Jerome Powell has made history as the first sitting Federal Reserve chair to become the subject of a criminal investigation by the Justice Department. The unprecedented probe has escalated tensions between the White House and the central bank while raising significant concerns about the Fed's institutional independence.

Investigation Details and Scope

The Justice Department investigation focuses on Powell's oversight of a major renovation project at the Federal Reserve's headquarters in Washington. Prosecutors are examining whether Powell misled Congress during testimony in June when discussing the renovation project. The inquiry was approved in November by Jeanine Pirro, the U.S. attorney for the District of Columbia.

Prosecutors have issued grand jury subpoenas and are reviewing spending records while contacting Powell's staff multiple times. The investigation examines discrepancies between earlier planning documents and the final design that Republican lawmakers later highlighted.

Renovation Project Costs and Overruns

The headquarters refurbishment project involves modernizing two historic buildings near the National Mall. The scope includes the Marriner S. Eccles Building, constructed in 1935, and a neighboring building on Constitution Avenue dating back to 1932. Neither structure has undergone comprehensive renovation since construction.

The Federal Reserve has attributed cost overruns to several factors including higher prices for materials, equipment and labor, unforeseen complications like additional asbestos and soil contamination, and the impact of tariffs on construction costs. The project includes removing asbestos and lead, addressing structural and waterproofing issues, upgrading security, and ensuring compliance with modern accessibility standards.

Project Features and Political Scrutiny

The renovation plans preserve much of the original classical architecture while adding modern features. Early planning documents from 2021 included amenities that later drew political scrutiny, with several features subsequently removed as plans evolved.

Current Project Features:

• New atriums and skylights
• Modern parking garage
• Enhanced security systems
• Updated accessibility compliance
• Structural and waterproofing improvements

Removed Features:

• Private elevators for senior officials
• Exclusive dining areas for leadership

Political Response and Fed Independence Concerns

Powell addressed the investigation in a rare video message on Sunday evening, characterizing it as an effort by the administration to use legal pressure to influence monetary policy. This marked a shift from the Fed's earlier strategy of treating renovation questions as technical and administrative rather than political issues.

The investigation occurs amid broader White House pressure on the Federal Reserve to cut interest rates. The renovation project became a focal point of administration attacks, with officials highlighting cost overruns and questioning the work's scope.

Support for Powell:

• Every living former Fed chair issued joint statement
• Several former Treasury secretaries backed Powell
• Republican lawmakers, including Senate Banking Committee members, expressed support
• Joint statement warned against using prosecutorial tools to pressure the central bank

Legal experts have indicated the probe could have far-reaching implications, including potential justification for attempting to remove Powell for cause, which would test longstanding norms protecting Fed independence. While the White House has denied linking the investigation to interest-rate policy, critics argue the timing and context suggest otherwise.

Former Federal Reserve chairs have issued an unprecedented joint rebuke of the Justice Department's criminal inquiry into Fed Chair Jerome Powell, warning that the investigation threatens the fundamental independence of America's central banking system.

Joint Statement from Former Fed Leadership

In a rare display of unity, former Fed chairs Janet Yellen, Ben Bernanke, and Alan Greenspan, along with other senior economic policymakers, released a joint statement on Monday condemning what they termed an "unprecedented attempt" to undermine Federal Reserve independence.

Background of the Criminal Inquiry

The controversy stems from a Justice Department criminal inquiry into remarks Powell made to Congress regarding renovation work at the Federal Reserve's headquarters complex in Washington. Powell disclosed the investigation in a video message on Sunday, revealing that the probe was opened under the Trump administration.

Institutional Independence at Stake

The former officials emphasized that Federal Reserve independence and public confidence in the institution are essential for achieving the central bank's core congressional mandates. They outlined the critical objectives that depend on this independence:

• Delivering stable prices
• Maintaining maximum employment
• Ensuring moderate long-term interest rates

The signatories warned that politicizing monetary policy erodes the rule of law, which they described as a cornerstone of United States economic strength. "It has no place in the United States," the statement declared, cautioning that undermining institutional credibility could have lasting consequences for financial stability and policy effectiveness.

Broader Economic Implications

The former Fed chairs drew parallels between the current situation and political interference observed in emerging market economies with weak institutions. They specifically warned that such actions have historically resulted in higher inflation and impaired economic functioning, suggesting that the inquiry could have far-reaching consequences beyond the immediate political implications.

The joint statement represents a rare intervention by former Federal Reserve leadership, underscoring the gravity with which these officials view the potential threat to central bank independence.