Fed faces crisis as Powell dispute collides with DOJ probe
The Federal Reserve is facing a growing institutional crisis as a legal standoff with the Department of Justice raises uncertainty over its leadership and independence.
A US federal court has blocked subpoenas issued by the Justice Department seeking documents linked to renovation cost overruns and testimony by Fed Chair Jerome Powell. Judge James Boasberg ruled the requests were made for an “improper purpose”, suggesting they were intended to pressure Powell to resign or adjust interest rate policy, News.Az reports, citing Reuters.
The dispute comes at a sensitive moment, with Powell’s term as chair due to expire in mid-May. The administration is seeking to install Kevin Warsh as his successor, but the confirmation timeline is tightening.
Powell has indicated he does not intend to leave his position on the Board until the investigation is resolved, raising the possibility of overlapping claims to leadership if a successor is not confirmed in time.
Analysts warn that such a scenario could create legal uncertainty and unsettle financial markets, as investors rely on the central bank’s stability and independence.
The situation is further complicated by tensions between the White House and the Fed. Unlike previous transitions, there has been limited coordination, with the administration openly critical of judicial decisions seen as protecting the central bank.
Powell has also declined to appear before a Senate committee, adding to the strain and raising questions about compliance with reporting obligations.
While removing a Fed chair requires a high legal threshold, any attempt to do so could depend on a broader Supreme Court ruling involving Fed Governor Lisa Cook.
Market participants are closely monitoring developments, with concerns that the dispute could become a source of volatility for interest rates and financial markets in the months ahead.
By Faig Mahmudov
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