Washington — The Justice Department has ended its criminal investigation into Federal Reserve Chair Jerome Powell, closing a probe that sent shockwaves through financial markets and raised fundamental questions about central bank independence in the United States.
According to CNBC, the DOJ quietly dropped the investigation on Thursday, weeks after President Donald Trump publicly pressured the department to pursue charges against the Fed chair. The existence of the investigation had been closely guarded until leaks emerged earlier this month, triggering concerns among economists and former central bankers about political interference in monetary policy.
The probe reportedly focused on allegations that Powell had misused his position during the pandemic-era economic response, though the Justice Department never publicly specified the charges under consideration. Legal experts had expressed skepticism about the case from the start, noting that Fed chairs enjoy broad statutory independence in setting monetary policy.
"This investigation should never have happened," said Janet Yellen, who preceded Powell as Fed chair and now serves in private practice. "The Federal Reserve's independence is sacrosanct. When politicians weaponize law enforcement against central bankers for doing their jobs, they undermine the foundation of our economic system."
The investigation's closure comes at a critical moment for the Fed, which has been navigating the economic fallout from the recent conflict with Iran while managing persistent inflation. Interest rates remain elevated, and Powell has resisted White House pressure to cut borrowing costs more aggressively.
President Trump has repeatedly criticized Powell on social media, calling the Fed chair's policies "economic sabotage" and floating the possibility of removing him before his term expires in 2026. While the president lacks clear legal authority to fire a Fed chair, the criminal investigation was seen by many as an attempt to pressure Powell into resignation.
Congressional Democrats praised the DOJ's decision to drop the probe. "This investigation was a transparent attempt to intimidate the Federal Reserve," said Senator Elizabeth Warren of Massachusetts, a member of the Banking Committee. "Chair Powell and the Fed must be free to make decisions based on economic data, not presidential Twitter outbursts."
Some Republicans also expressed relief, though more quietly. Former Treasury Secretary Steven Mnuchin, who served in the first Trump administration, told reporters that "Fed independence benefits Republicans and Democrats alike."
The episode has nonetheless left scars on an institution that depends on public credibility. Bond markets showed unusual volatility during the three weeks when the investigation's existence was public knowledge, with yields on 10-year Treasuries swinging by more than 40 basis points—a significant move that reflected investor uncertainty about the Fed's future autonomy.
For swing states like Pennsylvania and Michigan, the implications extend beyond Washington politics. The Fed's interest rate decisions directly affect mortgages, car loans, and business borrowing across the country. Manufacturing states have been particularly sensitive to monetary policy, as higher rates can slow investment in new plants and equipment.
Kevin Warsh, a former Fed governor who has been mentioned as a potential Powell replacement, declined to comment on the investigation's closure. The White House also did not immediately respond to requests for comment.
As Americans like to say, "all politics is local"—even in the nation's capital. But when politics threatens the independence of the Federal Reserve, the consequences ripple through every community in America, from small-town credit unions to Wall Street trading floors.
