According to informed sources, Federal Housing Finance Agency (FHFA) Director Bill Pulte is the key force behind the Trump administration's decision to subpoena Federal Reserve Chair Jerome Powell, a move that intensifies pressure on the central bank. Previously, Powell stated that the U.S. Department of Justice had served the Fed with a grand jury subpoena, threatening criminal prosecution related to his testimony before Congress in June 2025 concerning the ongoing renovation of the Fed's headquarters. Shortly before this, media reports citing details from sources revealed that federal prosecutors had initiated a criminal investigation into Fed Chair Powell, focusing on the multi-billion-dollar headquarters renovation project. In a statement released Sunday evening ET, Powell denied that the action was related to his testimony or the renovation project, conveying a message of defiance: this criminal subpoena is a "political pretext," and he vowed to resist pressure from Trump. Some Trump allies have expressed concern over the move, fearing that legal action against Powell could disrupt the bond market. Sources indicate they are also worried that this action could hinder Powell from leaving after his term as Fed Chair ends in May. Powell can remain on the Fed's Board of Governors until 2028, and by tradition, he has not yet indicated whether he intends to step down. While generally known for steady conduct, Pulte is an influential figure within the Trump administration, actively promoting controversial housing policies and investigating Trump's political rivals for alleged mortgage fraud. Previously, Pulte submitted a criminal referral to the Justice Department regarding Fed Governor Lisa Cook, providing a rationale for Trump's attempts to dismiss her. The U.S. Supreme Court is scheduled to hear Cook's case later this month. A senior U.S. administration official stated that the Justice Department, not Pulte's office, was behind issuing the subpoena, which is related to Powell's congressional testimony about the Fed building renovation. According to sources, the investigation is being handled by the U.S. Attorney's Office for the District of Columbia. Sources also revealed that U.S. Attorney for the District of Columbia, Jenny Piro, has approved the investigation into Powell. An unnamed source stated that U.S. Attorney General Pam Bondi has directed U.S. Attorney's offices to investigate potential misuse of taxpayer funds. Piro, a long-time Trump ally, was appointed to lead that office last year. This investigation marks a significant new legal front opened against Powell. According to some sources, several senior Trump aides were unaware of the matter until Powell received the subpoena on Friday evening. On Sunday, Trump denied knowledge of the Justice Department's investigation into the central bank during a news interview. Pulte accompanied Trump on a flight to Palm Beach, Florida, on Friday evening. He is a member of Mar-a-Lago and frequently visits the club and Trump's nearby private golf course when Trump is in Palm Beach on weekends. Trump's aides and allies are weighing the actions against Powell and their potential unintended consequences. One concern is how Wall Street will react, as the bond market might perceive it as a threat to Fed independence. Furthermore, this casts a shadow over Trump's efforts to replace Powell with a new Fed Chair. Trump has stated he has decided on the next central bank chief but has not yet announced it publicly. Leading candidates include National Economic Council Director Kevin Hassett and former Fed Governor Kevin Warsh. The subpoena has drawn strong criticism from Democrats and Republican Senator Thom Tillis of North Carolina. Senator Tillis, a member of the Senate Banking Committee, said, "If there was any doubt before about whether advisors inside the Trump administration are actively pushing to end the Fed's independence, there should be no doubt now. What's in question now is the independence and credibility of the Justice Department." Tillis stated he would oppose the confirmation of any Fed Chair nominee until "this legal issue is fully resolved." Opposition from a Republican senator could delay or even prevent Trump's nominee for Fed Chair from being confirmed by the Senate, a necessary step for appointment. This unprecedented move by the Trump administration marks a significant escalation in the long-standing dispute and interest rate tug-of-war between Trump and the Fed Chair. Trump, having returned to the White House, has long called for substantial interest rate cuts, even advocating for rates to fall sharply to 1% or lower. The current U.S. benchmark interest rate—the Fed's federal funds rate target range—is 3.5%-3.75%. Following this unprecedented political pressure on Fed independence, risk aversion surged significantly in financial markets on Monday, with the spot gold price hitting a record high.
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