Fed subpoenas blocked by judge; DOJ to appeal

In a scathing decision, a federal judge blocked subpoenas issued to the Federal Reserve by a grand jury as part of the criminal investigation into Chairman Jerome Powell.

U.S. Attorney for the District of Columbia Jeanine Pirro immediately said after it was sealed Friday that the Justice Department would appeal what she called the “outrageous” decision.

Friday’s action will likely keep Powell in the chair for longer because the RNC’s Sen. Thom Tillis has vowed to block Kevin Warsh’s confirmation to replace Powell until the federal investigation is over.

That could mean interest rates remain higher than President Donald Trump wants because Powell has refused to give in to the president’s demands to lower rates further.

In his ruling, Boasberg said the evidence showed Pirro was motivated to investigate Powell by the Fed chair’s desire to bow to Trump and cut interest rates quickly and broadly.

Pirro’s investigation allegedly focused on the multibillion-dollar renovation of the Fed’s headquarters in Washington and Powell’s testimony to the Senate Banking Committee about this project.

“Did prosecutors issue these subpoenas for a proper purpose? The court finds that they did not do so,” Boasberg wrote in the decision, filed Wednesday in U.S. District Court in D.C. but sealed Friday. he wrote.

“There is ample evidence that the dominant (though not the sole) purpose of the subpoenas was to harass and pressure Powell to either submit to the President or resign to make way for a Fed Chair who would resign,” the judge wrote.

“On the other side of the scale, the Government has presented no evidence that Powell committed any wrongdoing other than pleasing the President,” Boasberg wrote.

Pirro criticized Boasberg’s decision at a press conference on Friday, calling it “outrageous”.

“Jerome Powell is now immune,” he said angrily.

“This is wrong and against legal authority,” Pirro said.

“This outrageous decision will be appealed by the Ministry of Justice,” he said.

“This decision confirms how weak and pointless the criminal investigation into Chairman Powell is and nothing more than a failed attack on the independence of the Fed,” Tillis said in a statement on social media site X on Friday. he said.

“We all know how this ends, and the DCUS Attorney General’s Office must save itself from further embarrassment,” Tillis wrote.

The Federal Reserve declined to comment when contacted by CNBC.

Boasberg’s decision and the Justice Department’s planned appeal appear likely to ensure that Powell remains in his seat as Fed chair until his term ends in May.

Tillis’ “no” vote on Warsh’s nomination before the Banking Committee would deadlock that panel and prevent Warsh from receiving a confirmation vote by the full Senate.

Trump’s desire to further lower the Fed’s interest rates has been further complicated by the Iran war.

Rising energy costs are likely to deter policymakers from easing until there is greater clarity about when and how the war will end.

Recent statements from Fed officials indicate a mostly cautious approach to further rate cuts, with the exception of Governors Stephen Miran and Christopher Waller, who favor lower interest rates.

Markets had already postponed interest rate cut hopes until the end of the year. Before the war, the market was pricing in at least two disruptions.

— CNBC’s Eamon Javers And Jeff Cox Contributor to this article

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