With the subpoena of Jerome Powell, political pressure on the Federal Reserve has taken on a legal dimension. The timing is striking: Powell’s term still has months to run, yet the White House is pressing ahead now. The stakes extend well beyond the fate of the Fed chair himself.
Powell now is facing a Grand Jury. Prosecutors will ask a panel of ordinary citizens to decide whether there is ‘probable cause’ that Powell misled Congress about the cost of renovating the Fed’s Washington headquarters.
“Only if the grand jury agrees that there is ‘probable cause’ can a formal indictment follow,” Kenneth Manusama, a Dutch specialist in US constitutional law, told Investment Officer. The bar at this stage, he said, is lower than at trial.
From this moment on, Powell’s rights are comparable to those of a criminal suspect. He can challenge the subpoena, testify, or invoke the Fifth Amendment, his right to remain silent. “Legally, that is completely legitimate,” Manusama said of pleading the Fifth. “But it could create the impression that there is something to hide.”
Problematic for Powell’s defence, led by law firm Williams & Connolly, is that the current administration has already spent years weakening the legal protections that shield the Federal Reserve from political pressure. That context matters if the grand jury process moves toward criminal charges.
Humprey’s Executor ruling
Powell’s protection rests on a legal doctrine derived from Humphrey’s Executor, a U.S. Supreme Court ruling from 1935 that limits the president’s ability to remove leaders of independent agencies for policy reasons. For decades, that doctrine was treated as settled law. In recent years, it has come under sustained attack.
The Supreme Court first narrowed those protections in Seila Law, a 2020 case involving the Consumer Financial Protection Bureau. The court ruled that the CFPB’s leadership structure went too far in limiting presidential control. Humphrey’s Executor was not overturned, but the ruling signaled a willingness to create exceptions.
“The goal is to appoint a new Fed chair so that after the summer that person can say the economy is strong and rates can come down.”
Kenneth Manusama
That shift continued in Trump v. Wilcox, a 2025 case involving the National Labor Relations Board. Both the Supreme Court and the Washington D.C. circuit court ruled that President Trump was likely to prevail after dismissing an NLRB member Gwynn Wilcox for policy differences. At the time, the justices explicitly mentioned that the Federal Reserve was different, pointing to its history and institutional role.
Lawyers say the Supreme Court is unlikely to stop there. A senior litigation lawyer at a large New York firm, speaking on background, said the court’s approach is incremental.
“They use smaller carve-outs from Humphrey’s Executor so it doesn’t sound like they are doing anything big, even though they are”, he said. The Supreme Court favors the ‘unitary executive theory’, the idea that the president should control the entire executive branch, including officials at independent agencies.
That legal direction helps explain why the administration’s pressure has gone beyond Powell, reaching officials such as Federal Reserve Governor Lisa Cook and FTC Commissioner Rebecca Slaughter. Manusama said the Slaughter case matters because it squarely tests Humphrey’s Executor. “That doctrine is under heavy pressure,” he said.
Timing
Help for Powell may also come from outside the courts. Republican Senator Tom Tillis is blocking Federal Reserve nominations using Senate rules that allow a single lawmaker to freeze the process.
Tillis is willing to go further than most because he is not running for re-election and is nearing retirement, Manusama said. Such resistance often only surfaces once Republican lawmakers no longer depend on re-election. “For some, it is no longer just about political damage, but fear of personal repercussions,” he said.
The timing of the pressure on Powell is striking too. His term as Fed chair does not end until May, leaving no legal need to force the issue now. That might be precisely the point.
“The urgency is not about the legal merits,” he said. “It is about timing and politics.” The fact that the pressure is coming now, he said, shows the White House wants speed, not process.
The goal is to force an outcome early. “They want to take the pain as early as possible,” allowing any market or political fallout to fade before the election. Speed also creates room to install a successor quickly. “The goal is to appoint a new Fed chair so that after the summer that person can say the economy is strong and rates can come down,” he said.
Why markets barely moved
Financial markets reacted with notable restraint to news that Federal Reserve chair Jerome Powell had been subpoenaed, despite the political drama surrounding the move. According to Justin Wolfers, professor of economics at the University of Michigan, that calm reflects a basic market judgement: investors did not learn much that was genuinely new.
“Those risks were long priced in. What changed was not the substance of the threat, but the way it surfaced. Powell chose to make a private pressure tactic public, forcing a political confrontation rather than an immediate monetary one,” Wolfers said in a podcast interview.
“Some people argue markets should have gone up on this news. Many investors feared Trump would quietly appoint a compliant Fed chair who would take orders, leaving the Fed independent in name only. That would have had serious consequences.”
Instead, the episode triggered visible resistance in the Senate. “Trump’s move woke up the Senate. We now have at least two Republican senators on record saying they will not rubber-stamp a nominee. The fight over replacing Jay Powell is now out in the open, and that fight will be vitally important,” he said.
Wolfers added that traders have learned to be selective in reacting to presidential rhetoric. “Trump talks constantly. Some of what he says is offensive. Some of it he means. And even when he means it, he often backs off. If you are a trader, you learn not to lose money reacting to every threat that never materializes.”