Bloomberg: Powell Threatens Trump Government: He Will Remain a Federal Reserve Board Member Until January 2028 if the Investigation Continues

Powell's lawyer has conveyed a clear signal to federal prosecutors: if the criminal investigation against Powell continues, he will not voluntarily leave the Federal Reserve Board of Governors after his term as chairman expires in May and his seat can be retained until January 2028. This statement directly ties the fate of the leadership transition at the Federal Reserve to the course of the Justice Department's investigation. According to court documents unsealed on Friday, Powell's private lawyer met with federal prosecutor Jeanine Pirro on January 29 and conveyed the above position. The Justice Department characterized this communication as "pressure" on the prosecutor. Meanwhile, Chief Judge James Boasberg of the Federal District Court for the District of Columbia revoked the grand jury subpoena for Powell on March 11, writing in a 27-page ruling that "the government has not provided any evidence that Powell committed any crimes, 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 confirmation process for Kevin Warsh, Trump's nominee for Federal Reserve Chairman, will be further delayed. Republican Senator Thom Tillis of North Carolina, a key member of the Senate Banking Committee, has stated that he will continue to block Warsh until the issues surrounding Powell's investigation are resolved, and the court ruling has not changed his stance. TD Cowen analysts stated on Friday that the probability of Powell staying on as chairman after May 15th has increased significantly due to these developments. RSM Chief Economist Joe Brusuelas believes that Powell's extended tenure may have a calming effect on the markets because "the independence of the central bank is an indispensable cornerstone of the modern American economy, and any erosion of it is not in the interest of the American economy." Unprecedented staying prospects and market impact Powell's term as Chairman of the Federal Reserve will end on May 15th. Traditionally, outgoing chairmen usually vacate their seats when the incoming chair is sworn in. However, Powell's statutory term as a Federal Reserve Board member does not expire until January 2028, meaning there is no legal obligation for him to step down. If he chooses to stay on, he will continue to serve as a voting member of the Federal Open Market Committee (FOMC) throughout the midterm election period and the final year of Trump's second term. For the financial markets, there is no precedent for the former chairman and the current chairman working together. How the markets will interpret any differences between the two and how the newly appointed chairman by Trump will share decision-making authority with his predecessor are both unknown. TD Cowen analysts stated on Friday that the possibility of Powell remaining in office after May 15th has increased due to the Justice Department's appeal and the statements in the unsealed documents. However, some believe that Powell's continued tenure may help stabilize expectations. RSM Chief Economist Joe Brusuelas pointed out on Friday that an extension of Powell's term may soothe the markets. He emphasized that the independence of the central bank is an indispensable condition for the modern American economy, and weakening that independence is not in the interest of the American economy. Escalation of legal conflicts and grand jury investigations The unsealed documents reveal the details of the confrontation between the two sides in the meeting on January 29th. Powell's lawyer conveyed four points to federal prosecutor Jeanine Pirro: the president lacks sufficient votes in the Senate to confirm a new chairman; Powell believes that maintaining the independence of the Federal Reserve requires him to stay in his position; if the investigation is not resolved, he will not give up his board seat; but if the investigation is withdrawn, the outcome may be different. The investigation stemmed from Powell's testimony before the Senate Banking Committee in June last year regarding a $25 million overspending on the renovation budget for the Federal Reserve's Washington headquarters. The U.S. Attorney's Office launched a grand jury investigation at the end of 2025 to determine if the overspending constituted fraud and if Powell made false statements to Congress. According to the U.S. Attorney's Office, they contacted the Federal Reserve in December to arrange a meeting but received no response. On March 11th, Chief Judge James Boasberg of the U.S. District Court for the District of Columbia revoked the related grand jury subpoena. In a 27-page opinion unsealed on Friday, he stated that the subpoena had no legitimate law enforcement purpose and said, "the government has provided no evidence that Powell committed any crimes other than making the president angry." The judge inferred that the government was targeting Powell out of malice or harassment. Powell had previously publicly fought back, stating that the threat of criminal charges was because the Federal Reserve sets interest rates based on the public interest rather than presidential preferences. Nomination obstacles and political deadlock Despite the court's ruling in favor of Powell, the Justice Department has not backed down. Jeanine Pirro criticized Chief Judge James Boasberg as a "radical judge" at a press conference on Friday, calling his ruling "lawless," and announced that the Justice Department would appeal. She accused Powell of currently being protected by immunity, preventing her office from investigating the Federal Reserve. When asked if the appeal would further delay the confirmation of Trump's nominee for Federal Reserve Chairman, Jeanine Pirro dismissively stated that she only cared about the legal aspects, and the rest was just noise. The immediate consequence of this legal battle is that the nomination of former Fed Governor Warsh is stalled in the Senate. Republican Senator Thom Tillis reiterated on Friday that the Justice Department's appeal would only further delay the confirmation process of Warsh as the next Federal Reserve Chairman, pledging to block the nomination until the dust settles on Powell's investigation. In response to the unsealed court documents, the White House did not directly address the contents of the documents in a statement. According to media reports, White House spokesperson Kush Desai stated that Kevin Warsh's academic background, private sector experience, and previous service on the Federal Reserve Board make him fully qualified to be the next Federal Reserve Chairman. He emphasized that the White House is closely collaborating with Congress to quickly confirm the nomination and restore public confidence and credibility in the Federal Reserve. This article is translated from beyond the wall street, GMTEight editor: Chen Wenfang.