A federal judge in the United States has dismissed a grand jury subpoena issued by the Department of Justice against Federal Reserve Chair Jerome Powell, citing an almost complete lack of evidence. The judge ruled that the subpoena was intended for coercive purposes rather than legitimate law enforcement, dealing a significant blow to the Trump administration's efforts to pressure the Fed through legal channels.
In a ruling made public on Friday, March 13, Eastern Time, Chief Judge James Boasberg of the U.S. District Court for the District of Washington wrote that "substantial evidence indicates" the primary aim of the subpoenas was to "harass and pressure Powell into either yielding to the President's wishes or resigning to make way for a Fed Chair willing to cooperate."
Judge Boasberg noted that the Trump administration "provided no evidence" that Powell had committed any crime, "apart from having drawn the President's [Trump's] displeasure." The Justice Department promptly announced it would appeal the decision. At a press conference, Jeanine Pirro, the prosecutor leading the U.S. Attorney's Office for the District of Columbia, condemned Boasberg's ruling as "appalling."
This legal confrontation is expected to have direct implications for the direction of Federal Reserve policy and the outlook for interest rates.
Prior to the ruling, Thom Tillis, a key Republican senator on the Senate Banking Committee from North Carolina, had warned that he would block the confirmation of Kevin Warsh, President Trump's nominee for the next Fed Chair, as long as the Justice Department's investigation into Powell remained unresolved. Media analysts suggest that Judge Boasberg's decision increases the likelihood that Powell will remain in his position until his term expires in May.
Judge: Subpoena Motivated by Improper Aims, Essentially Retaliation for Policy Disagreements
Judge Boasberg's ruling was unusually pointed in its language. Dated Wednesday, March 11, it was officially released on Friday, March 13.
Court documents reveal that the subpoena nominally concerned a $2.5 billion renovation project at the Federal Reserve's headquarters and Powell's testimony before the Senate Banking Committee on the matter last year. The Justice Department served the subpoena to the Fed in January, threatening criminal prosecution. Powell responded with an unusually strong video statement, asserting that the investigation was retaliatory, stemming from the Fed's refusal to set interest rates according to President Trump's desires.
In his ruling, Boasberg wrote: "On the one hand, the evidence indicates that the government issued these subpoenas to the Federal Reserve Board in order to pressure its Chair into voting for interest rate cuts or resigning. On the other hand, the government has provided almost no evidence to suspect Powell of criminal conduct; the thinness and hollowness of its justifications lead the Court to conclude they are pretextual."
The Federal Reserve declined to comment on the matter.
Prosecutor Vows Appeal, Calls Ruling Intervention by "Activist Judge"
At a press conference held on the day the ruling was released, prosecutor Jeanine Pirro strongly criticized the decision. She stated that Powell is now "cloaked in a shield of immunity," which she called "wrong and without any basis in law."
Pirro said the investigation into Powell was "arbitrarily disrupted by an activist judge" and that the process "should have been allowed to run its course, but it wasn't. They should be ashamed." She explicitly stated that the Justice Department would appeal the ruling.
The White House did not immediately respond to the matter.
Warsh's Confirmation Prospects Dim, Timeline for Rate Cuts Potentially Further Delayed
The immediate political consequence of this legal battle relates to Kevin Warsh, President Trump's nominee for the next Chair of the Federal Reserve.
On January 9 of this year, the Federal Reserve received a subpoena related to Powell's congressional testimony from the previous year concerning the renovation project of the Fed's headquarters. Powell issued a rare video statement condemning the investigation, and several Republican lawmakers also defended the Fed.
Key senators, including Republican Thom Tillis of the Senate Banking Committee, had warned that Trump's nominee for the Fed would face heightened scrutiny following the Justice Department's subpoena related to Powell's comments on the renovation project.
On January 30, the day Trump announced Warsh's nomination, Tillis posted on social media that Warsh was "a qualified nominee with a deep understanding of monetary policy," but also stated he would oppose the nomination until the Fed investigation was resolved.
This past Friday, Tillis posted on social media that the new ruling "confirms how weak and baseless the criminal investigation into Chairman Powell was, amounting to nothing more than a failed attack on Fed independence. An appeal will only further delay the confirmation process for Warsh to become Fed Chair." He added, "The U.S. Attorney's Office for the District of Columbia should stand down to avoid further embarrassment."
Media reports note that markets had already pushed back expectations for the Fed's first interest rate cut to the end of this year. Under the current circumstances, the probability of Powell serving out his full term has increased. This suggests that interest rates are more likely to remain at levels higher than those desired by President Trump for a longer period. Recent statements from Fed officials have generally been cautious, with only Stephen Miran, a governor nominated by Trump last year, and another governor, Christopher Waller, explicitly supporting rate cuts.
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