The Federal Reserve is under intense legal scrutiny after grand jury subpoenas were issued by the Justice Department, threatening criminal charges against Chair Jerome Powell and senior officials. The move marks a dramatic escalation in political tensions surrounding the central bank's independence.
- Grand jury subpoenas issued by the Justice Department target Fed Chair Jerome Powell and senior officials
- Subpoenas demand records from January 2023 through December 2025
- CBOE VIX rose 18% and S&P 500 dropped 2.4% on announcement day
- 10-year Treasury yield increased to 4.87%
- JPMorgan Chase, Bank of America, and Citigroup saw stock declines between 1.7% and 3.1%
- Federal Reserve Bank of New York reported 45% spike in trading volume
The Federal Reserve’s institutional autonomy is now at the center of a high-stakes legal confrontation, following the issuance of grand jury subpoenas from the Department of Justice. The subpoenas, directed at Federal Reserve Chair Jerome Powell and several top officials, demand production of internal communications and policy deliberations dating back to January 2023. The legal action is linked to ongoing investigations into monetary policy decisions during the 2023–2025 inflation surge and the central bank’s response to the 2024 financial market volatility. The subpoenas represent a significant departure from past norms, as criminal indictments have never been pursued against sitting Fed officials. The Justice Department has reportedly identified potential violations of federal statutes related to transparency and financial reporting, though the specific allegations remain undisclosed. The Fed has formally objected to the subpoenas, asserting that they undermine the central bank’s ability to conduct independent monetary policy without political interference. Market participants reacted swiftly to the news, with the CBOE Volatility Index (VIX) spiking 18% within hours. The S&P 500 dropped 2.4%, while the 10-year Treasury yield jumped 12 basis points to 4.87%. Financial institutions with significant exposure to Fed policy—such as JPMorgan Chase (JPM), Bank of America (BAC), and Citigroup (C)—saw their stock prices decline between 1.7% and 3.1% in early trading. The Federal Reserve Bank of New York reported a 45% increase in trading volume on the day of the announcement, reflecting heightened uncertainty. The standoff raises fundamental questions about the separation of powers and the integrity of the nation’s monetary system. Legal experts warn that if the Justice Department proceeds with criminal charges, it could set a precedent that jeopardizes the Fed’s long-standing independence. The case may ultimately be decided by the Supreme Court, which has not ruled on such a matter since 1948.