A federal judge in Washington blocked grand jury subpoenas issued to the Federal Reserve as part of a criminal investigation into Fed Chair Jerome Powell, ruling that prosecutors failed to demonstrate any legitimate purpose behind the demands. The Department of Justice announced Friday it would appeal.
U.S. District Judge James Boasberg issued the ruling on Wednesday. It was unsealed on Friday. His language was blunt.
"Did prosecutors issue those subpoenas for a proper purpose? The Court finds that they did not."
Boasberg went further, writing that the subpoenas appeared designed not to uncover criminal conduct but to squeeze Powell into submission on interest rates or force his resignation entirely.
"There is abundant evidence that the subpoenas' dominant (if not sole) purpose is to harass and pressure Powell either to yield to the President or to resign and make way for a Fed Chair who will."
The criminal probe, led by U.S. Attorney for the District of Columbia Jeanine Pirro, purportedly centers on the Fed's multibillion-dollar headquarters renovation and Powell's testimony to the Senate Banking Committee about the project. That's the stated predicate. What Boasberg found was something else entirely: a prosecution in search of a crime.
"On the other side of the scale, the Government has offered no evidence whatsoever that Powell committed any crime other than displeasing the President."
That is a devastating line from a federal judge. Not "insufficient evidence." Not "procedural deficiencies." No evidence whatsoever. The court examined the record and concluded the investigation lacks any factual basis beyond a political disagreement over monetary policy.
Pirro fired back at a Friday news conference, CNBC News reports, calling the ruling "outrageous" and declaring that Powell "is now bathed in immunity." She added: "This is wrong, and it is without legal authority." The DOJ will take its case to the appellate court.
The backdrop here matters. Powell has refused to bend to demands to lower interest rates. President Trump has made clear he wants the Fed to slash rates further, and Powell's resistance has been a persistent source of friction. Before the Iran war, markets had been pricing in at least two rate cuts. Since then, hopes for reductions have been pushed back until the end of the year. The Fed's mostly cautious approach, aside from Governors Stephen Miran and Christopher Waller, who have favored lower rates, has held firm.
Powell's term expires in May. Kevin Warsh has been nominated to succeed him. Under normal circumstances, the transition would proceed through the Senate Banking Committee. These are not normal circumstances.
This is where the ruling creates an unexpected bottleneck. Sen. Thom Tillis, a Republican from North Carolina, has vowed to block Warsh's confirmation until the federal investigation ends. His promised "no" vote on the Banking Committee would deadlock the panel, preventing Warsh from getting a confirmation vote by the full Senate.
Tillis posted on X Friday, making his position plain:
"This ruling confirms just how weak and frivolous the criminal investigation of Chairman Powell is and it is nothing more than a failed attack on Fed independence."
He followed up with a prediction that should give Pirro's office pause:
"We all know how this is going to end and the D.C. U.S. Attorney's Office should save itself further embarrassment."
Consider the position this creates. The investigation that was supposed to pressure Powell may now keep him in the chair longer. Warsh can't get confirmed while Tillis holds his ground, and Tillis won't budge while the probe continues. The DOJ's appeal could take months. Powell's term expires in May. Every week the legal fight drags on, it's another week the transition stalls.
The irony is structural. If the goal was to accelerate Powell's departure, the investigation has accomplished the opposite. It has justified a Republican senator to freeze the very confirmation process that would install a new Fed chair. The tool designed to remove Powell has become the instrument preserving him.
Meanwhile, interest rates stay where they are. The Fed continues its cautious posture. Markets adjust expectations accordingly. None of the outcomes anyone wanted from this confrontation is materializing.
Pirro's office will need to persuade an appellate court that Boasberg got it wrong. That means overcoming a factual record the judge described as containing "no evidence whatsoever" of criminal conduct. Appeals courts can reverse legal conclusions. Reversing factual findings is a steeper climb. The DOJ will need to present something it apparently could not produce at the district level: an actual criminal theory supported by actual evidence.
The renovation angle remains thin. A multibillion-dollar project and congressional testimony about it could theoretically generate criminal liability, but Boasberg examined what prosecutors actually brought forward and found nothing beneath the surface. An appeal built on the same record faces the same problem.
Tillis is watching. So is the Banking Committee. And so is every market participant trying to price in what the Fed will look like six months from now.
The Fed declined to comment.
