It was peculiar in some way because it took place on a Tuesday. Without an appointment or prior notice, two deputies from U.S. Attorney Jeanine Pirro’s office arrived at the Federal Reserve’s headquarters renovation site in Washington, asking questions of the construction workers and asking to take a tour. They expressed a desire to see the advancement. The cranes remained upright. The building was still surrounded by scaffolding. Furthermore, the men in charge of US monetary policy had nothing to do with the discussion.
The prosecutors were unable to enter. safety procedures, according to the Fed. No prior authorization. They were essentially shown the way out and given the contact details of the central bank’s legal staff. The image of federal prosecutors conversing with men wearing hard hats while searching for evidence of a crime in drywall and cost overruns has an almost theatrical quality. It’s difficult not to wonder what they genuinely anticipated discovering.
The official narrative revolves around money. An 80% overrun on the initial budget resulted in a $2.5 billion renovation, up from an earlier estimate of about $1.9 billion. Pirro put it succinctly: the country’s monetary policy is being run by people incapable of overseeing a construction project. It’s a tidy soundbite. However, very few people in this area think that the renovation is the true story, and it’s worth taking a moment to consider that.
In January, Powell himself stated as much. He described it as a result of the Fed determining interest rates based on its assessment of the economy rather than the President’s preferences. For over a year, Trump has publicly criticized Powell and demanded that the benchmark rate be lowered from approximately 3.6% to 1%, a level that, it should be noted, no Fed official supports. There has been unrelenting and unusually open pressure. The majority of presidents who rely on the Fed do so covertly. Quiet has been the exact opposite of this.
Meanwhile, the legal foundation continued to deteriorate. In a closed hearing in March, a prosecutor acknowledged that there was no proof of a crime. Judge James Boasberg quashed the subpoenas, stating that there was virtually no evidence and that the justification was flimsy and unsupported. A federal judge’s use of blunt language usually has a deeper meaning. The fact that the unexpected visit occurred despite the department’s declaration that it would file an appeal indicates that the objective was most likely never a conviction.
The whole thing collapsed by the end of April. On X, Pirro declared that her office was closing the investigation and turning it over to the Fed’s inspector general, but she added that she wouldn’t think twice about reopening it if new information became available. It was a convenient time. Now that the investigation is over, Trump’s choice to succeed Powell, whose term as chair expires on May 15, is Kevin Warsh. Until the investigation was concluded, Senator Thom Tillis had been obstructing Warsh. That barrier has also vanished.
Former Fed chairs from both parties expressed concern about all of this for a reason. Economists did not create the concept of central bank independence just to feel important. It allows monetary policymakers to focus on inflation in 2029 rather than the upcoming election. Both Johnson and Nixon relied on the Fed for cheap money, and it wasn’t until Volcker raised interest rates to 20% and severely strained the economy that the ensuing prolonged inflation was contained. The cost of the lesson was high.
The question of what was truly established remains. Even though a criminal investigation turned up nothing, it was still able to impede a confirmation, put pressure on a sitting chair, and show that the Fed can be targeted by the prosecution’s apparatus. Powell might avoid giving Trump another seat by remaining on the board until 2028. Warsh maintains that he was not asked to commit to a rate. It’s still unclear if any of that is true. However, the precedent is what remains.
