WSJ What’s News - U.S. Prosecutors Investigate Fed Chair Powell

Episode Date: January 12, 2026

A.M. Edition for Jan. 12. The Justice Department is threatening Federal Reserve Chair Jerome Powell with a criminal indictment, in what Powell is calling an attack on the central bank’s independence. WSJ finance editor Alex Frangos discusses how markets are reacting and what the investigation means for the Fed’s future leaders. Plus, President Trump mulls intervention in Iran as anti-regime protest deaths rise. And bank stocks sag after Trump calls for capping credit-card interest rates. Luke Vargas hosts. Sign up for the WSJ’s free What’s News newsletter. Learn more about your ad choices. Visit megaphone.fm/adchoices

The Justice Department threatens Fed Chair Jerome Powell with a criminal indictment and what he calls an attack on the central bank's independence. Plus, President Trump moles' intervention in Iran as protest deaths rise. We're looking at it very seriously. The military is looking at it. And we're looking at some very strong options. We'll make a determination. And the latest from Minnesota as more federal agents head to the state.

It's Monday, January 12th. I'm Luke Vargas for the Wall Street. Journal, and here is the AM edition of What's News, the top headlines and business stories moving your world today. U.S. prosecutors have launched an investigation into Fed Chair Jerome Powell, threatening a criminal indictment over his testimony last year concerning the bank's building renovation project. We report the investigation is being run out of Washington's U.S. Attorney's Office, overseen by a close ally of the President Jeanine Piro, and concerns the Fed's spending records.

Trump last month threatened a lawsuit against Powell, alleging incompetence over the renovation of two historic buildings that's been hit by cost overruns. In a video posted by the Federal Reserve, Powell denied any wrongdoing and called the renovation project pretext for an attack on the central bank's independence. 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. This is about whether the Fed will be able to continue to set interest rates based on evidence and economic conditions or whether instead monetary policy will be directed by political pressure or intimidation. Powell said potential criminal prosecution wouldn't affect his ability to serve out his term as Fed chair, which ends May 15th. But that doesn't mean investors will be ignoring these developments as Journal Finance Editor Alex Frankos is here to discuss. Alex, you've seen Powell's comments. Many have. What was your reaction? It was definitely stronger than he usually is. He's a very technocratic, careful guy, you know, tends not to try to make waves in what he says. I mean, Fed chair is like the consummate kind of person who goes before Congress and says nothing for four hours. So for him to come out and do a video, put it on X, put it out at 730 just as the NFL games are ending, knowing, you know, who the audience is. It's a pretty strong statement.

Alex, we've still got a few hours until markets open, but I'm assuming we're seeing a reaction. What do you? you hearing? Yeah, so far negatively. It's not massive so far, but the dollar is definitely weaker. Gold is at a record, went up another 2%. You're seeing long-term bond yields rise, which is an indication that investors are nervous about the far future and stock futures are down. So generally, it's a negative reaction. This definitely, you know, makes people worried not just about the short term. Powell's terms up in May. I mean, like, what's the difference, right? But he would continue to serve on the board as a board member for another two years. So there's the possibility that gets undone. The big implication is for his successor, whether it's one of the Kevin's, Kevin Hassert or Kevin Warsh,

who are the top candidates to replace him, they now have to go in thinking, well, I want to be independent, but look what happened to the guy before me. Exactly. You're turning our attention to the distant future, which is helpful, but we do have a Fed meeting later this month. And two more, assuming Powell serves out his term until May 15th. I mean, how does this change the context heading into those meetings. Well, he's not fired. They didn't say he's fired and he's not indicted. This was questions from a grand jury. Powell came out fighting, you know, put out the statement saying, you know, he's not going anywhere. So there's no indication that this is going to make a change for the, you know, meetings upcoming. But over all of this is that there's the Lisa Cook case. There's the

other Fed member who Trump is trying to fire whose cases going before the Supreme Court. And that's going to set a very big precedent about how much the president can, in fact, exert. this power to remove a Fed chair or a Fed board member. And you mentioned earlier the negative market reaction we've seen heading into trading today. That's relevant because President Trump had wavered in the past about whether to dismiss Powell before. He did this in his first term and then again last spring. And then he backed off. We report because of suggestions from his advisors, it would have a negative market impact.

Yeah. And I mean, so far it's very early and we'll see how the day plays out. Sometimes it takes a little while for markets to digest something like this. But yeah, so far it's negative. Trump has set this pattern over the last year and in his second term of coming out strong about something and then backing off when markets get upset. You know, we saw that obviously with tariffs and also with some of the Fed moves. There's also going to be a lot of probably behind the scenes establishment Republicans. You were going to say, come on, like the guy's leaving in May anyway.

Like, why are we doing this? That was Journal Finance Editor Alex Frankos. We go to Iran now where over 500 people have been killed in two weeks. weeks of unrest. According to the Hengah Human Rights Organization, some protesters were killed by government forces with live ammunition, and the group Human Rights activists in Iran, say a further 10,000 people have been arrested. The regime's crackdown on protesters has also gotten the attention of President Trump, who we understand is meeting with advisors tomorrow to consider possible responses. Yesterday, Iran's leadership accused rioters of acting on behalf of the U.S. and Israel,

and threatened to attack American military bases in the Middle East if the U.S. hits first. Journal National Security reporter Alex Ward says U.S. intervention in Iran could include everything from sanctions to cyber weapons to a military strike or nothing at all. There is concern that if the U.S. were to attack Iran, it would actually undermine the protests. For a couple of reasons. One, it would help the Iranian propaganda that the U.S. is actually behind these protests and that they aren't organic and Israel potentially, too. And then there's the other side of this, which is if the U.S. does attack, but it doesn't actually have any meaningful effect, then will the protesters be demoralized? Alex says that even though Trump has been emboldened by recent military successes, including the removal of Venezuelan President Nicolas Maduro, it isn't enough to suggest an imminent

strike on Iran. Trump feels that the U.S. military is just on a hot streak effectively, and he's feeling pretty good. And so in his mind, new military options have a high rate of success. But there's tons of research out there and tons of real. world experience it shows just because you airstrike something doesn't mean you solve the problem. And so the sort of main strategic question Trump has to ask is, if the U.S. were to bomb Iran, does that lead to a better future for Iran?

Coming up, DHS sends hundreds of additional officers to Minnesota. And President Trump weighs in on which oil companies could get a chance to do business in Venezuela and who might be left on the outside looking in. Those stories and more after the break. In Minnesota, a federal immigration crackdown is continuing this morning in the Twin Cities as part of what the Department of Homeland Security has described as its largest ever immigration enforcement operation. More than 2,000 federal border and immigration agents are taking part while officers and police continued to clash with protesters. The Trump administration

is facing questions about why officials were so quick to defend the actions of an ICE agent who shot and killed Renee Nicole Good in Minneapolis last week before. an investigation plays out. Speaking to CNN's Jake Tapper yesterday, Homeland Security Secretary Christy Knoem called Good a domestic terrorist for obstructing agents. The question is, what was she doing when she was moving her car? The question is, that's the question. Why are we arguing with a president who's working to keep people safe? Why are we arguing with law enforcement operations that have gone on in this country for years? And we're working to collect murderers and rapists and drug traffickers and fraudsters off the streets of Minnesota,

and we don't have local law enforcement and local elected officials that are partnering with us to help do that work. Overwhelmingly, the people in this country said they wanted America to be safe again, that they didn't want dangerous criminals on our streets. I would encourage the elected leaders in that city and in that state to work with us so that we can do our operations without the kind of opposition and people that are conducting and perpetuating the kind of violent rhetoric that we're seeing today. On NBC's Meet the Press, Minneapolis Mayor Jacob Fry once again called for state authorities to be involved in the investigation into goods' death, which is currently being overseen

by the FBI. We need to be doing this right now. We need to be doing this transparently. And what I was pushing back on from the very beginning was a narrative that had jumped to that conclusion right from the... get-go. And when you've got a federal administration that is so quick to jump on a narrative as opposed to the truth, I think we all need to be speaking out. A Homeland Security spokesperson said that more than 2,000 immigration arrests have been made in Minnesota since the enforcement

operation began at the beginning of December. President Trump has said he might block Exxon Mobile from drilling in Venezuela. That's after the president met with oil executives at the White House on Friday, where Exxon Chief Executive Darren Woods said that Venezuela is currently, quote, uninvestable. Probably be inclined to keep Exxon out. I didn't like their response. They're playing too cute. That was Trump there speaking to reporters on Air Force One last night. Wood said significant changes to Venezuela's commercial frameworks, legal system, and hydrocarbon laws were needed, but also expressed confidence that the Trump administration and Venezuelan government

would work together to put those changes in place. The president has been pushing. American energy companies to invest in Venezuela, saying the U.S. would provide security guarantees. We are exclusively reporting that House Republicans are backing a stock trading crackdown that would prohibit members of Congress from buying individual stocks. The draft bills said to be introduced today would address concerns about lawmakers potentially profiting from insider trading. Under the plan, lawmakers would still be allowed to buy and sell diversified investment funds and wouldn't be required to sell any stocks they already own, but they would have to file a public notice ahead of selling an individual stock.

The proposal would also boost penalties if lawmakers fail to follow the guidelines. And shares of America's leading banks are trending lower today after President Trump on Friday called for a 10% cap on credit card interest rates. Credit card rates average around 23% according to the Federal Reserve. Borrowers in lower and middle-income households would benefit the most from a 10% cap, but experts say they'd also be the first ones that banks would stop lending to. The American Bankers Association and other industry groups said that Trump's proposal would hurt families and small business owners by driving them toward less regulated alternatives.

And that's it for what's news for this Monday morning. Today's show was produced by Hattie Moyer and Daniel Bach, our supervising producer with Sandra Kilhoff, and I'm Luke Vargas for the Wall Street Journal. We will be back tonight with a new show. Until then, thanks for listening. Thank you.