US Markets Reel as DOJ Subpoena Stokes Fed Independence Fears
An unprecedented Justice Department subpoena, reportedly threatening criminal indictment against the central bank, has sent shockwaves through global financial markets.
Global markets were thrown into turmoil on Tuesday after reports emerged that the U.S. Department of Justice had served the Federal Reserve with a subpoena, an unprecedented move that included the threat of a criminal indictment. The news triggered an immediate flight to safety among investors, sending U.S. stock futures tumbling and gold prices surging to record highs on fears of institutional instability at the world's most powerful central bank.
Federal Reserve Chair Jerome Powell confirmed the move, stating the central bank had received subpoenas from the Justice Department. The probe is reportedly centered on whether Powell committed perjury during congressional testimony in June 2025 regarding a multi-billion-dollar renovation project at the Fed's Washington headquarters. According to The Wall Street Journal, the subpoena from the U.S. Attorney's office threatens a grand jury criminal indictment, a historically aggressive action against the sitting leadership of the central bank.
In a forceful response, Chair Powell accused the administration of political intimidation, framing the investigation as a direct assault on the Federal Reserve's operational independence. Powell has suggested the legal action is a pretext for political retaliation related to the central bank's monetary policy decisions on interest rates.
The market’s reaction was swift and severe, reflecting deep investor anxiety. Equity futures dipped sharply ahead of the market open, while the U.S. dollar weakened against a basket of major currencies. Haven assets rallied, with gold prices climbing to a record high as market participants digested the implications of a potential constitutional crisis between the U.S. government and its central bank.
This confrontation strikes at the heart of central bank independence, a core tenet of modern economic policy that insulates monetary decisions from short-term political pressures. Investors have long relied on the Fed's autonomy to ensure stable, predictable policy aimed at controlling inflation and fostering maximum employment. The threat of a criminal probe, regardless of its merits, introduces a level of political risk not seen in the institution's recent history.
This event unfolds at a particularly fraught moment. The White House is expected to announce its nominee for the next Federal Reserve chair this month, and this investigation could be perceived as an attempt to discredit Powell and influence the selection process. As J.P. Morgan Asset Management noted in a recent report, investors are already on edge about the interplay between government actions and Federal Reserve reactions. For now, the subpoena has injected a profound level of uncertainty into U.S. and global markets, leaving investors to weigh the stability of the very institutions that underpin the financial system.