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To investors,
News broke last night that the Department of Justice has opened an investigation into Federal Reserve Chairman Jerome Powell over comments he made while testifying about renovations to the Federal Reserve building.
This development comes after months of disagreement about monetary policy between the Trump administration and the Federal Reserve. Before we get into what is likely to happen with this investigation and how it will impact the market, I want to remind everyone of the context.
Background on Powell’s previous comments
The investigation centers on whether Powell made false or misleading statements to Congress during his testimony before the Senate Banking Committee in June 2025. This testimony addressed the Federal Reserve’s ongoing multi-year renovation project for its headquarters buildings in Washington, D.C., which is estimated to cost around $2.5 billion and has experienced significant cost overruns (reportedly around $600-700 million).
Key points of contention include:
* Powell allegedly denied or downplayed the inclusion of certain luxury or non-essential features in the final project plans, such as private elevators, premium marble, water features/fountains, a VIP dining room, a rooftop terrace garden, and other upgrades.
* These features appeared in earlier project documents submitted to bodies like the National Capital Planning Commission, but Powell stated during testimony that many had been removed or were not part of the current scope, attributing cost increases to factors like inflation in materials/labor, asbestos removal, soil contamination, and accessibility requirements.
* Critics (including some Republican lawmakers and Trump administration figures) claim these statements were inaccurate or deceptive, potentially constituting perjury or false statements to Congress.
The probe announced last night involves analyzing Powell’s public statements (including the congressional testimony), reviewing spending records, and other documents related to the renovation.
An important point is that the renovation was reportedly approved in November 2025 by U.S. Attorney Jeanine Pirro (a Trump appointee). Prosecutors have contacted Powell’s staff for documents, and on Friday, January 9, 2026, the DOJ served the Federal Reserve with grand jury subpoenas threatening a potential criminal indictment tied to the June testimony.
Powell’s response
After the New York Times broke the story of the investigation, Jerome Powell released a video message defending his actions and calling into question the motivation behind the investigation. Powell said:
“This new threat is not about my testimony last June or about the renovation of the Federal Reserve buildings… Those are pretexts. The threat of criminal charges is a consequence of the Federal Reserve setting interest rates based on our best assessment of what will serve the public, rather than following the preferences of the President.”
There are a few takeaways I had from this response. First, Powell posted a video response to the allegations within minutes of the New York Times report being published. That seems highly suspicious. It takes time to create a script, record a video, edit the video, and get it posted online. The Federal Reserve is not exactly known as a world class content creator, so my guess is that the Fed or Powell are the ones who leaked the investigation to the media.
There is nothing wrong with that decision per se, but it does beg the question of why would the Fed or Powell want to create a flame war in the public eye? I don’t know the answer. I suspect we will get answers later that provide clarity in hindsight.
Second, the response seemed much more focused on the argument “this is political!” than denying the allegations. I have learned over time that the more someone yells about something, the more likely they are hiding something about it. As one user on X said, the response can usually tell you more than the initial accusation.
This means that Powell is probably more political than most people realize. I wouldn’t blame him. The President and the administration have been pressuring him for months. It is human nature to dislike someone attacking you or to want to get revenge. It wouldn’t make the decision to succumb to politics the right decision, but it is understandable how humans get into these situations.
The Federal Reserve renovations
In order to understand what is happening with the Federal Reserve renovations, you have to ignore the noise and go to the source material. I spent the morning digging through the National Capital Planning Commission’s materials on previous meetings and current plans for this renovation.
Here is how they describe the project:
“The Federal Reserve Board is proposing to renovate and expand the Eccles Building and the FRB-East Building to address a critical backlog of upgrades; respond to changes in building codes and regulatory requirements, accommodate information technology requirements, building security provisions, advancements in environmental awareness and energy efficiency; and address increased utility demands and associated requirements imposed by an increased building population.”
The big controversy in these renovations is how expensive everything has become. The Fed was originally going to spend approximately $1.9 billion, which would have been fairly absurd by itself, but the costs have now ballooned to an estimated $3.1 billion due to delays and cost overruns.
These are renderings of the renovations being done:
One of the problems here is that the Federal Reserve is using taxpayer money to make these renovations. This is objectively insane. Half of the population is complaining about being unable to afford a normal life, plus the country is broke and in trillions of dollars of debt, yet the central bank is lavishly spending on a castle fit for a king.
Compare this to the White House ballroom that has been announced. The ballroom is being funded through private donations and allegedly will not use public taxpayer money.
So regardless of the political nature of this whole thing, the American people should get an answer as to why their tax dollars are being used for this wasteful situation.
Potential impact going forward
My guess is the revelation last night is not going to change anyone’s mind in politics. If you liked Trump before the weekend, you are going to defend the DOJ’s actions. You will argue there should be a full investigation on whether the Fed Chairman lied to Congress.
That doesn’t seem unreasonable to ensure no one is above the law.
If you did not like Trump before the weekend, you are going to condemn this development as being unhelpful to the country’s long-term success. That doesn’t seem unreasonable either.
See, this is the thing about controversial current events…usually both sides have a hint of truth to them. In this case, Powell should be held accountable if he misled Congress. We should also be very concerned if the legal system is being weaponized by any administration, regardless of political party.
The hard part about coming to a conclusion on this situation is that we don’t yet have all the information. I am reserving the right to make up my mind at a later date when we have that information. The only thing I feel strongly about at the moment is the egregious wasting of taxpayer money to fund the unnecessarily lavish renovations of an office building.
The United States and its leaders need to get serious about stopping waste, fraud, and abuse. Sometimes those issues are hiding in daycares in Minnesota and other times they may be hiding in plain sight in Washington DC.
Hope you all have a great start to your week. I will talk to everyone next time.
- Anthony J. Pompliano
Founder & CEO, Professional Capital Management
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