Can a subpoena redraw the map of American economic power?
Federal Reserve Chair Jerome Powell, who will step down as chair on May 15, suddenly finds himself at the center of a legal and political storm: a Justice Department criminal inquiry into whether he misled Congress about cost overruns tied to a multibillion-dollar renovation of Fed offices. The probe — and the timing of its public emergence — has thrust an arcane procedural question into the spotlight: will Powell leave the Fed altogether when his chairmanship ends, or will he remain on the Board of Governors until 2028?
Why that choice matters
If Powell steps off the board, President Trump could fill the vacancy and, with a few more appointments, assemble a majority sympathetic to his demand for deep interest-rate cuts and other sweeping reshuffles. If Powell stays as a governor after May, he could deny the White House that immediate control, preserving a longstanding mix of institutional independence and internal checks that have kept the Fed insulated from day-to-day White House politics.
The legal cloud changes the confirmation math. Several Republican senators on the Banking Committee have signaled reluctance to consider Fed nominees while Powell’s situation remains unresolved; Sen. Thom Tillis, for example, said he would withhold votes until the legal questions are settled. That kind of delay could leave any new chair in office but without a sympathetic board — a rare scenario last seen decades ago.
What the investigation alleges
Prosecutors are examining Powell’s testimony last June about cost overruns on a roughly $2.5 billion renovation project for two Federal Reserve buildings. Subpoenas seeking documents and testimony have been sent to the Fed itself by the U.S. attorney in Washington. The Fed has acknowledged receiving subpoenas and said it would comply, while Powell has declined to discuss details publicly.
Some critics — both inside and outside Washington — describe the inquiry as politically charged, arguing it looks designed to pressure Powell into vacating his seat and thereby open the door to a Trump majority at the Fed. Supporters of the investigation say potential false statements to Congress are serious and deserve scrutiny like any other.
The practical scenarios
- If Powell stays on the Board of Governors after May, he and other holdovers could outvote a new chair on many decisions. That would blunt the administration’s ability to force steep rate cuts and to remake the Fed’s governance quickly. As former Fed economist David Wilcox told reporters, he finds it “very difficult to see Powell leaving before midnight on Jan. 31, 2028.”
- If Powell resigns or is forced off the board, the White House could appoint enough members to tilt policy — and perhaps pursue structural changes, including measures advocated by some Treasury officials who want to shrink the Fed’s reach.
Either outcome has market consequences: investors hate policy uncertainty, and the question of who controls interest rates is central to mortgage rates, borrowing costs and stock valuations. Tools that surface market reactions and sentiment — things like Google’s revamped finance features — become busier as traders and analysts parse every development for clues about future rate policy tools like Google Finance's Deep Search.
Politics and precedent
Nearly all modern Fed chairs have left the board after their chairmanship ended. There are exceptions: Marriner Eccles stayed for years after his time as chair in the late 1940s and played a consequential role in postwar policy, and Arthur Burns briefly remained in the late 1970s. Those examples show the choice is not purely ceremonial — a holdover can shape policy and, in moments of stress, confront the White House.
The current dispute also feeds a broader argument about the erosion of norms in Washington: the same tools of oversight that once policed corruption are now being deployed in partisan fights, and institutions built to resist short-term political pressure are being tested in real time. In an era where powerful technology and networks accelerate market reactions and magnify political signals, the stakes feel particularly high — a reminder of how much the background rules matter even as headlines veer toward personalities the accelerating role of technology in markets and policymaking.
What Powell might do
Powell has publicly declined to preview his plans. Remaining on the board would be an unusual step — and one fraught with political heat — but some Fed-watchers argue he could view it as a duty to preserve institutional stability amid what they see as an aggressive attempt to politicize the central bank.
Others worry that staying would only deepen the crisis: a sitting governor under criminal investigation would be a distraction for the institution that sets policy for the entire economy. The choice is part legal calculus, part statesmanship: whether Powell believes his presence steadies markets and the Fed’s reputation or merely prolongs a constitutional and political tug-of-war.
A living experiment in independence
This moment is a rare, live test of how independent the Federal Reserve really is. The questions are technical on their face — terms of appointment, committee votes, Senate timing — but their implications are broad: control over interest rates, confidence in central banking, and the precedent for how future administrations wield law enforcement in political contests.
Whatever route unfolds, the episode will be studied in classrooms and courtrooms alike. The Fed’s marble halls — and the shows of power that play out inside them — are suddenly less abstract and more consequential than they have been in a generation.