Powell "threatens" the Trump administration: If the investigation continues, he will remain as a Federal Reserve governor until January 2028.

Powell "threatens" the Trump administration: If the investigation continues, he will remain as a Federal Reserve governor until January 2028.

Powell’s lawyer has sent a clear message to federal prosecutors: If criminal investigations against Powell continue, he will not voluntarily leave the Federal Reserve Board after his term as Chairman expires in May. His board seat can be retained until January 2028. This position directly ties the fate of the Fed’s leadership transition to the direction of the Justice Department’s investigation.

According to court documents unsealed Friday, Powell’s private attorney met with federal prosecutor Jeanine Pirro on January 29 and conveyed this stance. The Justice Department characterized the communication as "pressure" on the prosecutor. Meanwhile, Chief Judge James Boasberg of the U.S. District Court for the District of Columbia quashed the grand jury subpoena against Powell on March 11, writing in his 27-page ruling that "the government has offered no evidence Powell committed a crime; the only reasonable inference is the government acted maliciously or with intent to harass Powell." Prosecutor Pirro immediately announced an appeal.

The initiation of the appeals process means the Senate confirmation process for Trump’s Fed Chairman nominee Kevin Warsh will face further obstacles. North Carolina Republican Senator Thom Tillis, a key vote on the Senate Banking Committee, stated he would continue to block Warsh until the Powell investigation is resolved, and the court’s decision has not changed his position.

TD Cowen analysts said Friday that the likelihood of Powell remaining after his term as Chairman ends on May 15 has clearly increased due to these developments. RSM chief economist Joe Brusuelas believes that Powell’s extended stay could help soothe markets, because "central bank independence is an indispensable cornerstone of the modern U.S. economy, and its erosion is not in the country’s interest."

Unprecedented Prospects for Continued Service and Market Impact

Powell’s term as Fed Chairman ends May 15. Traditionally, outgoing chairmen vacate their board seat when the successor is sworn in. However, Powell’s statutory term as a Fed board member does not end until January 2028, meaning there is no legal requirement for his departure. If he chooses to stay, he will remain a voting member of the Federal Open Market Committee (FOMC) through the midterm elections and even into the last year of a possible second Trump administration.

For financial markets, there is no precedent for a former chairman serving alongside the current chairman. How the market will interpret disagreements between the two and how Trump’s new appointee would share decision-making authority with the predecessor remain unknown. TD Cowen analysts said Friday that, given the Justice Department’s appeal and statements in unsealed documents, Powell’s likelihood of staying post-May 15 has increased.

Still, some believe Powell’s retention may help stabilize expectations. RSM chief economist Joe Brusuelas said Friday that Powell’s extended tenure could calm markets. He emphasized that central bank independence is an essential condition for the modern U.S. economy, and undermining it does not serve America’s interests.

The unsealed documents disclosed the details of the confrontation at the January 29 meeting. Powell’s lawyer gave prosecutor Jeanine Pirro four messages: The President lacks enough Senate votes to confirm a new chairman; Powell believes maintaining Fed independence requires him to stay; if the investigation isn’t resolved, he will not relinquish his board seat; but if the investigation is dropped, the outcome may be different.

The investigation stems from a Senate Banking Committee hearing in June last year concerning cost overruns in the Fed’s $2.5 billion Washington headquarters renovation. At the end of 2025, the U.S. Attorney’s Office launched a grand jury inquiry to determine whether the overruns constituted fraud and whether Powell misled Congress. According to the office, they had attempted to contact the Fed for a meeting in December but had received no response.

On March 11, U.S. District Court Chief Judge James Boasberg quashed the related grand jury subpoena. In his 27-page opinion unsealed Friday, he stated the subpoena lacked a lawful investigative purpose, declaring “the government has no evidence Powell committed any crime other than angering the President.” The judge reasoned the government acted out of malice or harassment. Powell had previously publicly stated that the threat of criminal charges resulted from the Fed setting rates based on public interest, not presidential preference.

Succession Blocked and Political Deadlock

Although the court ruled in Powell’s favor, the Justice Department did not back down. Jeanine Pirro, in a Friday press conference, criticized James Boasberg as an "activist judge," called his ruling "detached from the law," and announced the Department of Justice would appeal. She accused Powell of currently enjoying immunity, preventing her office from investigating the Fed. When asked whether the appeal would continue to impede Trump’s Fed Chair nominee’s confirmation, Pirro dismissed the matter, assuring she cared only about the legal side: "Everything else is just white noise."

The direct result of this legal battle is that former Fed Governor Warsh’s nomination is stuck in the Senate. Key Republican Senator Thom Tillis on the Senate Banking Committee reiterated Friday that the Justice Department’s appeal would further delay Warsh’s confirmation as the next Fed Chair, vowing to block the nomination until Powell’s investigation is concluded.

Faced with the unsealed court documents, the White House issued a statement declining to respond directly to the contents. Media reports said White House spokesperson Kush Desai stated Kevin Warsh’s academic background, private sector experience, and prior Fed Board tenure make him fully qualified to serve as the next Fed Chairman. He emphasized the White House is working closely with Congress to confirm the nomination as soon as possible and restore trust and credibility in the Fed.

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