Fed urges judge to deny bid to resurrect Jerome Powell probe subpoenas

• Judge Boasberg blocked subpoenas after finding 'abundant evidence' their purpose was to harass Powell into yielding to Trump's rate-cut demands or resigning
• Prosecutors cite $1.2 billion in renovation cost overruns but admitted 'we do not know' of any evidence of fraud when questioned by the judge
• The Fed's independent Inspector General audited the renovation years ago and raised no concerns about fraud, undermining the criminal probe's justification

Summary: Federal Reserve Resists Effort to Revive Powell Investigation

The Federal Reserve's Board of Governors has urged a federal judge to reject prosecutors' request to reconsider his decision blocking subpoenas in a criminal investigation of Fed Chair Jerome Powell. The probe, led by U.S. Attorney Jeanine Pirro, focuses on $1.2 billion in cost overruns for renovations of the Fed's Washington headquarters and Powell's congressional testimony about the project.

Key Developments:

Judge James Boasberg quashed the subpoenas on March 11, ruling that the investigation appeared politically motivated—designed to pressure Powell to comply with President Donald Trump's demands for faster, steeper interest rate cuts. Trump recently called Powell a "moron at the Fed," continuing a pattern of public criticism that Boasberg cited as evidence of improper motivation.

The Fed's lawyers argue prosecutors failed to meet the legal threshold for reconsideration, which requires new evidence, changed law, or clear error. At a sealed hearing, prosecutor G.A. Massucco-LaTaif admitted, "We do not know at this time" whether evidence of fraud exists, relying solely on the cost overrun magnitude as justification for investigation.

Market Implications:

The case introduces uncertainty around Fed leadership and independence. Senator Thom Tillis (R-NC) has pledged to block the confirmation of Powell's nominated successor until the investigation ends. Boasberg noted that the Fed's independent Inspector General previously audited the renovation without raising fraud concerns, and cost overruns on large construction projects are common.

Reversals of such judicial decisions are extremely rare. The ongoing political pressure on the Fed chair could impact market confidence in the central bank's independence regarding monetary policy decisions.