U.S. judge rejects Trump administration's subpoena against Powell; Department of Justice vows to appeal

A judge in the U.S. federal court dismissed the Justice Department's grand jury subpoena against Federal Reserve Chairman Powell, citing almost no evidence, and ruled that the subpoena was intended for suppression rather than legitimate law enforcement, delivering a major setback to the Trump administration’s efforts to pressure the Fed through legal means.

In the ruling released on Friday, the 13th Eastern Time, Chief Judge James Boasberg of the U.S. District Court for the District of Columbia wrote that “substantial evidence shows” the main purpose of these subpoenas was to “harass and pressure Powell, forcing him to either comply with the President’s will or resign to make way for a more cooperative Fed chairman.”

Boasberg pointed out that the Trump administration “provided no evidence at all” to prove Powell committed any crime, “other than displeasing the President (Trump).” The Department of Justice promptly announced it would appeal, and Jeanine Pirro, the prosecutor leading the District of Columbia U.S. Attorney's Office, condemned Boasberg’s ruling as “shocking” during a press conference.

The judicial battle will have a direct impact on the direction of Federal Reserve policy and the outlook for interest rates.

Thom Tillis, a key member of the Senate Banking Committee and Republican Senator from North Carolina, previously warned that as long as the Justice Department’s investigation into Powell remains unresolved, he would block the nomination and confirmation of Trump’s pick for the next Fed chair, Kevin Warsh. Media outlets believe Boasberg’s ruling means Powell is now more likely to remain in office until his term expires this May.

Judge: Improper Motive for Subpoena, Retaliation for Policy Differences

Boasberg’s ruling is unusually sharp in its wording. The ruling is dated Wednesday, March 11, and was officially made public on Friday, March 13.

The ruling shows that, nominally, the subpoenas concern a roughly $2.5 billion renovation project at the Federal Reserve's headquarters and Powell’s testimony before the Senate Banking Committee last year about the project. The Justice Department sent the subpoenas to the Fed this January, threatening criminal prosecution. Powell responded with a rare, forceful video statement, directly accusing the investigation of being retaliation for the Fed’s refusal to set interest rates according to Trump’s wishes.

Boasberg wrote in the ruling: “On the one hand, evidence shows the government issued these subpoenas to the Fed’s Board to pressure its chairman to vote for rate cuts or resign. On the other hand, the administration has provided barely any evidence to suspect Powell of a crime; the reasoning is so flimsy and hollow that the court can only conclude such reasons are mere pretexts.”

The Fed declined to comment.

Prosecutor Vows to Appeal, Calling Ruling “Radical Judicial Intervention”

At a press conference on the day the ruling was released, Prosecutor Pirro strongly condemned the ruling. She said Powell “is now wrapped in a blanket of immunity,” and “this is wrong, with no legal basis.”

Pirro asserted that the investigation into Powell “has been arbitrarily disrupted by a radical judge,” and that the process “should have run its full course, but it did not. They should be ashamed.”

Pirro stated clearly that the Justice Department would appeal the ruling.

The White House did not immediately respond to the matter.

Warsh Nomination Faces Uncertainty, Rate Cut Schedule May Be Further Delayed

The direct political consequence of this legal tug-of-war centers on Trump’s nominee for the next Fed chair, Warsh.

On January 9 this year, the Fed received the subpoena, concerning Powell’s congressional testimony last year about the Fed’s headquarters renovation. Powell issued a rare video statement denouncing the investigation, and several Republican legislators also defended the Fed.

Several key senators, including Republican Thom Tillis of the Senate Banking Committee, warned that after the Justice Department issued a subpoena to the Fed regarding Powell’s statements on the renovation project, any Fed nominee from Trump would face stricter scrutiny.

When Trump announced Warsh’s nomination on January 30, Tillis stated on social media that Warsh is “a qualified nominee with a deep understanding of monetary policy,” but also indicated he would oppose the nomination until the Fed investigation is resolved.

This Friday, Tillis posted on social media that the new ruling “confirms how weak and baseless the criminal probe into Chairman Powell is—just a failed attack on Fed independence. The appeal will only further delay Warsh’s confirmation process.” He also wrote, “The D.C. U.S. Attorney’s Office should stand down, lest they disgrace themselves.”

Media noted that the market had already postponed expectations for the Fed’s first rate cut to the end of this year; under the current situation, Powell's likelihood of remaining until the end of his term has increased. This means the odds of rates staying above Trump’s desired level for longer have also risen. Fed officials have recently been broadly cautious, with only Trump’s nominee Stephen Miran and another board member Christopher Waller clearly supporting rate cuts.

Risk Warning and DisclaimerThe market carries risks; investments require caution. This article does not constitute personal investment advice, nor does it take into account the unique investment objectives, financial conditions, or needs of individual users. Users should consider whether any opinions, views, or conclusions in this article are appropriate for their own circumstances. Investment based on this is at your own risk.