Federal Reserve Chair Powell Faces Criminal Referral Over Eccles Building Renovation

Federal Reserve Chair Jerome Powell is facing potential legal scrutiny following a criminal referral to the Department of Justice (DOJ) by U.S. Representative Anna Paulina Luna. The Florida congresswoman has accused Powell of providing false testimony regarding the renovation of the Eccles Building, the headquarters of the Federal Reserve, which is estimated to cost $600 million. Luna's letter to the DOJ alleges that Powell made materially false statements during his testimony before the Senate Banking Committee on June 25. She highlighted discrepancies in Powell's statements about the additional costs and the significance of the renovation changes, claiming that he downplayed their importance in both his testimony and a letter to the Director of the Office of Management and Budget, Russel Vought.

The referral escalates the tension between Powell and Donald Trump, who has repeatedly urged significant interest rate reductions. Trump has publicly criticized Powell's monetary policy, even suggesting that the heightened scrutiny might prompt Powell to resign. The referral reinforces Trump's criticism of Powell's unwillingness to be more aggressive in monetary policy. If found guilty of perjury, Powell could face up to five years in prison and financial penalties. The DOJ has not yet responded to the referral, and no official charges have been filed.

Reports suggested that Treasury Secretary Scott Bessent played a role in convincing Trump not to dismiss Powell. However, Trump publicly denied any such influence, stating that he knows what is best for the market and the country. Bessent, in an interview, reiterated that Trump seeks advice from a wide range of allies and advisors before making decisions. He also cautioned that dismissing Powell could provoke lawsuits and a meltdown in the financial markets. Trump has previously accused Powell of preventing the Federal Reserve from lowering interest rates to make housing more affordable, calling him a “numbskull” and stating that he is making it difficult for people, especially the young, to buy a house.

The criminal referral comes amid ongoing political tensions and raises broader implications for market trust and economic policy. The dispute centers around the necessity and cost of the renovation project, with critics arguing that the Fed has overstepped its authority and engaged in wasteful spending. The Fed, however, maintains that its actions are within its legal mandate and that the building renovation project is necessary to ensure the safety and security of its facilities. The outcome of the criminal referral remains uncertain, but it is clear that the dispute is far from resolved. Financial analysts note that while Powell's referral does not include direct financial transactions, macroeconomic uncertainty could affect market stability.