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US federal prosecutors have launched a criminal investigation into Jay Powell over a $2.5bn renovation of the Federal Reserve’s Washington headquarters, marking a major escalation of tensions between the White House and the chair of the central bank.
Powell said on Sunday evening that the Fed had on Friday received grand jury subpoenas and a threat of criminal indictment from the Department of Justice.
The legal action related to testimony Powell made before the Senate banking committee in June regarding a renovation project Trump officials claim has been “grossly mismanaged”.
The administration has used the project, which has run substantially over budget, as a line of attack against the US central bank and Powell, who Trump has labelled a “numbskull” over his refusal to slash interest rates to 1 per cent.
Powell said on Sunday that the legal action was a pretext to rein in the Fed’s independence to set interest rates as it sees fit.
“This new threat is not about my testimony last June or about the renovation of the Federal Reserve buildings. It is not about Congress’s oversight role; the Fed through testimony and other public disclosures made every effort to keep Congress informed about the renovation project,” the Fed chair said.
“The threat of criminal charges is a consequence of the Federal Reserve setting interest rates based on our best assessment of what will serve the public, rather than following the preferences of the President.”
Powell, who is set to step down as chair in May, has previously rebutted claims from Russell Vought, a close Trump ally who heads the Office of Management and Budget, that he had misled Congress over the renovation of the Fed’s headquarters on the National Mall.
The Fed chair said Vought’s accusations that he had either lied to lawmakers or failed to inform planners were incorrect, as changes made were not substantial enough to warrant disclosure.
Controversy over the project, which involves the renovation of historic buildings, erupted after Powell hit back against claims of largesse at a congressional hearing in late June.
The Fed chair told lawmakers on the Senate banking committee that media reports claiming the new headquarters featured VIP dining rooms and VIP elevators were false. Powell also said plans for new water features had been eliminated.