Caught in an investigation, why did Powell appear at the Supreme Court against the odds?

Faced with criminal investigation subpoenas and threats of presidential impeachment, Federal Reserve Chair Jerome Powell walks up the steps of the Supreme Court, behind him a tradition of over a century of Fed independence, and in front of him a legal battle that will determine the fate of the U.S. central bank.

On January 20, 2026, the U.S. Supreme Court will hold oral arguments in the case of former President Trump’s attempt to remove Federal Reserve Board member Lisa Cook.

Fed Chair Jerome Powell plans to personally attend the hearing, even as he is under criminal investigation related to the Fed headquarters renovation project. This legal battle has been described as “the most significant legal test of Fed independence in over a century.”

1. Background of the Case

The controversy began on August 25, 2025, when Trump issued a public letter announcing the “immediate removal” of Fed Board member Lisa Cook.

● The letter accused Cook of issues with mortgage applications, claiming she repeatedly declared different residences as her “primary residence” in Michigan and Georgia to enjoy favorable loan conditions.

● Cook quickly responded that “there is no legal reason” to dismiss her and stated she would continue to perform her duties. She denied any misconduct and has not been charged with any crimes.

In response to Trump’s removal attempt, Cook filed a lawsuit in a federal court in Washington, D.C., seeking to prevent her removal.

● On September 9, 2025, a district court judge issued an order prohibiting Trump from removing her during the litigation. Soon after, a federal appeals court upheld this injunction.

● On October 1, 2025, the Supreme Court temporarily maintained Cook’s position and scheduled oral arguments for January 2026.

2. The Supreme Court’s Key Role

● The U.S. Department of Justice, in documents submitted to the Supreme Court, called the lower court’s order prohibiting Cook’s removal “another example of judicial overreach into the President’s removal authority.”

● The Supreme Court will hear oral arguments on this case on January 21, 2026. Analysts note that the core dispute revolves around whether Trump can remove Fed Board members based on his interpretation of “just cause.”

● Jon Faust, an economics professor at Johns Hopkins University and former senior advisor to Powell and Yellen, expressed concern that even if Cook remains in her position, the ruling could weaken the Fed’s resistance to political pressure.

3. Powell’s Dilemma and Counterattack

Meanwhile, Powell himself faces pressure. The U.S. Department of Justice delivered a subpoena to the Fed in September 2025, threatening criminal charges related to his testimony before the Senate Banking Committee in June 2025.

● The investigation mainly focuses on cost overruns in the Fed headquarters renovation project, which increased from an initial $1.9 billion to nearly $2.5 billion.

● In a public statement on January 11, 2026, Powell said the criminal investigation aims to pressure the Fed, as it did not lower interest rates quickly enough at Trump’s request.

White House National Economic Council Director Kevin Hassett downplayed the investigation, saying he expects “no substantive results.”

● Hassett stated he believes Powell’s previous testimony regarding the Fed headquarters renovation was truthful. However, he also said that if he were Fed Chair, he would “push for transparency.”

● Notably, Hassett was once considered a top potential successor to Powell. But during a White House speech on January 16, 2026, Trump hinted he prefers to keep Hassett in his current role rather than nominate him as the next Fed Chair.

4. Trump’s True Intentions

Since returning to the White House in early 2025, Trump has been urging the Fed to cut interest rates sharply, hoping to boost the economy and reduce government debt costs.

● Analysts see the attack on Cook as a significant escalation of Trump’s interference in Fed policy. If Trump succeeds in removing Cook, he can appoint someone else to fill her vacancy, giving his appointees a majority on the Fed Board.

● Former New York Fed President Bill Dudley warned that markets underestimate the threat posed by Trump’s move to remove Fed Board member Cook. “Even if the possibility of Trump controlling the Fed is minimal, the effort itself is destructive. And if successful, the consequences could be dire.”

5. Institutional Design of Fed Independence

The design of the Federal Reserve system aims to ensure financial stability and maintain the professionalism and independence of monetary policy.

● According to the Federal Reserve Act, Fed Board members are independent officials with 14-year terms, removable only for “cause,” such as serious misconduct, illegality, or moral turpitude, following legal procedures.

● Hu Jie, a professor at Shanghai Jiao Tong University’s Shanghai Advanced Institute of Finance, stated that Fed independence is protected by U.S. law and widely recognized by society and regulators. Any attempt to turn it into an administrative tool could trigger market turmoil.

6. Global Market Reactions

● The removal controversy has caused turbulence in financial markets. After the news, the Japanese yen appreciated nearly 0.5% against the dollar amid risk aversion.

● The yield on 30-year U.S. Treasury bonds widened by 5 basis points to 4.94%. Fearing that losing some independence could accelerate inflation, the 30-year Treasury yield approached 5% at one point.

● Robert Savage, head of Market Strategy and Insights at BNY Mellon, said that firing Cook is “a historic test of presidential power,” and the loss of Fed independence could pose long-term risks to U.S. bonds and the dollar.

Analysts believe that if Trump gains the power to veto and select regional Fed presidents through the Federal Reserve Board, Fed district boards will face tricky political issues.

● Bai Xue, Senior Vice President of Research and Development at Orient Securities, believes Trump’s move could influence future monetary policy and institutional direction, increasing risks of politicization and short-termism in policy decisions.

● From a global perspective, weakening Fed independence could undermine the dollar’s reserve currency status and challenge global financial stability.

Outside the Supreme Court, reporters wait for Powell’s appearance. His term as Fed Chair will end in May 2026, and his successor has yet to be announced.

Regardless of the final ruling, this case has left an indelible mark on the history of U.S. monetary policy. The investigation by the U.S. District Attorney’s Office in Washington, D.C., is ongoing, and the renovation of the Fed headquarters seems to symbolize the “structural reform” facing the U.S. central bank itself.

Financial markets hold their breath, not only watching interest rate trends but also pondering a fundamental question: Is the future of the Fed to remain an independent technical agency, or will it gradually take on political characteristics?