January 12, 2026

Good Monday evening. In this edition: Justice Department launches criminal investigation into Fed Chair Powell.

• Plus, Iran, Minnesota, Mark Kelly and Maria Corina Machado.

Jerome Powell

The Justice Department opened a criminal investigation into Federal Reserve Chair Jerome Powell, dramatically escalating President Trump's feud with the central banker over interest rates and igniting a firestorm on Capitol Hill.

• The investigation, approved by U.S. Attorney for the District of Columbia Jeanine Pirro, centers on the Fed's renovation of its Washington headquarters and whether Mr. Powell lied to Congress in June about the scope and cost of the project.

Mr. Powell, in a rare video statement Sunday night, cast the probe as retribution for not slashing interest rates more aggressively, as President Trump has repeatedly demanded.

• "This new threat is not about my testimony last June or about the renovation of the Federal Reserve buildings. It is not about Congress's oversight role; the Fed through testimony and other public disclosures made every effort to keep Congress informed about the renovation project. Those are pretexts," he said.
  
  

• "The threat of criminal charges is a consequence of the Federal Reserve setting interest rates based on our best assessment of what will serve the public, rather than following the preferences of the President."

Mr. Powell, along with most other central bankers, maintains that inflation still poses a risk to the economy and has cautioned against cutting rates too sharply.

• President Trump, on the other hand, argues inflation is no longer a problem and has called for dramatic rate cuts.

The president has repeatedly criticized and threatened to fire Mr. Powell, whom he nominated to the post in 2017, despite questions over the legality of such a move.

• Late month, President Trump raised the prospect of a lawsuit against Mr. Powell tied to the renovation project, citing what he called "gross incompetence."

White House Press Secretary Karoline Leavitt denied that President Trump ordered the Justice Department to launch the investigation, but called Mr. Powell "bad" at his job and said his fate would be up to the justice system.

• "The president has every right to criticize the Fed chair. He has a First Amendment right, just like all of you do. And one thing for sure, the president's made it quite clear, is Jerome Powell is bad at his job," she told reporters.
  
  

• "As for whether or not Jerome Powell is a criminal, that's an answer the Department of Justice is going to have to find out."

Senate Majority Leader Chuck Schumer (D-NY) blasted the probe as an effort to strongarm the central bank and called on the Senate to block all future Federal Reserve nominees.

• "Anyone with two eyes and half a brain knows exactly what this criminal probe represents: a brazen attempt by Donald Trump to cannibalize the Fed's independence. The allegations behind this probe are clearly bogus," he said on the Senate floor.

Kevin Hassett, the president's top economic adviser and the frontrunner to replace Mr. Powell when his term ends in May, brushed aside concerns that the probe undermines the Fed's independence.

• "I guess the question is, if you think the building costs $20 billion or $10 billion, do you think at some point that it's appropriate for the federal government to investigate? It seems like the Justice Department has decided they want to see what's going on over there," he told reporters.
  
  

• "If I were Fed chair, I would want them to do that. It's really important to understand where the taxpayer money goes."

Sen. Thom Tillis (R-NC), a senior member of the Banking Committee, criticized the investigation and said he would oppose future Fed nominations until the legal matter is "fully resolved."

• "If there were any remaining doubt whether advisers within the Trump Administration are actively pushing to end the independence of the Federal Reserve, there should now be none. It is now the independence and credibility of the Department of Justice that are in question," he said in a statement.
  
  

• Sens. Lisa Murkowski (R-AK) and Kevin Cramer (R-ND) also condemned the investigation.

Rep. French Hill (R-AR), the chair of the Financial Services Committee, called Mr. Powell a person of the "highest integrity" and said the DOJ probe was an "unnecessary distraction."

• "The Federal Reserve is led by strong, capable individuals appointed by President Trump, and this action could undermine this and future Administrations' ability to make sound monetary policy decisions," he said.

Speaker Mike Johnson (R-LA) said to "reserve judgement" and insisted the Justice Department was not being turned against the president's perceived political adversaries.

• "No, the Justice Department is not being weaponized," he told reporters. "It was for four years under Biden–Harris so that is what everybody expects."

Senate Majority Leader John Thune (R-SD) said he had not reviewed the allegations but warned that "they better be real and they better be serious."

• "It needs to be resolved quickly because the Fed's role and the Fed's independence in shaping monetary policy in the country is something we need to ensure proceeds without political interference," he told reporters.

A bipartisan group of former Fed chairs and prominent economists also issued a joint statement calling the probe an "unprecedented attempt" to undermine the central bank's independence.

• "This is how monetary policy is made in emerging markets with weak institutions, with highly negative consequences for inflation and the functioning of their economies more broadly," the group, including former Fed chairs Janet Yellen, Ben Bernanke and Alan Greenspan, wrote.
  
  

• "It has no place in the United States whose greatest strength is the rule of law, which is at the foundation of our economic success."

The Federal Open Market Committee (FOMC), which sets interest rates, is scheduled to meet Jan. 27–28, with the benchmark lending rate currently at 3.5% to 3.75%.

• It was already considered unlikely the Fed would cut rates at the meeting, and investors now give a quarter-point reduction less than a 5% chance.

Watch the remarks from Mr. Powell, Sen. Schumer, Mr. Hassett and Ms. Leavitt.

In other news…

• President Trump said the U.S. is weighing "strong options" on Iran as the regime cracks down on growing protests across the country. "We're looking at it very seriously," he told reporters aboard Air Force One on Sunday evening. The president also said Iran's leadership had reached out to the White House and is interested in striking a deal. "Iran wants to negotiate, yes. We may meet with them. I mean, a meeting is being set up," he said. "But we may have to act, because of what's happening, before the meeting." More than 500 people have been killed and almost 11,000 arrested, according to a U.S.-based rights group, as demonstrations enter a third week.
  
  

• Minnesota sued the Homeland Security Department, asking a federal court to block its large-scale federal immigration enforcement operation that state officials say is unconstitutional, politically motivated and harmful to public safety. "The deployment of thousands of armed, masked DHS agents to Minnesota has done our state serious harm. This is, in essence, a federal invasion of the Twin Cities and Minnesota, and it must stop," Minnesota AG Keith Ellison (D) said. The lawsuit follows a weekend of protests sparked by the fatal shooting of a U.S. citizen by an Immigration and Customs Enforcement (ICE) agent in Minneapolis last week.
  
  

• Sen. Mark Kelly (D-AZ) filed a lawsuit seeking to reverse Defense Secretary Pete Hegseth's letter of censure and effort to demote the retired Navy captain. "I've never backed down from a fight for our country and I'm not going to back down from this one," he said on the Senate floor. The move comes after the Pentagon retaliated against Sen. Kelly for participating in a video message with other Democratic senators reminding service members of their obligation to refuse illegal orders. The senator's suit alleges that the Pentagon's actions unlawfully punished him for his speech and violated his due process.
  
  

• President Trump plans to meet with Venezuelan opposition leader Maria Corina Machado, the 2025 Nobel Peace Prize winner, at the White House on Thursday. The president declined to endorse Ms. Machado to lead the country in the aftermath of the U.S.'s arrest of President Nicolas Maduro.

For your radar…

• The Supreme Court hears a pair of cases Tuesday on whether state laws prohibiting transgender women from participating in female sports violate the 14th Amendment's Equal Protection Clause. Listen LIVE on C-SPAN3 starting at 10am ET.
  
  

• President Trump addresses the Detroit Economic Club on Tuesday. Watch LIVE on C-SPAN3 at 2pm ET.

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