A criminal investigation into Federal Reserve Chair Jerome Powell by the Department of Justice has Republicans worried about more than just legal proceedings. The bigger concern? Market chaos and political gridlock that could make everything worse.
Sen. Thom Tillis (R. N.C.) threw down a marker after news of the investigation went public: he won't support any Fed nominee from President Donald Trump until this mess gets sorted out. That's not just posturing. With the Senate Banking Committee split nearly down the middle, Tillis alone could prevent a nominee from reaching the Senate floor for a vote.
Sen. John Kennedy (R-La.) was even blunter in his criticism. He warned that a public fight between the White House and the Federal Reserve would likely push interest rates higher, not lower—exactly the opposite of what anyone wants. His take? This confrontation is both unnecessary and counterproductive.
Senate Majority Leader John Thune (R., S.D.) and Speaker Mike Johnson (R-La.) have expressed concerns too, but they're taking a wait-and-see approach, preferring to let the investigation run its course.
Bessent's Warning to Trump
According to an Axios report Monday, Treasury Secretary Scott Bessent pulled no punches in his assessment. He told Trump the federal probe into Powell "made a mess" and posed real risks to financial markets.
Axios also reported that senior administration officials suggested the push for criminal investigation may have partly originated with FHFA Director Bill Pulte. Pulte denied any involvement on Bloomberg TV Monday, saying the matter falls outside his responsibilities and deferring questions to the DOJ.
Trump himself distanced from the situation, telling NBC News on Sunday he had no knowledge of the probe. Still, he took the opportunity to criticize Powell as "bad" at both Fed and construction matters.
Fed Independence Under Fire
This investigation follows months of tension between the Trump administration and the Federal Reserve. Powell issued a statement Sunday accusing the Justice Department of using the Fed's $2.5 billion headquarters renovation—and related grand jury subpoenas—as "pretexts" to exert control over U.S. monetary policy.
Economist Justin Wolfers warned that Powell is "going to war" to defend the Fed's independence against what he termed the "Department of Recriminations." Markets are already feeling the uncertainty: investors drove gold and silver prices to record highs Monday as they reassess the Fed's autonomy. Former Fed Chair Janet Yellen called the probe "chilling" and cautioned that markets should be worried.
