Federal Reserve Chair Jerome Powell could face legal scrutiny after a criminal referral by U.S. Representative Anna Paulina Luna. The Florida congresswoman has alleged that Powell testified falsely about the renovation of the Eccles Building of the Federal Reserve at a high cost.
In a letter to the Justice Department, Luna claimed Powell testified falsely before the Senate Banking Committee on June 25. She provided discrepancies in his utterances on the additional cost of the $600 million. She also described his utterances as material statements of falsity. According to Luna, Powell lied that these changes were minor, as was the case in internal documents that were examined by the congressional investigators.
The accusation also contends that Powell had written a letter to the Director of the Office of Management and Budget, Russel Vought, where he allegedly downplayed the importance of the renovation changes.
Legal stakes are rising
The criminal referral escalates the tension between Powell and President Donald Trump, who had urged a considerable interest rate reduction numerous times. Recently, Trump advised the Federal Open Market Committee to reduce rates by 300 basis points.
These trends in the current market anticipate a 56.1% possibility of the Fed cutting interest rates during its September meeting this week. Analysts say that this has boosted expectations.
Although Trump has pondered the possibility of firing Powell, he has told news outlets there is no such possibility. But he said the heightened scrutiny might prompt Powell to resign, should any legal or reputation pressure come to bear.
The referral further reinforces the criticism Trump has constantly issued concerning Powell’s unwillingness to be aggressive in monetary policy. Powell could face up to five years in prison and financial penalties if found guilty of perjury. The Department of Justice has not yet responded to the referral, and no official charges have been filed.
White House denies influence from the Treasury Secretary
Reports from the Wall Street Journal suggested that Treasury Secretary Scott Bessent played a role in convincing Trump not to dismiss Powell. However, Trump publicly denied any such influence in a social media post on Sunday.
“Nobody had to explain that to me,” Trump wrote. “I know better than anybody what’s good for the Market, and what’s good for the U.S.A.”
In an interview with CNBC, Bessent did not entirely push the account recorded by the Journal but reiterated that Trump seeks many people’s opinions before making decisions. “ The president draws advice from a wide range of allies and advisors,” he said. According to the report, Bessent had cautioned Trump that dismissing Powell would provoke lawsuits and a meltdown in the financial markets.
“What we need to do is examine the entire Federal Reserve institution and whether they have been successful.”
Bessett
Recently, Trump called Powell a “numbskull” and accused him of “making it difficult for people, especially the young, to buy a house.” The US president accused Powell of preventing the Federal Reserve from lowering interest rates to make housing more affordable. Powell took office in 2018 following Trump’s nomination of him as his successor to Janet Yellen in his first term as president.
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