Hidden threat: the US has launched a criminal investigation against the head of the Federal Reserve

On Monday, January 12, it became known that the U.S. Attorney's Office has launched a criminal investigation against Federal Reserve Chairman Jerome Powell. According to official data, this is due to the reconstruction of the regulator's headquarters. However, experts also see some political motives. For more information about the investigation and its causes, see the Izvestia article.

The headquarters is too expensive

The New York Times reported that the U.S. Attorney General's Office has launched an investigation into Fed Chairman Jerome Powell. It is connected with the reconstruction of the regulator's headquarters in Washington, as well as suspicions that Powell lied about the scale of the project.

According to the newspaper's sources, the investigation was approved in November last year by the District of Columbia Prosecutor Jeanine Pirro and includes an analysis of Powell's public statements, as well as an examination of expense reports. The New York Times article clarifies that Pirro is a longtime ally of US President Donald Trump, and the investigation itself is a major new legal front against Powell.

As it was stated later, the US president himself was unaware of Powell's impending criminal prosecution.

The head of the Fed confirmed in an address on the agency's website that the US Department of Justice on Friday sent a grand jury subpoena to the regulator, "threatening criminal charges in connection with testimony before the Senate Banking Committee last June," which, in particular, related to the reconstruction of the Fed headquarters.

Recall, the reconstruction of the historical building named after Eccles and the adjacent East Building were valued at $1.9 billion in 2021, but by 2025 the cost had increased by more than 30%. The amount needed to repair the buildings already exceeds $2.5 billion. Trump said in June 2025 that the final figure was $3.1 billion.

The preparation of the reconstruction project began in 2017, and work began in 2022. Their necessity was due to the fact that the buildings were built almost 100 years ago and have never been rebuilt. In addition, lead and asbestos were used for the construction of buildings at that time.

Among the reasons for the rise in the cost of reconstruction work are: inflation during the pandemic; rising costs of building materials; infrastructure problems; labor shortages; requirements of the design supervisory Board, and others.

As Malek Dudakov, an American political scientist, noted in an interview with Izvestia, there are big questions about the renovation of the Fed headquarters due to the fact that it has become too "posh" and "luxurious." The total amount, according to the expert, will exceed $ 3 billion. Because of all this, the American expert notes, Powell is accused of embezzlement, fraud, corruption and negligence — standard charges that are often brought against those involved in such large government projects that go beyond the budget and pre-set deadlines.

Powell's shift

As Powell said, in fact, the pressure exerted on him by the Trump administration is due to his position on interest rate regulation. He added that the regulator conducts monetary policy based on an assessment of what "will serve the interests of society, and not on the preferences of the president."

"It's about whether the Fed can continue to set interest rates based on evidence and economic conditions, or whether monetary policy will instead be driven by political pressure or intimidation," Powell said.

Malek Dudakov also notes that the main reason for the criminal investigation is not the reconstruction of the building.

"The real reason is to put political pressure on the Fed in order to reformat this organization the way the administration of Donald Trump would like,— the source told Izvestia.

In May of this year, Powell's term as head of the Federal Reserve ends. It is expected that someone close to Trump will take his place. Kevin Hassett and Kevin Warsh, economic advisers to the current administration, are considered the main candidates.

— The majority of the Fed's board of directors is already Republican and is guided by the approach and opinion of the current American president. In general, the reformatting program of the Fed is in full swing," emphasizes Malek Dudakov.

What's next

In the future, as the American expert notes, Trump will try to force the Fed to lower its key rate in order to more easily resolve the budget crisis and support the American economy.

— As we can see, there are mixed signals about the current state of the US economy. On the one hand, there is economic growth, but not as high as it was before. On the other hand, unemployment has increased quite a lot and it has not been possible to fully deal with inflation. In this regard, the Fed is lowering the rate, but slowly," explains the American expert.

In his opinion, the criminal investigation is an attempt by Trump to show that he is the main one in Washington right now.

— The future leadership of the Fed, no matter who Trump's appointee is, will have to be in a position where he may always be at risk of the same criminal case that was brought against Powell. It is important not to forget that Jerome Powell was appointed by Trump, but he quickly became disillusioned with him. I think Trump, of course, hopes that the next head of the Federal Reserve will learn the lessons of Powell and will indulge his policies in everything, at least while Trump is in office," concludes Malek Dudakov.

On the fall

The pressure on Jerome Powell has already affected the dollar exchange rate and received a reaction on the stock market. The US currency has fallen the most in the last three weeks. The dollar index, which measures its strength against a basket of six major currencies, fell 0.2% to 99.011. Later, the decline increased to 0.3%.

The euro strengthened by 0.17% to 1.1656 per dollar. The Swiss franc, in turn, rose 0.4% to $0.7979. The US currency declined even against risk-sensitive currencies such as the Australian and New Zealand dollars.

The news about the start of a criminal investigation against the head of the Federal Reserve has undermined confidence in the independence of the regulator, says investment adviser to the registry of the Central Bank, founder of the online investment university "Financology" Yulia Kuznetsova. The dollar index dropped below the psychologically important zone of 99-100 points, which increased pressure on the US currency, she said.

However, the current weakening of the dollar is also due to the gradual reduction of the US share in global trade and the subsequent strengthening of the yuan and the euro, says Vladimir Korovkin, head of research at the Skolkovo School of Management.

Denis Astafyev, an entrepreneur, fund manager and founder of the SharesPro fintech platform, believes that the news about the start of an investigation into the Fed chairman has become an institutional signal for the stock market. Investors are reviewing the level of confidence in the key regulator, against which the dollar has moved to correction.

"At the same time, the movement remains restrained in scale and looks like a reaction to growing political and regulatory uncertainty, rather than a revision of the long—term economic prospects of the United States," the expert draws attention.

The current situation, however, is worrying for traders. American indices have already shown a decline. Futures for the S&P 500, in particular, declined by 0.5%.

In general, a weak dollar has a dual effect on American investors, Yulia Kuznetsova believes.

— On the one hand, exporters and companies with a high share of foreign revenue benefit — their financial performance in dollar terms is improving. On the other hand, the purchasing power of capital is decreasing, inflationary expectations are rising and currency risks for domestic investors are increasing, especially in the context of instability around the Fed, the Izvestia interlocutor emphasizes.

A weak dollar has ambiguous consequences for American investors, Astafyev confirms. It supports the financial results of multinational corporations by revaluing foreign revenue and increasing the dollar value of foreign assets. However, at the same time, pressure through import prices is increasing and market volatility is increasing, the expert notes.

Against this background, gold reached a record, jumping to $ 4,600.33 per ounce. The price of silver also showed a significant increase, reaching a new maximum. Its exchange price has updated the historical record above the level of $ 84 per troy ounce.

The increase in gold and silver prices in this situation looks logical, Kuznetsova is convinced. Precious metals traditionally act as a protective asset during periods of weakening of the dollar and falling confidence in financial institutions. Investors use gold and silver as protection from political and financial uncertainty, as well as as a tool to preserve value amid expectations of softer monetary conditions and lower real yields, Astafyev lists.

— In the near future, interest in gold and silver is likely to continue. Gold may remain at historical highs, while silver may show increased volatility with the potential for outstripping growth,— Kuznetsova expects.

At the same time, further pressure on the Fed could lead to increased turbulence in financial markets, she suggests.

"The independence of the US monetary policy is being questioned, which may increase capital outflow from dollar assets and accelerate the global diversification of reserves in favor of gold and alternative currencies," predicts Kuznetsova.

A decrease in tension and a return of focus to macroeconomic indicators may contribute to the stabilization of precious metals prices and the market's transition to a phase of more moderate fluctuations, Astafyev points out.