U.S. Attorney Jeanine Pirro has defended the probe. Aaron Schwartz/Bloomberg News
WASHINGTON -- The Federal Reserve is waging a behind-closed-doors legal challenge to a pair of subpoenas issued as part of U.S. Attorney Jeanine Pirro's criminal investigation into Chair Jerome Powell, according to people familiar with the matter.
Pirro, a longtime ally of President Trump, opened the probe to examine whether Powell gave false testimony to Congress last summer about the central bank's building-renovation project. The move prompted an unprecedented public response from Powell, who in a Jan. 11 video statement said the investigation was a pretext for Trump's continuing campaign to pressure the Fed to lower interest rates and end the independence of the central bank.
The Fed, in sealed proceedings, is asking a judge to quash the subpoenas, which could reduce or eliminate its obligation to respond. Its specific legal arguments couldn't immediately be learned. It isn't uncommon, especially in high-profile investigations, for a subpoena recipient to challenge prosecutors' demands as being overly broad or seeking information protected by legal privilege.
The fight is taking place out of public view because of secrecy rules that apply to criminal investigations pending before a grand jury.
Pirro was present during a White House event on Jan. 8 where Trump excoriated his U.S. attorneys for not moving fast enough to prosecute his favored targets. The Justice Department sent the Fed a pair of subpoenas the following day. The subpoenas asked the Fed to respond toward the end of January.
Republicans have been looking for an off-ramp to the standoff because it is threatening to delay the confirmation of Kevin Warsh, the former Fed governor Trump has chosen to succeed Powell when his term as chair ends in May.
"There were subpoenas issued. But that doesn't have to mean that there are charges," Treasury Secretary Scott Bessent said on CNBC earlier this month. He has also defended the probe, telling CBS in January, "I think that the message is that independence does not mean no accountability."
Sen. Thom Tillis (R., N.C.) has repeatedly said he would not advance any Fed nomination, including Warsh's, until the Justice Department probe has ended. With all Democrats on the Senate Banking Committee taking the same stand, the 13-11 GOP majority isn't enough to push a nominee through without him.
Tillis has said the probe was launched outside of traditional channels and has warned about steps that erode investors' expectations that the central bank will be given reasonable latitude to set interest rates as economic conditions warrant.
The investigation centers on a few minutes of answers Powell provided to questions at a Senate hearing last summer about cost overruns on renovations of two historic buildings. White House officials last year suggested either Powell made false statements about the project's costs or the Fed failed to update building records, but the furor quickly faded after Trump toured the project with Powell in July.
Pirro has defended the probe, saying the subpoenas were issued after her office hadn't received answers to multiple information requests. The inquiry opened in November. A lawyer in Pirro's office sent two emails to the Fed in December asking for a meeting about the renovation.
Trump has sounded less concerned about resolving the impasse. Pirro is "going to take it to the end and see," Trump told reporters at the White House on Feb. 2, where he inflated to $4 billion the cost of the $2.5-billion renovation.