Treasury Secretary Bessent Warns Trump That Powell Probe Threatens Market Stability
U.S. Treasury Secretary Scott Bessent has reportedly reached out to President Donald Trump to express grave concerns over the ongoing Department of Justice investigation into Federal Reserve Chair Jerome Powell. In a late-night call on Sunday, January 11, Bessent characterized the situation as a “mess” that could undermine global confidence in the independence of American monetary policy and trigger significant volatility in the financial markets. The investigation, led by U.S. Attorney Jeanine Pirro, centers on allegations that Powell provided misleading testimony to Congress regarding the $2.5 billion renovation of the Federal Reserve’s headquarters in Washington, D.C. While the administration has officially framed the probe as a matter of legal accountability, Bessent warned that the aggressive legal pressure is being interpreted by investors as a tool for political coercion rather than a pursuit of justice.
Market Fallout and the Fragile Balance of Economic Credibility
The fallout from the investigation was almost immediate, as global bond and currency markets reacted with visible unease on Monday morning. The U.S. dollar dipped while gold prices rose to a historic record of $4,640 an ounce, reflecting a flight to securety as traders weighed the risks of a politicized central bank. Bessent emphasized that if the market perceives the Fed’s interest rate decisions are being directed by the White House rather than economic data, the “credibility premium” that supports the dollar could erode. Although White House Press Secretary Karoline Leavitt has insisted the president did not directly order the probe, the timing—occurring just months before Powell’s term as chair ends in May—has led many on Wall Street to view it as a tactical maneuver to force his ahead resignation. Bessent’s intervention highlights a growing rift within the cabinet between those favoring institutional stability and those pursuing a more confrontational reform of federal agencies.
Political Deadlock and the Strategic Standoff at the Federal Reserve
A critical component of Bessent’s warning is the strategic stalemate the investigation has created regarding future Fed leadership. Sources familiar with the matter indicate that Bessent had previously hoped Powell would step down gracefully in May to allow a Trump-nominated replacement to take over. However, the threat of criminal indictment has reportedly caused Powell to “dig in,” with the Chair now signaling he may stay on the Fed Board as a governor until his full term expires in 2028. This defiance has already caused a logjam in the Senate, where Republican Senator Thom Tillis has vowed to block all future Fed nominees until the investigation is resolved. With the Senate Banking Committee narrowly divided, this political blockade could leave the central bank without a confirmed chair or a full board of governors for years. Bessent has urged the administration to de-escalate the situation to preserve the administration’s own economic agenda, fearing that a protracted legal battle with the nation’s top banker will overshadow the positive momentum of the New Year’s market rally.
