'Mountain of evidence’ points to Trump pressuring Powell for lower rates
A federal judge announced on Friday that he was blocking subpoenas served by the Justice Department to Federal Reserve chair Jerome Powell regarding alleged mismanagement of the central bank’s ongoing renovation.
Judge James Boasberg, chief judge of the US District Court of Washington, DC, blocked the subpoenas in a court filing.
"A mountain of evidence suggests that the Government served these subpoenas on the Board to pressure its Chair into voting for lower interest rates or resigning," Boasberg said in the filing. "On the other side of the scale, the Government has produced essentially zero evidence to suspect Chair Powell of a crime; indeed, its justifications are so thin and unsubstantiated that the Court can only conclude that they are pretextual."
The DOJ announced shortly after that it would appeal the ruling.
Powell himself announced the investigation in January. The probe centers on the Fed’s multi‑year, $2.5 billion renovation of its Washington headquarters, but markets quickly focused on the politics behind it and the potential fallout for borrowing costs, including mortgages.
Kenneth Katkin (pictured top), law professor at Northern Kentucky University’s Chase College of Law, said Powell likely decided to bring this into the public light because he knew the pressure from the administration was going to continue.
“I think Powell just decided that the pressure was going to never end,” Katkin told Mortgage Professional America. “I think that's what made Powell make the decision. Instead of just ignoring the whole thing and doing what he does, and not worrying about all the pressure being directed at him, I think he decided, this campaign is going to be relentless, and so he needs to push back.”
Fed set to meet next week
All of this comes as the central bank prepares to meet for the second time in 2026, now facing a two-sided mandate that continues to worsen on both ends.
The jobs market continues to soften as AI-fueled layoffs continue to increase. Meanwhile, the economy, which was believed to be rolling along, now appears to be sputtering, with Q4 2025 GDP revised down to just 0.7% growth on Friday.
The other mandate, inflation, continued its upward trend on Friday, with core PCE increasing. Inflation could continue to increase as oil prices have pushed up near $100 a barrel, thanks to the Iran war.
Warsh confirmation on hold
Senator Thom Tillis, who is on the Banking Committee, promised not to approve Trump’s pick for the new Fed Chair, Kevin Warsh, until the investigation into Powell was ended. He labeled the ongoing investigation “absurd.”
Tillis said today that he hopes the administration will not appeal the ruling, as it would continue to delay the confirmation of Warsh as the next Fed chair.
Next week’s Fed meeting is scheduled to be the next-to-last meeting for Powell as Fed chair, but until Warsh is approved, Powell would remain Fed chair.
Warsh’s delayed confirmation has also left Stephen Miran on the Fed board. His term was set to expire in January, but until his replacement is confirmed, he remains a Fed board member.
Powell has not yet confirmed what his plans are once his term as chair has ended, but Katkin thinks that as long as he’s being investigated, Powell isn’t going to resign from the Fed even after his term as chair ends.
“It would be typical for most chairs to actually resign from being a governor when their chairmanship ends,” Katkin said. “That's what they usually do, even though they're not required to do that. I think Trump actually just made that impossible. He probably has to stay on and not resign because he doesn't want to look like he was pushed out, or like he had to leave because he's actually a criminal.”
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