Hassett Downplays Powell's Federal Criminal Probe, Says He Expects 'No Issues'

Federal Reserve Chair Jerome Powell is under a criminal investigation by the U.S. Department of Justice (DOJ). The probe, initiated by U.S. Attorney for the District of Columbia Jeanine Pirro, centers on Powell’s testimony regarding the $2.5 billion renovation of the Federal Reserve’s headquarters according to reports. The investigation has sparked political debate and raised concerns about the independence of the central bank.

Markets initially reacted with sharp declines following the news. The S&P 500 and Nasdaq both fell nearly 0.4% within the first hour of trading. However, the market soon rebounded, with the S&P 500 closing 0.1% higher and the Nasdaq climbing 0.4%. Investors appeared to treat the news as a short-term disruption rather than a long-term threat to monetary policy.

Kevin Hassett, the Director of the National Economic Council and a potential replacement for Powell, downplayed the significance of the probe. He expressed confidence that the investigation would not result in any major issues for Powell or the Fed. His remarks suggest the administration may be preparing for a resolution that preserves the Fed’s independence according to analysis.

Why Did This Happen?

The DOJ investigation focuses on allegations that Powell gave misleading testimony to the Senate Banking Committee in June 2025 about the renovation of the Federal Reserve’s Marriner S. Eccles Building. Critics, including Russell Vought of the Office of Management and Budget (OMB), accuse the Fed of wasteful spending on luxury upgrades and inaccurate cost reporting according to reports.

The renovation project has already faced significant scrutiny. The total cost has risen to $2.5 billion from an original estimate of $1.9 billion, partly due to unforeseen challenges like asbestos removal and changes mandated by federal design requirements according to construction reports.

How Did Markets React?

Although the initial market reaction was negative, the broader trend was one of resilience. Technology stocks, including Nvidia and Microsoft, saw increased demand as investors focused on long-term AI-driven productivity according to market data. In contrast, financial stocks like JPMorgan Chase and Goldman Sachs faced uncertainty due to concerns about regulatory stability and the potential impact on interest rate policy according to analysis.

Safe-haven assets also experienced a surge in demand. Gold reached a record high of $4,629, and Bitcoin approached $92,000 as investors sought protection from potential economic instability according to reports. The U.S. dollar also weakened against the euro and British pound according to currency data.

What Are Analysts Watching Next?

Analysts are closely monitoring whether Powell will resign or continue to resist the DOJ subpoenas. A resignation could trigger a more severe market reaction, particularly if a replacement aligned with the administration’s interests is appointed according to market analysis.

Investors are also watching for potential changes in the Fed’s communication strategy. To maintain its independence, the Fed may adopt more transparent data-dependent approaches to demonstrate that its decisions are based on economic conditions, not political pressure according to analysis.

Kevin Hassett, as a potential successor to Powell, has expressed support for the DOJ’s investigation. He emphasized the importance of understanding how taxpayer money is being spent, suggesting that the administration views the probe as a necessary step in ensuring accountability according to analysis.

The coming months will be crucial for the Fed and the market. With Powell’s term as chair set to expire in May 2026, the transition period could bring further volatility. Markets will remain focused on the outcomes of the DOJ investigation and any potential shifts in monetary policy according to market reports.

For now, investors appear to be treating the situation as a temporary disruption. The market’s ability to recover quickly suggests that the broader economic outlook remains intact, with AI-driven productivity and strong corporate earnings continuing to drive long-term trends according to analysis.