A federal judge on Friday threw out two subpoenas the Justice Department issued to the Federal Reserve, all but branding the criminal probe invalid and handing a significant victory to the Fed and its embattled Chair Jerome Powell.
The DOJ, under D.C. District Attorney Jeanine Pirro, opened the criminal inquiry in January into whether Powell lied to Congress in testimony last summer about cost overruns at the Fed headquarters in Washington. Powell pushed back publicly with a video statement, asserting that the Trump administration was pursuing the investigation because it disagreed with the central bank’s handling of interest rates. President Trump regularly pushes for lower rates.
Read more: How much control does the president have over the Fed and interest rates?
US District Judge James Boasberg, in a sharply worded order, essentially agreed.
“A mountain of evidence suggests that the Government served these subpoenas on the Board to pressure its Chair into voting for lower rates or resigning,” he wrote. “On the other side of the scale, the Government has produced essentially zero evidence to suspect Chair Powell of a crime.”
The judge also echoed widely held concerns that the criminal case threatens the independence of the Fed and its ability to set monetary policy without political interference.
“It is hard to see the renovations and testimony as anything other than a convenient pretext for launching a criminal investigation that the Government launched for another, unstated purpose: pressuring Powell to knuckle under,” Boasberg wrote in the order, in which he cited multiple Truth Social posts by Trump lambasting the Fed and Powell for not lowering rates.
“In light of all the evidence, the only reasonable inference is that the Government targeted Powell ‘out of malice or an intent to harass’ and has launched a ‘fishing expedition’ to either find something to pin on him or to pressure him to fold,” he continued.
“That harassment seems aimed at bulldozing the Fed’s statutory independence.”
In a press conference Friday afternoon, Pirro called Boasberg an “activist judge” and accused him of neutering the investigation.
“Jerome Powell today is now bathed in immunity, preventing my office from investigating the Federal Reserve. This is wrong, and it is without legal authority,” Pirro said.
“This outrageous decision will be appealed by the Department of Justice.”
The Fed is at a critical juncture, with Powell’s term as chair ending in May and Kevin Warsh, Trump’s nominee to replace him, waiting in the wings. But Warsh’s confirmation has been stalled because of the criminal probe.
South Carolina Sen. Tim Scott, who questioned Powell last summer, reiterated this week that while he thought Powell was “woefully unprepared,” he did not believe Powell engaged in criminal activity. Scott, a Republican, chairs the Senate Banking Committee, Warsh’s first stop toward confirmation. He told CNBC that he’s looking to hold a confirmation hearing as soon as possible.
But North Carolina GOP Sen. Thom Tillis, who sits on the Banking Committee and supports Warsh’s nomination, has vowed to hold up the process until the probe is dropped.
On Friday, Tillis said an appeal of Boasberg’s decision will only further delay Warsh’s confirmation.
“This ruling confirms just how weak and frivolous the criminal investigation of Chairman Powell is and it is nothing more than a failed attack on Fed independence,” Tillis wrote on X.
Jennifer Schonberger is a veteran financial journalist covering markets, the economy, and investing. At Yahoo Finance she covers the Federal Reserve, Congress, the White House, the Treasury, the SEC, the economy, cryptocurrencies, and the intersection of Washington policy with finance. Follow her on X @Jenniferisms and on Instagram.
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