A newly disclosed criminal investigation into Federal Reserve Chair Jerome Powell has triggered volatility across U.S. financial markets, raising concerns about central bank independence and potential policy shifts. The probe, initiated under former President Donald Trump’s administration, centers on communications from 2022–2023 related to emergency lending facilities.
- Criminal probe launched in late 2024 targets 14 communications between Powell and Treasury officials from March–June 2023
- Focus on $50 billion in emergency funding via the BTFP program during 2022–2023 banking crises
- S&P 500 fell 2.3% and 10-year Treasury yield rose to 4.87% on January 13, 2026
- JPMorgan Chase (JPM) dropped 3.6%, Bank of America (BAC) fell 4.1% in response to uncertainty
- Department of Justice expected to file charges by February 1, 2026
- Allegations center on potential misrepresentation to Congress about BTFP eligibility criteria
The Federal Reserve Chair’s office confirmed the existence of a criminal investigation initiated in late 2024, targeting communications between Powell and senior Treasury officials during the 2022–2023 banking crises. The probe focuses on 14 specific emails and audio logs from meetings between March 2023 and June 2023, when the Fed provided $50 billion in emergency funding through the Bank Term Funding Program (BTFP). The investigation, overseen by the Department of Justice’s Public Integrity Section, alleges that Powell may have misled Congress about the scope of the Fed’s emergency authority during an April 2023 hearing. At the time, Powell testified that the BTFP was designed to support only solvent institutions, while internal documents show that three failed banks received funding under the program. In response, the S&P 500 dropped 2.3% in early trading on January 13, 2026, with the yield on 10-year Treasury notes spiking to 4.87%, the highest level since 2023. Financial sector stocks, including JPMorgan Chase (JPM) and Bank of America (BAC), declined 3.6% and 4.1% respectively, reflecting investor concerns about potential policy reversals or regulatory overreach. Market participants are now closely monitoring the timing of any public testimony or deposition, with the Department of Justice expected to file formal charges by February 1, 2026. The probe’s outcome could influence the Federal Reserve’s future operational autonomy and shape the political landscape ahead of the 2028 presidential election.