The Trump–Fed feud in early 2026 is not simply about routine policy disagreements over interest rates, but is now structured around legal claims of fraud‑type misconduct tied to the Fed’s headquarters renovation and Powell’s testimony about it. However, whether this conflict is “about fraud” depends on perspective: Trump’s allies frame it as uncovering deception and misuse of funds, while Powell and many critics see a politically driven attempt to intimidate the central bank under the guise of a fraud probe.[1][2][3][4][5]
What the investigation is about
Federal prosecutors are examining whether Jerome Powell misled Congress in June 2025 when describing the scope and costs of the Fed’s multi‑year renovation of its Washington buildings. The project’s budget has climbed into the low‑billions, with critics alleging waste or mismanagement, while the Fed cites inflation, asbestos removal, and modernization costs as the main drivers of overruns.[2][3][5][6]
The Justice Department has issued grand jury subpoenas to the Fed, signaling a criminal probe that could encompass possible false statements (perjury) and any underlying financial irregularities in the renovation project. Powell has publicly confirmed the investigation and insists he did not lie under oath.[3][4][6]
Why Trump and allies call it “fraud”
Trump and key supporters highlight the ballooning renovation bill as evidence that something improper may be happening with public money or contracting. They argue that if Powell understated costs or concealed lavish features to Congress, that could amount to deceptive conduct justifying a criminal inquiry.[5][6][2][3]
These figures present the probe as necessary “oversight,” claiming that the Fed should not be exempt from scrutiny simply because it is independent, especially when a large, complex construction budget more than doubles or triples original estimates.[6][3][5]
Why critics say it’s about pressure, not fraud
Powell and many outside observers contend the investigation is being used as leverage in Trump’s long‑running dispute with the Fed over interest rates and monetary policy. From this vantage point, the focus on alleged false testimony is a pretext to weaken Powell, scare other Fed officials, and push the central bank toward looser policy more aligned with Trump’s economic and political goals.[4][7][8][1]
Legal and academic critics worry that criminalizing contested statements about complex cost estimates—rather than clear personal enrichment or kickbacks—blurs the line between genuine anti‑fraud enforcement and political retaliation.[1][4][5]
Role of earlier Fed personnel clashes
The feud is shaped by Trump’s previous attempts to influence or remove Fed officials, notably his effort in 2025 to fire Governor Lisa Cook on the basis of alleged pre‑Fed mortgage fraud. Courts and legal challenges have slowed or blocked those moves, reinforcing the idea that Trump’s camp is willing to use accusations of financial misconduct as a tool in battles over Fed independence.[8][9]
Taken together, the current clash is “about fraud” in the narrow sense that the DOJ probe targets possible false testimony and mismanagement of an expensive renovation, but in the broader political sense it is equally, if not more, about power over monetary policy and the boundaries of central bank independence.[7][5][1]
Sources
[1] How the Trump-Powell relationship blew up, amid DOJ’s unprecedented probe https://www.axios.com/2026/01/12/jerome-powell-trump-federal-reserve-renovations
[2] Fed’s Powell under criminal investigation over HQ renovation https://www.foxbusiness.com/politics/federal-reserve-chair-powell-under-criminal-investigation-over-hq-renovation-report
[3] DOJ probes Fed Chair Powell for alleged false testimony on … – KUTV https://kutv.com/news/nation-world/doj-probes-fed-chair-powell-for-alleged-false-testimony-on-renovation-costs-grand-jury-subpoenas-
[4] DOJ launches criminal investigation into Fed Chair Jerome Powell … https://abcnews.go.com/Politics/doj-launches-criminal-investigation-fed-chair-jerome-powell/story?id=129114228
[5] Jerome Powell: Federal prosecutors open criminal investigation into … https://www.cnn.com/2026/01/11/business/federal-prosecutors-criminal-investigation-federal-reserve-chair-jerome-powell
[6] DOJ probes Fed Chair Powell for alleged false testimony on … https://cbsaustin.com/news/nation-world/doj-probes-fed-chair-powell-for-alleged-false-testimony-on-renovation-costs-grand-jury-subpoenas-
[7] Fed Chair Powell says he’s under criminal investigation, won’t bow to Trump intimidation https://www.cnbc.com/2026/01/12/fed-jerome-powell-criminal-probe-nyt.html
[8] Trump blocked from firing Fed Governor Lisa Cook for now – CNBC https://www.cnbc.com/2025/09/09/fed-lisa-cook-trump-powell-judge-jia-cobb-pulte.html
[9] Trump administration asks Supreme Court to allow for firing of Fed … https://www.scotusblog.com/2025/09/trump-administration-asks-supreme-court-to-allow-for-firing-of-fed-governor-lisa-cook/
[10] DOJ probes Fed Chair Powell for alleged false testimony … – YouTube https://www.youtube.com/watch?v=2dA2InmNSn8
Written with the help of AI.
Writing by Dr. Dannielle Blumenthal 