Powell 'Threatens' Trump Administration: If Investigations Continue, He Will Remain as Fed Governor Until January 2028

Powell’s lawyer previously sent a clear signal to federal prosecutors: If the criminal investigation into Powell continues, he will not voluntarily leave the Federal Reserve Board after his term as Chair ends in May, and his Board seat can be retained until January 2028. This statement directly links the fate of the Fed leadership transition to the direction of the Justice Department investigation.

According to court documents unsealed on Friday, Powell’s private attorney met with federal prosecutor Jeanine Pirro on January 29 and conveyed the above position. The Justice Department characterized this exchange as “pressure” on the prosecutor. Meanwhile, Chief Judge James Boasberg of the U.S. District Court for D.C. on March 11 revoked the grand jury subpoena against Powell, stating in a 27-page ruling that “the government has provided no evidence that Powell committed a crime; the only reasonable inference is that the government is targeting Powell out of malice or harassment.” Prosecutor Pirro immediately announced an appeal.

The initiation of the appeal process means that the Senate confirmation process for Trump-nominated Fed Chair candidate Waller will face further delays. North Carolina Republican Senator Thom Tillis, a key vote on the Senate Banking Committee, said he would continue to block Waller until the Powell investigation issue is resolved, and the court ruling has not changed his stance.

TD Cowen analyst said on Friday that the probability of Powell remaining in office beyond his May 15 term has significantly increased due to these developments. RSM Chief Economist Joe Brusuelas believes that Powell’s extension could serve to reassure markets, as “central bank independence is an essential cornerstone of modern U.S. economy, and undermining it is not in America’s economic interest.”

Unprecedented prospects of reappointment and market impact

Powell’s term as Fed Chair ends on May 15. Traditionally, the outgoing Chair would vacate their Board seat upon the swearing-in of the successor. However, Powell’s statutory term as a Fed Board member extends until January 2028, meaning there is no legal requirement for him to resign. If he chooses to stay, he will continue to serve as a voting member of the FOMC throughout the midterm elections and even into the last year of Trump’s second term.

For financial markets, there is no precedent for a former Chair serving alongside the current Chair. How the market will interpret potential disagreements between the two, and how the new Chair appointed by Trump will share decision-making with the predecessor, remain unknown. TD Cowen analyst said on Friday that, given the Justice Department’s appeal and government statements in the declassified documents, the likelihood of Powell remaining after May 15 has increased.

However, some believe that reappointment could help stabilize expectations. RSM Chief Economist Joe Brusuelas pointed out on Friday that Powell’s extended tenure might calm markets. He emphasized that central bank independence is an indispensable condition for the modern U.S. economy, and weakening it would not serve American economic interests.

Legal showdown intensifies with grand jury investigation

The declassified documents reveal details of the confrontation during the January 29 meeting. Powell’s lawyer conveyed four points to federal prosecutor Jeanine Pirro: The President lacks enough Senate votes to confirm a new Chair; Powell believes maintaining Fed independence requires him to stay in office; if the investigation remains unresolved, he will not relinquish his Board seat; but if the investigation is dropped, the outcome could differ.

This investigation stems from Powell’s June last year testimony before the Senate Banking Committee regarding the $2.5 billion Washington headquarters renovation budget overruns. By the end of 2025, the U.S. Attorney’s Office launched a grand jury probe to determine whether the overrun involved fraud and whether Powell made false statements to Congress. According to the prosecutors, they contacted the Fed in December seeking a meeting but received no response.

On March 11, Chief Judge James Boasberg of the D.C. District Court revoked the grand jury subpoena. In the 27-page opinion unsealed on Friday, he stated that the subpoena lacked a legitimate law enforcement purpose and noted that “the government has no evidence that Powell committed any crime other than angering the President.” The judge inferred that the government’s targeting of Powell was out of malice or harassment. Powell had previously publicly countered, saying that the threat of criminal charges was due to the Fed setting interest rates based on public interest rather than presidential preferences.

Nomination deadlock and political stalemate

Despite the court ruling in favor of Powell, the Justice Department has not relented. Pirro criticized Judge Boasberg as an “activist judge” during a Friday press conference, claiming his ruling was “lawless,” and announced that the DOJ would appeal. She accused Powell of currently being protected by immunity, preventing his office from being investigated. When asked whether the appeal would further delay Waller’s confirmation as Fed Chair, Pirro dismissively said she only cares about the legal process—“the rest is just noise.”

The direct consequence of this legal battle is that Waller’s nomination, backed by Trump, faces a deadlock in the Senate. Thom Tillis, a key Republican on the Senate Banking Committee, reiterated on Friday that the Justice Department’s appeal would only further delay Waller’s confirmation, vowing to block the nomination until the Powell investigation is resolved.

In response to the declassified court documents, the White House issued a statement that did not directly address their content. Media reports quoted White House spokesperson Kush Desai as saying that Kevin Warsh’s academic background, private sector experience, and previous tenure on the Fed Board make him fully qualified to be the next Fed Chair. He emphasized that the White House is working closely with Congress to expedite the nomination and restore public confidence and credibility in the Fed.