The Chairman of the Federal Reserve, Mr. Jerome Powell, is facing serious legal risks after Republican Congresswoman Anna Paulina Luna (Florida) submitted a criminal referral to the U.S. Department of Justice, accusing him of perjury before the Senate regarding the renovation costs of the Eccles Building – the Fed's headquarters in Washington D.C.
Allegations of Perjury Before Congress
During the June 25 hearing before the Senate Banking Committee, Mr. Powell allegedly made inaccurate statements about the total renovation cost of up to $600 million for the Fed headquarters. According to Congresswoman Luna, Mr. Powell described these changes as 'minor' and 'insignificant,' while internal documents collected by congressional investigators indicate that the changes were substantial and significantly impactful.
Ms. Luna also pointed out discrepancies between Powell's testimony and a letter he sent to the Director of the Office of Management and Budget (OMB), Mr. Russel Vought, in which Powell is alleged to have deliberately downplayed the importance of the adjustments in this renovation project. If convicted of perjury before Congress, the Fed Chairman could face a sentence of up to 5 years in prison and significant fines.
Tensions Between Powell and Trump Continue to Escalate
The incident has heightened the already simmering tensions between Mr. Powell and former President Donald Trump. Throughout his tenure and in the current campaign, Trump has repeatedly criticized Powell for not taking a strong stance on interest rate cuts to support the economy, especially amid rising mortgage borrowing costs.
Trump recently called for the Federal Reserve to cut rates sharply by 300 basis points, and even considered firing Powell. However, in a recent statement, Trump denied this possibility but hinted that legal pressure or reputational harm could force Powell to resign.
Trump called Powell a 'numbskull' and accused him of 'making home buying more difficult, especially for young people.' According to Trump, the Fed has failed to help people access housing by not taking more aggressive action in monetary policy.
Treasury Department Intervention
In an article in the Wall Street Journal, sources indicated that Treasury Secretary Scott Bessent intervened, persuading Trump not to fire Powell to avoid causing chaos in the financial markets and getting embroiled in lawsuits. However, Trump denied this on social media: 'No one needs to explain that to me. I know better than anyone what is good for the market and for America.'
Speaking on CNBC, Mr. Bessent did not entirely dismiss the reports but asserted that Trump always listens to opinions from many sources before making decisions. He said, 'The president consults with many advisors and allies before each significant action.'
The Market is Waiting for Action from the Fed
At the same time, the market is anxiously watching the Fed's monetary policy meeting scheduled for this week. Market analysis tools show a 56.1% chance that the Fed will cut interest rates at the September meeting, a move driven by expectations from investors and increasing political pressure.
In the context of Powell facing legal risks and severe criticism from Trump, his political and professional future at the Fed is facing a significant challenge. While the Department of Justice has yet to provide an official response, Congresswoman Luna's criminal referral has opened a new chapter of uncertainty for the leadership position of the world's most powerful central bank.
Summary: The story surrounding Jerome Powell is an intersection of economics, politics, and law – clearly reflecting the tensions within the U.S. financial management system during a tumultuous period.
