Federal Reserve launches counteroffensive…“Pursuing legal action over Powell subpoena”

The Federal Reserve (Fed), the U.S. central bank, is pursuing legal action in response to a U.S. Department of Justice investigation involving Chair Jerome Powell.

According to The Wall Street Journal (WSJ) on the 26th (local time), the Fed, through a sealed proceeding, asked a court to quash the subpoena that prosecutors issued to Chair Powell. The move appears aimed at securing an exemption from, or a reduction in, the obligation to comply with the subpoena. The Fed’s specific legal arguments have not been disclosed.

The WSJ noted that in high-profile investigations, it is common for subpoena recipients to challenge prosecutors’ requests in court, arguing that the scope is overly broad or that some information is protected by legal privilege.

The dispute is being handled under seal due to confidentiality rules that apply to criminal investigations pending before a federal grand jury. A grand jury refers to a U.S. judicial mechanism in which ordinary citizens review investigative evidence and decide whether to indict, intended to prevent abuse of prosecutorial charging power.

Chair Powell received a subpoena from the Justice Department in January in connection with testimony he gave to Congress last June about renovations to the Fed’s headquarters. President Donald Trump has publicly pressured Chair Powell to cut interest rates. The Justice Department’s investigation into Powell has heightened concerns over the Fed’s independence.

Criticism has also emerged within the ruling Republican Party. Republican Sen. Thom Tillis, a member of the Senate Banking Committee, is said to have taken the position that he cannot support the confirmation of Kevin Warsh—designated as the next Fed chair—until the Justice Department’s investigation into Powell is resolved. The WSJ reported that Republicans are currently looking for an “exit strategy” to prevent delays in the confirmation.

President Trump selected Warsh late last month as Powell’s successor, with Powell’s term set to expire in May.

The investigation is being led by Jeanine Pirro, the U.S. attorney for Washington, D.C., a former Fox News host with conservative leanings and someone regarded as a Trump ally. Pirro has emphasized that issuing the subpoena was justified, given that the Fed had repeatedly failed to respond to requests for document production.

Park Subin, Hankyung.com reporter waterbean@hankyung.com