A brewing controversy is causing a stir within the White House, with officials pointing fingers at DC US Attorney Jeanine Pirro for her handling of the criminal investigation into Fed Chair Jerome Powell. This unexpected inquiry has not only blindsided the administration but has also forced them into a prolonged damage control campaign, according to four sources familiar with the matter.
The revelation of the criminal probe earlier this week sent shockwaves through senior government officials. Inside the White House, a scramble ensued to calm markets, reassure lawmakers, and distance President Donald Trump from the investigation, despite his well-known criticism of Powell.
Trump's attempts to engineer criminal investigations against his political opponents are no secret. However, the investigation into Powell has disrupted the White House's plans for a peaceful final term, raising concerns about confirming a new Fed chair who might be more amenable to Trump's economic agenda.
Powell himself issued a statement confirming the receipt of grand jury subpoenas, framing the probe as an attempt by Trump to pressure him into lowering interest rates. Even Trump's Treasury Secretary Scott Bessent expressed frustration with the move. Multiple Republican senators, including Sen. Thom Tillis, have criticized the investigation, with Tillis vowing to withhold his vote on any Powell replacement until the inquiry is resolved.
"Until this matter is settled, I'm not considering anybody," Tillis stated. "I wouldn't consider my mother for the post under these conditions."
Trump, in an interview with NBC News, denied knowledge of the investigation, criticizing Powell's performance at the Fed and in building construction. When asked about the probe on Tuesday, Trump repeated his attacks on Powell and defended his push for lower interest rates. Notably, Office of Management and Budget Director Russ Vought had previously raised questions about Powell's congressional testimony on a Fed headquarters renovation project, which is now part of the federal investigation.
Trump's criticism of the Department of Justice for not prosecuting his political foes quickly enough has intensified in recent weeks. Sources familiar with the matter told CNN that Trump has complained about the US attorneys in specific jurisdictions and Attorney General Pam Bondi for not following through on investigations into perceived enemies like California Senator Adam Schiff. Trump was also frustrated that prosecutors couldn't re-charge former FBI Director James Comey after a judge dismissed the original case.
Trump's aides and allies expressed frustration with Pirro, who they believe has disrupted their efforts to curb the president's attacks on Powell. Aides have also pointed to top housing official Bill Pulte, a vocal Powell critic who had been advocating for an investigation, including presenting Trump with a "wanted" poster of the Fed chair.
Pirro stated that her office had previously tried to contact the Fed but was ignored, necessitating the use of legal process. Pulte denied involvement in the investigation, and White House communications director Steven Cheung described him as one of the President's most loyal advisers.
Trump has frequently complained about Powell's reluctance to cut rates, deriding him for hindering economic growth and even considering firing him. Senior officials, including Bessent, had successfully persuaded Trump not to take action against Powell, arguing that it would cause market turmoil and that Powell's term was due to end in May anyway.
Since then, Bessent has been guiding the selection process for Trump's new Fed chair nominee, with an official announcement expected in the coming weeks.
However, the inquiry overseen by Pirro now threatens to complicate this timeline by casting doubt on the administration's respect for the Fed's independence. After opening the investigation in November, Pirro's office sent two emails to Federal Reserve staff over the December holidays seeking conversations, but these messages did not explicitly mention a criminal investigation or the possibility of issuing subpoenas.
Within days of those initial emails, Pirro's office served the central bank with a subpoena, prompting Powell to release a video response describing the probe as "unprecedented" and a consequence of the Fed's independent interest rate setting.
Trump aides and allies were alarmed by the rapid escalation, questioning the wisdom of pursuing the criminal probe and the likelihood of finding substantial evidence of wrongdoing.
"Whether there's fraud involved is perhaps worth investigating, but why not wait until after he's out?" said Stephen Moore, a former economic adviser to Trump. "It's not healthy, this kind of bitter rivalry between Trump and Powell."
The move also gave Powell an opportunity to take the offensive. After receiving the subpoena, the Fed chair decided to publicly disclose the situation, releasing a video response that circulated widely and put the White House on the defensive.
A bipartisan group of former Fed chairs and Treasury secretaries quickly rallied behind Powell, collectively denouncing the investigation in a statement. "This is just about as simple as it gets," said a Powell ally. "There's an enormous benefit of the doubt granted to Powell, and not to Donald Trump and the Justice Department."
Amid the backlash, some Trump officials now wonder if Powell might decide to stay at the Fed beyond his term as chair, a decision that could prevent Trump from filling the seat until 2028.
"Powell had no desire to stick around," said the ally. "But now, I wouldn't be so quick to say that. I think he might want to stay, just out of spite."
This ongoing controversy raises questions about the balance of power and the independence of institutions, leaving many to wonder what the future holds for the Fed and the White House.
