As of January 12, 2026, U.S. markets are on edge after the Justice Department issued grand jury subpoenas to the Federal Reserve, threatening criminal indictment against Chair Jerome Powell over his June 2025 testimony on the central bank’s headquarters renovation project. Powell called the probe an “unprecedented” escalation of political pressure tied to President Trump’s repeated demands for faster interest-rate cuts—prompting immediate sell-offs in stock futures, a slide in the dollar, and a flight to safe-haven assets like gold.
This guide explains the Trump-Powell feud, the DOJ subpoenas, their impact on markets, and what it means for Fed independence in 2026.
What Happened: DOJ Subpoenas Hit the Federal Reserve
On Friday, January 9, 2026, the DOJ served the Fed with subpoenas related to Powell’s Senate testimony about the $2.5 billion renovation of the Fed’s historic Washington headquarters. Powell, in a rare Sunday video statement, accused the administration of using the probe as a pretext to intimidate the central bank into lowering rates.
Key points from Powell’s statement:
- The subpoenas threaten criminal charges over his congressional comments.
- He insists the Fed sets rates based on evidence and public interest—not political preferences.
- “No one—certainly not the chair of the Federal Reserve—is above the law. But this unprecedented action should be seen in the broader context of the administration’s threats and ongoing pressure.”
Trump denied involvement, telling NBC the subpoenas “have nothing to do with interest rates” and criticizing Powell’s handling of both rates and the renovation project.
Background: The Long-Running Trump-Powell Feud
The tension dates back to Trump’s first term, when he appointed Powell in 2017 but later criticized him for not cutting rates aggressively enough. In 2025, after returning to office, Trump renewed attacks—demanding rapid cuts to support economic growth while slamming the Fed’s independence.
The headquarters renovation became a flashpoint:
- Costs ballooned from $1.9B to $2.5B.
- Trump and allies accused Powell of mismanagement and luxury overspending.
- Powell defended the project in June 2025 Senate testimony, denying extravagance.
The DOJ probe is widely seen as an escalation of this feud, raising alarms about political interference in monetary policy.
Market Reaction: Stocks Slide, Dollar Weakens, Gold Rises
Overnight markets reacted sharply:
- S&P 500 futures fell ~0.5-0.8%.
- Nasdaq futures slipped ~0.8%.
- U.S. dollar index declined ~0.2% against major currencies.
- Gold and silver rose to fresh highs as safe-haven demand surged.
Analysts attribute the move to fears of eroded Fed independence, which could undermine investor confidence in U.S. monetary policy stability.
Pros & Cons of the DOJ Subpoena & Political Pressure
| Pros (for the administration’s view) | Cons (for markets & Fed independence) |
|---|---|
| Holds Fed accountable for spending | Threatens central bank autonomy |
| Addresses perceived mismanagement | Risks politicized interest-rate decisions |
| May force cost controls | Erodes global trust in U.S. institutions |
| Signals executive oversight | Increases market volatility & uncertainty |
What Investors Should Watch Next
- Committee hearings (Q1 2026)
- Potential Senate opposition to future Fed nominees
- Powell’s response and possible legal challenges
- Broader macro impact: rate-cut expectations, dollar strength, safe-haven flows
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FAQs: Trump-Powell Feud & DOJ Subpoenas 2026
Why did DOJ subpoena the Fed? Over Powell’s testimony on headquarters renovations, seen as pretext for rate-cut pressure.
Will the Fed lose independence? Powell says no; bipartisan lawmakers warn of serious risk.
Market impact so far? Stock futures down, dollar weaker, gold higher.
What happens next? Hearings, possible indictment threat, and ongoing political tension.
Conclusion
The DOJ subpoenas against the Federal Reserve mark a dramatic escalation in the Trump-Powell feud, raising serious questions about central bank independence. Markets are reacting with caution—higher volatility, dollar weakness, and safe-haven buying. While passage of lasting change is uncertain, the episode underscores the fragile balance between politics and monetary policy.
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Disclaimer: Not financial advice. Markets volatile. Data as of January 12, 2026.
