Boasberg dismissed the Department of Justice's motion to reinstate the subpoena against Federal Reserve Chair Jerome Powell, effectively halting the criminal investigation into Powell.
Chief Judge James Boasberg of the U.S. District Court for the District of Columbia issued a pivotal ruling on Friday, formally rejecting the Department of Justice's motion to reinstate the subpoena authority over Federal Reserve Chair Jerome Powell. This decision has effectively suspended the criminal investigation into Powell. The move is likely to trigger an appeal and may further delay President Donald Trump’s plan to appoint a more compliant central bank governor.
In his March 13 ruling, Boasberg determined that the January subpoenas issued to the Federal Reserve Board were based on improper motives, aiming to pressure Powell into complying with Trump’s demands—either cutting interest rates quickly or resigning. These subpoenas were issued by Washington, D.C., federal prosecutor Jenny Piro, a staunch ally of Trump, officially under the pretext of investigating whether there was budgetary mismanagement in the $2.5 billion renovation project at the Federal Reserve headquarters and whether Powell provided misleading statements to Congress regarding the progress of the project.
In Friday’s ruling, Boasberg noted that Piro’s office “fell far short of persuading the court that a change in outcome was warranted,” adding that prosecutors “completely lacked a sincere basis for suspecting criminal activity.” He wrote: “The government’s fundamental flaw lies in failing to provide any evidence of fraud.” Boasberg was appointed by Democratic President Barack Obama.
A spokesperson for Piro issued a statement saying that her office “will absolutely appeal the judiciary’s interference in our access to the grand jury.” The Federal Reserve declined to comment. It is understood that immediately after the ruling, Prosecutor Piro indicated plans to appeal to the U.S. Court of Appeals for the District of Columbia Circuit, meaning this dispute will enter higher-level judicial proceedings. According to informed sources, the leadership of the Department of Justice has supported the appeal decision.
Prosecutors stated they are investigating allegations that Powell committed fraud and made false statements to congressional committees. However, according to court records, a senior attorney in Piro’s office admitted in court on March 3 that the prosecution currently does not know whether evidence of Powell’s alleged wrongdoing exists.
Piro’s office needed to meet a high legal threshold to convince Boasberg to overturn his previous ruling, which would require demonstrating new evidence or clear legal error by the judge. Department of Justice attorneys argued that Boasberg set an excessively high standard for the prosecution at the early stages of the investigation and misinterpreted the timeline of the inquiry. Attorneys for the Federal Reserve Board contended that Boasberg’s initial ruling was supported by “overwhelming evidence.”
This judicial ruling is not only a personal legal victory for Powell but also directly disrupts the political and financial balance in Washington. Since Powell had previously made it clear that he would not step down when his term ends in May until all criminal investigations against him are thoroughly concluded, this ruling effectively extends his “political life.”
Meanwhile, the nomination process for Kevin Warsh, the Fed chair successor appointed by the Trump administration, has also been affected. Republican Senator Thom Tillis has publicly stated that he will use his authority to obstruct the Senate Banking Committee’s confirmation process for Warsh until the legal clouds surrounding Powell dissipate.
Such internal partisan divisions mean that if the legal deadlock persists, Powell is highly likely to continue leading the Federal Reserve as acting chair beyond May, causing the Trump administration’s attempt to swiftly replace the monetary policy leadership to face failure.
At the macroeconomic level, this legal battle over subpoenas occurred during a sensitive period of global turmoil, exacerbating uncertainty in financial markets. With energy price volatility triggered by the conflict in Iran, inflationary pressures in the United States have resurfaced, placing the Federal Reserve’s policy direction under intense scrutiny.
The market widely believes that the Department of Justice's persistent appeal in this case has evolved into a public contest over 'central bank independence.' For investors, the escalation of legal battles could not only disrupt the Federal Reserve’s decision-making rhythm but also undermine public confidence in the stability of monetary policy at a critical juncture when inflation remains volatile.
Editor/Melody