for clues on when rate cuts might unlock pent-up refinance demand.
United Wholesale Mortgage (UWM) chief executive Mat Ishbia said the administration “wants lower rates” and that a trend toward lower borrowing costs would mean “more buyers will be able to buy houses and a lot of people will be able to refinance” in 2026.
With affordability still stretched but leverage shifting toward buyers, Mat Ishbia of United Wholesale Mortgage highlights opportunities for brokers as market share approaches 30% and policy signals point to lower rates ahead.https://t.co/7ug1Gc76Me
— Mortgage Professional America Magazine (@MPAMagazineUS) January 7, 2026
If anything, the pressure campaign risks the opposite effect. Some Fed watchers believe that, to protect its credibility, the central bank might now demand clearer evidence of economic weakness before cutting again, precisely to avoid appearing to yield to Trump.
Others warned that a politicized Fed could push long-term yields higher if investors demand extra compensation for inflation risk and institutional uncertainty, lifting mortgage rates even if short-term policy eventually moves lower.
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