Federal Reserve Lawyers Request Judge to Uphold Previous Ruling as Powell Subpoena Case Sparks New Turmoil

Huitong Finance APP News - The Federal Reserve Board recently strongly urged a judge in court documents to uphold a previous ruling and reject the prosecutor’s reconsideration motion. This motion aims to restore a subpoena for a criminal investigation against Federal Reserve Chairman Jerome Powell, focusing on the costly renovation project at the Fed’s headquarters and Powell’s testimony to Congress regarding this matter. This incident highlights the tension between the U.S. executive branch and the central bank regarding monetary policy and institutional independence.

Federal Reserve Lawyers Firmly Reject Prosecutor’s Motion

In court documents declassified on Thursday (March 26), Federal Reserve lawyers made it clear to Judge James Boasberg that the U.S. Attorney’s Office for the District of Columbia’s reconsideration motion did not meet the legal threshold.

The motion submitted by Federal Reserve lawyers in the U.S. District Court for Washington stated that the reconsideration motion did not even mention, let alone satisfy, the strict legal standards applicable to the special relief it sought. They pointed out that reconsideration is warranted only when there is a change in the relevant law, new evidence emerges, or there is a need to correct a clear error or prevent manifest injustice, none of which have occurred.

The lawyers further stated that the prosecutor’s motion did not attempt to overcome these high thresholds but instead turned to a distorted description of the court’s opinion and the record on which it was based.

This position of the Federal Reserve is not surprising, as the Board had initially firmly opposed subpoenas against the central bank, arguing that these subpoenas and the related criminal investigation were merely excuses to force Powell to cut interest rates faster and more significantly to satisfy President Trump’s repeated demands.

Trump Publicly Harshly Criticizes Powell

On the day of the incident, President Trump commented to reporters at the White House, directly calling Powell a “dummy at the Federal Reserve.” This statement is in line with his past similar harsh criticisms of the chairman.

Judge Boasberg extensively quoted Trump’s previous similar statements in his ruling as evidence, stating: “In short, the President has basically been asking for years whether there is no one who can help him get rid of this troublesome Federal Reserve Chairman.”

Trump also harshly criticized the cost overruns of the Federal Reserve building renovation and complained that he was sued for tearing down the East Wing of the White House to build a ballroom, while Powell seemingly escaped legal responsibility. He stated that he could have completed a similar project for far less than the current estimated cost, but now the project is progressing slowly, and the building is even in a “ghost” state, with walls yet to be erected.

Trump added that the National Trust for Historic Preservation did not sue the Federal Reserve building but sued him personally, stating that this situation “could only happen to Trump.” He also mocked Powell as “Too Late Powell,” claiming that his interest rate policies were inappropriate but did not face legal repercussions.

Core Basis of the Judge’s Previous Ruling: Improper Purpose of Subpoenas

Previously, Judge Boasberg made a strongly worded ruling to quash two subpoenas issued by U.S. Attorney Jeanine Pirro’s office to the Federal Reserve Board. These subpoenas sought records related to the central bank’s multi-billion dollar renovation project and the content Powell briefly discussed during his testimony to the Senate committee regarding the project.

The judge agreed with the Federal Reserve Board’s argument, finding that these subpoenas were issued for improper purposes. He wrote: “There is ample evidence to suggest that the primary (if not sole) purpose of these subpoenas is to harass and pressure Powell to either yield to the President or resign, making way for a Federal Reserve Chairman willing to do so.”

In an earlier sealed court hearing, Judge Boasberg directly asked the prosecutor about evidence of fraud or criminal misconduct related to the renovation project. Prosecutor G.A. Massucco-LaTaif responded, “We currently do not know.” However, he added that there was about $1.2 billion in cost overruns, which warranted investigation and stated that such a large overrun “seems off,” equating to the GDP of some smaller countries and cannot simply be overlooked based on the historical building.

Judge Boasberg, in his written ruling, found that the prosecutor’s defense of the subpoenas’ purpose was “a strained assertion of legitimate purpose.” He noted that construction projects often exceed budgets, and this fact alone hardly suggests that a crime has occurred, nor is there reason to believe that this project is particularly susceptible to fraud. The Federal Reserve’s independent inspector general has fully obtained project information and conducted audits, raising no concerns about fraud.

Prosecutor’s Motion and External Reactions

Pirro’s office argued in its reconsideration motion on March 12 that Judge Boasberg’s ruling applied the wrong legal standard, contained errors on certain key facts, and overlooked other pertinent facts.

It is currently unclear when the judge will make a final ruling on these opposing motions, and it is also uncertain whether the prosecutor’s office will abandon its investigation into Powell if the reconsideration motion is denied.

North Carolina Republican Senator Thom Tillis has stated that he will block Kevin Warsh’s confirmation process to replace Powell as Chairman of the Federal Reserve until the related investigation concludes.

In such cases, it is extremely rare for a judge to overturn their own ruling or for an appellate court to overturn such decisions.

Overall Impact and Outlook of the Incident

This series of court battles reflects the ongoing divergence between the Trump administration and the Federal Reserve regarding interest rate policies and challenges to the central bank’s independence.

The Federal Reserve Board emphasizes that the investigation lacks substantial evidence of crime, while the prosecution insists that the cost overruns merit a deeper investigation. Regardless of the final outcome, this incident may further heighten financial market concerns over the stability of monetary policy and institutional autonomy.

As the review of related motions progresses, markets and the public will continue to pay close attention to Judge Boasberg’s next ruling and the evolution of the tense relationship between the Trump administration and the Federal Reserve.