Powell Testimony to Lawmakers Is Focus of High-Stakes DOJ Probe

Political

Central Bank

Summary:

The Fed chairman said he would provide that information but maintained that the details being discussed were not the drivers for the cost overruns.

Jerome Powell was clear: No beehives or terraced roof gardens. No new fountains or fancy marble. No special elevators or VIP dining rooms.

That is what the Federal Reserve chairman told Congress last June. Powell, during a hearing on monetary policy, was pressed by two Republican senators about cost overruns stemming from the ongoing renovations of two historic buildings, including the 88-year-old Marriner S. Eccles Building, the Fed’s pink-granite headquarters in Washington.

Now, Powell’s words are at the center of an extraordinary criminal investigation into the Fed chair. His critics have suggested that he may have lied during his testimony about the project, when he denied that luxury upgrades swelled its costs. Powell contends the investigation is a pretext to punish him for not cutting rates quickly enough.

The probe follows months of attacks by President Donald Trump, who has blasted Powell over the cost overruns and — more broadly — for not lowering interest rates.

“He’s billions of dollars over budget, so either he’s incompetent or he’s crooked,” Trump told reporters Tuesday as he departed the White House for an economic speech in Detroit. “I don’t know what he is, but he certainly doesn’t do a very good job.” The president — who initially nominated Powell to the Fed chair job in 2017 — has denied having any knowledge of the criminal investigation.

No charges have been filed against Powell, and the grand jury subpoenas issued to the Fed do not ensure an indictment will be returned.

A review of the Fed chair’s testimony, as well as public statements he has made about the project, show how Powell has responded to the various allegations of costly additions to the building.

Powell’s testimony focused mostly on inflation and interest rates. But lawmakers also grilled Powell about why the cost of the headquarters renovation project had ballooned by about a third to $2.5 billion from $1.9 billion.

‘Not Really Safe’

The Fed “has spent billions on lavish renovations to its DC offices,” Senator Tim Scott, the committee’s chair, said in his opening remarks that day.

“We’re talking about rooftop terraces, custom elevators that open into VIP dining rooms, white marble finishes and even a private art collection,” Scott said, adding that the Fed “hasn’t turned a profit since 2022.”

Senator Mike Rounds, a South Dakota Republican, also wanted answers. He told Powell that an explanation of the cost overruns was warranted because lawmakers were “talking about billions of dollars in costs.”

Powell testified that prior to becoming chair, when he was serving as administrative governor, he “came to understand how badly the Eccles building really needed a serious renovation” and had “never had one.”

“It was not really safe and it was not waterproof and that kind of thing,” Powell said.

Scrapped Water Features

Powell testified that media reports cited at the hearing were “inaccurate.” He said there was no VIP dining room, no new water features, no beehives and “no roof terrace gardens.” He also said there was no new marble other than where “some of the old marble broke.”

“I’m happy that there are no beehives in there, but we’re going to figure out what they are anyways,” Scott said.

The senator said the allegedly lavish renovation work was not only found in articles in the New York Post and the Wall Street Journal, as Powell suggested, but on the “final plans” found on National Capital Planning Commission’s website.

But Powell characterized some of the media reports as misleading, according to the transcript. He also pushed back on the claim about “special elevators.”

“It’s the same elevator — it’s been there since the building was built,” Powell said, “that’s a mischaracterization.“ He added some of those details are no longer in the plans, which “have continued to evolve.”

Scott asked if the changes were made starting in April, as a result of media attention on the cost overruns, “or was that just never in the plan?”

The Fed chairman said he would provide that information but maintained that the details being discussed were not the drivers for the cost overruns. The Fed later created a fact sheet and FAQ to answer questions about the controversy.

According to the Fed, the price tag for the renovation has more to do with the challenges of building — particularly underground — in what was once a swamp near the Tidal Basin along the Potomac River. The Fed also cited the cost of removing asbestos and lead and replacing antiquated mechanical systems.

Powell went into greater detail in a July letter to Office of Management and Budget Director Russell Vought, saying that earlier designs that called for new water features were scrapped in favor of renovating existing fountains, and that new VIP dining rooms were never called for.

“There are no VIP dining rooms being constructed as part of the project,” Powell said. “The Eccles Building has historic multi-use rooms on the 4th Floor that are used as conference rooms and for mealtime meetings. These rooms are being renovated and preserved.”

DOJ Referral

A few weeks after the Senate hearing, Republican Representative Anna Paulina Luna wrote to Attorney General Pam Bondi, saying Powell had omitted earlier renovation work in 1993 and 2003 from his testimony and calling for an investigation. She also pointed to the alleged luxury raised by Scott.

“If Chairman Powell knowingly misrepresented these facts — whether in testimony before Congress or in formal correspondence to senior executive officials — such actions may constitute perjury or materially false statements under federal law,” Luna wrote in her letter to Bondi.

Powell responded to that argument in his letter to Vought, saying, “While periodic work has been done to keep these buildings occupiable, neither building has seen a comprehensive renovation since they were first constructed.”

Mike Romano, a former federal prosecutor with the Justice Department’s Public Integrity Section, said the investigation into Powell is “highly unusual” without some indication that he was lying to lawmakers in an attempt to benefit himself.

Romano said an allegation of self-dealing or enrichment of friends could lead to a probe. “But going to Congress and testifying about why a construction project was needed, or how it was going, without some sense of a person lying for the sake of benefiting themselves, I struggle to think that that would be worth investigating,” he said.

Source: Bloomberg

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Dark Current

Data Interpretation

Commodity

Remarks of Officials

Economic

Energy

U.S. oil production is set to decline by 1% this year as lower prices curb drilling activity, according to a forecast from the Energy Information Administration (EIA). The government agency also warned that a potential increase in oil supply from Venezuela could exert even more downward pressure on the market.

This analysis from the EIA, the statistical arm of the Department of Energy, reflects concerns already voiced by American shale producers. They argue that President Donald Trump's push for U.S. companies to help restart Venezuelan output following the capture of President Nicolas Maduro would further harm their businesses, which are already struggling with low oil prices.

Lower Prices Expected to Curb Drilling

In its monthly Short Term Energy Outlook, the EIA projected that Brent crude prices will average $56 a barrel this year, a significant drop from last year's average of $69. The agency attributes this decline to global liquid fuels production outpacing demand, leading to a buildup in inventories.

This environment of sustained lower prices is expected to trigger a slowdown in U.S. operations. "Over the next two years, we expect sustained lower crude oil prices will result in a pullback in drilling and completion activity that is enough to outweigh ongoing increases in productivity," the EIA stated.

As a result, U.S. oil output is forecast to slip from a record 13.61 million barrels per day (bpd) in 2025 to an average of 13.59 million bpd this year. The EIA sees a further decline to 13.25 million bpd next year.

The Venezuela Wildcard

The EIA's current outlook was finalized under the assumption that U.S. sanctions against Venezuela will remain in effect through 2027. However, the agency noted that any policy changes could significantly alter the forecast.

If sanctions are eased, allowing more Venezuelan oil to enter the global market, prices could fall more steeply than currently projected. "Any change in sanctions or other U.S. government policy related to Venezuela that could result in more oil production than we assumed in this forecast would put additional downward pressure on oil prices," the report explained.

This possibility was highlighted by U.S. Treasury Secretary Scott Bessent, who recently told Reuters that more sanctions on Venezuela could be lifted as soon as this week to facilitate oil sales.

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Nathaniel Wright

Remarks of Officials

Economic

Central Bank

Traders' Opinions

The head of BNY Mellon, a $2.2 trillion asset management firm, has issued a stark warning that challenges the market's consensus: the Federal Reserve might be forced to raise interest rates again, not cut them. This cautionary note comes as investors widely anticipate a shift toward easier monetary policy.

The CEO expressed concern that the central bank could be pushed into a corner by mounting economic and political pressure. If inflation remains a persistent threat, the Fed may have to tighten its policy further, a move that could slow economic growth or even trigger a recession.

Market Optimism vs. Economic Reality

Many investors have been positioning for interest rate cuts in 2024, fueled by signs that inflation is beginning to cool. However, the BNY Mellon chief suggests this optimism might be premature and that market expectations may be outpacing reality.

Several key factors could force the Fed’s hand:

• A Strong Labor Market: Resilient employment data continues to support the economy.

• Robust Consumer Spending: Consumers have continued to spend, which can keep upward pressure on prices.

• Sticky Inflation: If these elements prevent inflation from falling to the Fed's target, the case for rate cuts weakens significantly.

This analysis stands in sharp contrast to the more optimistic forecasts from analysts who predict the Fed could begin easing as early as mid-2024. If BNY Mellon's assessment is correct, markets could be unprepared for the jolt of another hike.

What Another Hike Means for Investors

The underlying message is clear: investors should not get too comfortable. A surprise rate hike from the Federal Reserve would send shockwaves through global markets, triggering significant volatility.

Such a move would have broad implications for nearly every asset class, from equities and bonds to real estate and cryptocurrencies. For now, all eyes remain fixed on Fed Chair Jerome Powell and the upcoming FOMC meetings, where the central bank's next steps will be scrutinized more closely than ever.

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Edward Lawson

Commodity

Political

Remarks of Officials

Economic

Energy

A key group of House Republicans is advancing a plan to allocate up to $1.1 billion to buy discounted Venezuelan crude oil to refill the U.S. Strategic Petroleum Reserve (SPR).

The proposal is a central component of a larger budget framework released Tuesday by the Republican Study Committee, a caucus representing 190 of the 218 Republicans in the House of Representatives.

A Trillion-Dollar Budget Push

The committee’s plan aims to use a filibuster-proof budget reconciliation process to achieve $1 trillion in savings over the next decade. This is the same legislative tool Republicans used last year for major tax cuts and energy policy reforms.

"President Trump has supercharged our economy, and now it's our time in Congress to act to codify what he has done," said Republican Study Committee chairman August Pfluger of Texas.

Beyond the SPR provision, the framework calls for significant cuts to social programs, new limits on regulations, and "royalty-style fees" on environmental lawsuits. It also seeks to streamline permitting and make President Trump's deregulatory actions permanent.

The Details of the Oil Purchase

The plan earmarks $1.1 billion to partially refill the SPR with what it calls "discounted Venezuelan oil made available by Operation Absolute Resolve," a U.S. military operation that took place in the South American country on January 3.

At a potential discounted price of $50 per barrel, the funding would purchase approximately 22 million barrels of crude. The SPR currently has 300 million barrels of available storage capacity.

U.S. Energy Secretary Chris Wright suggested that an increase in Venezuelan oil production could help fill the reserve by lowering global oil prices. "That makes it easier to fill our Strategic Petroleum Reserve back up, which the president is committed to do and we'll get done," Wright said in a January 11 interview on Fox News.

Technical Hurdles and Industry Concerns

However, U.S. oil industry leaders have raised concerns about the technical suitability of Venezuelan crude for the SPR. The reserve stores oil in vast underground salt caverns, and the extra-heavy, high-sulfur crude produced in Venezuela may not be a good fit for long-term storage in this system.

"The grade of Venezuelan crude does have a higher sulfur content than the current SPR can take," noted Mike Sommers, president of the American Petroleum Institute. "There are some logistical issues about the SPR that make it difficult for it to just take in Venezuelan crude."

Industry officials suggest the oil could instead be stored at the Louisiana Offshore Oil Port or sent directly to refineries.

Political Realities and Alternatives

Passing a second major reconciliation bill could prove difficult. House Republicans hold a very narrow majority, and moderate members face a challenging political climate leading up to the November midterm elections.

The Trump administration has signaled it is exploring other options to replenish the reserve. On January 8, Secretary Wright stated he was looking at "creative" methods to refill the SPR that would not require additional appropriations from Congress.

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Frederick Miles

Economic

Central Bank

Political

Markets should prepare for a period of volatility as President Donald Trump tests the limits of his power, even though Congress is expected to block his most disruptive policy ambitions, according to analysis from BCA Research.

In a recent note, the firm predicted that while "Congress will ultimately limit Trump from acting on his worst impulses," the president's "efforts to bypass those limits will cause market volatility." This dynamic is creating a tense outlook for investors navigating the political landscape.

The White House vs. The Federal Reserve

The primary flashpoint highlighted by BCA Research is the escalating conflict between the White House and the Federal Reserve. The latest development saw Fed Chairman Jerome Powell receive a Department of Justice subpoena related to an investigation into renovations at the central bank.

Analysts at BCA described this move as "another episode in President Trump's long-standing attempt to control the Fed and reshape it in his image." This follows last year's dismissal of Fed Governor Lisa Cook over allegations of mortgage fraud, a case that has since reached the Supreme Court.

Legal and Political Roadblocks for Trump

Despite the pressure campaign, several factors may prevent a presidential takeover of the central bank.

The Legal Timeline

BCA Research emphasized that Chairman Powell "has not yet been officially charged" with any wrongdoing. The firm noted that a grand jury could choose not to issue an indictment, pointing to the DOJ's "dismal record on grand juries in DC and Virginia."

Even if an indictment were to occur, analysts believe a verdict is "extremely unlikely" before Powell’s term concludes in May.

The Senate's Veto Power

On the political front, BCA expects the Senate to serve as a crucial check on the president. Retiring and moderate Republicans have already demonstrated a willingness to break with Trump on key votes, and they are positioned to prevent the installation of an unconventional Fed chair.

As evidence, the research points to Senator Thom Tillis, who has already "vowed not to advance Trump's Fed nominees."

Broader Congressional Check on Trump's Agenda

The pushback against the president is expected to extend beyond just Fed appointments. With government funding set to expire in January and divisions appearing among House Republicans, Congress is poised to constrain Trump’s policies more broadly.

According to BCA Research, lawmakers will likely move to "constrain President Trump's disruptive domestic and foreign policies" as they look toward the midterm elections in November and face their constituents.

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Manuel

Political

China–U.S. Trade War

A new report from the US Treasury released Tuesday showed that $27.89 billion in tariff revenue came into US coffers in December, capping off a year that saw President Trump reorder US trade policy.

The release brings the total revenue collected in 2025 to $264.05 billion. It's a historically high annual total — but also the second straight monthly decline after Trump dialed back key tariffs last November.

The peak for the year was October's monthly haul of $31.35 billion. The first decline then came in November, with $30.76 billion in customs duties collected that month.

Tuesday's new reading marks a more than 10% drop from that October high. It's also the latest evidence of how much tariffs are reordering global trade and lessening trade into the US, with new figures for the US trade deficit also recently released.

Commerce Department data showed the US trade gap narrowed in November to $29.4 billion, the lowest level since mid-2009. The data was delayed by last fall's government shutdown.

In both cases, the driving factor is Trump's wide-reaching tariff program, which shook up importers last year and led to global trade resettling (at least in US ports) at lower levels.

Tuesday's tariff revenue figures also underlined just how dramatically the tariff landscape has changed in one year. The US collected $6.81 billion in December 2024, compared to the most recent reading of more than four times that.

The US collected about $79 billion in tariffs in all of 2024.

Tuesday's release of the Treasury Department's Monthly Treasury Statement also showed that the US ran a deficit of $602 billion between October and December — the first three months of the fiscal year — including a deficit of $145 billion in December that far outstripped the tariff revenues despite Trump's frequent claims that tariffs are balancing the budget.

The numbers are unlikely to dampen Trump's enthusiasm for tariffs. Moments after Tuesday's release, President Trump was speaking in Detroit, where he once again touted how the tariffs are resulting in "hundreds of billions coming into the US Treasury."

When Trump began rolling out his tariff regime early last year, monthly revenues skyrocketed from $7.25 billion collected in February and rose every month through October.

The continued step-down in revenue isn't wholly unexpected, considering the Congressional Budget Office recently slashed its estimate of expected tariff receipts for the decade ahead by $1 trillion.

A changing trade landscape

The monthly dip in tariff revenues also has an impact on Trump's wider agenda, which has been heavily reliant, rhetorically at least, on historically high collections.

The president has said in recent months that tariffs could pay for at least 10 different things, far beyond what the tariffs were actually bringing in, even at their peak.

The most recent example came last week when Trump began to push a $500 billion increase in the US military budget, which he specifically claimed is possible thanks to tariffs. That annual military budget increase amounts to more than twice the entire tariff revenue collected in 2025.

Overall, the tariff threats from the White House — as well as uncertainty for importers — are clearly continuing in 2026. Just this week, Trump issued a new threat of 25% tariffs on goods from any nation "doing business" with Iran. There's also the much-watched Supreme Court decision on Trump's "blanket" tariffs that could come as early as Wednesday.

In Detroit on Tuesday, Trump once again said a negative ruling from the Supreme Court would hurt the US. He also claimed that "we have a group that's foreign-centric, China-centric," and added that if the ruling goes against him, "we'll figure something out."

The case at issue is Learning Resources, Inc. v. Trump, with the lead plaintiff being a company based in Illinois that manufactures and imports its products overseas.

The trade deficit reading, meanwhile, was reflective of less trade — at least involving the US.

A January report from shipping data company Project44 underlined the point. The firm found that in 2025, US imports from China fell 28% while exports to China dropped 38%.

The report found more signs of stabilization in shipping, but at this new lower level, after what it described as a tariff-fueled change that marks "one of the sharpest bilateral trade contractions in recent history."

But the changes to what's moving into and out of US ports may not be applicable around the world.

Last week, the European Union backed a landmark trade deal with four major Latin American nations called Mercosur. This alliance is set to create one of the largest free-trade zones in the world, lowering barriers between nations collectively populated by over 700 million people.

Source: Yahoo Finance

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Edward Lawson

Political

Commodity

Remarks of Officials

Economic

Traders' Opinions

Energy

Crude oil prices surged to their highest level since late October after U.S. President Donald Trump intensified his rhetoric over the escalating unrest in Iran, stoking market fears of a potential supply disruption from the major OPEC producer.

West Texas Intermediate (WTI) futures jumped 2.8% on Tuesday to settle at $61.15 a barrel, a peak not seen in over two months. The rally was fueled by Trump's remarks in Detroit, where he suggested it would be a "good idea" for U.S. citizens to leave Iran and reaffirmed his support for protesters challenging the country's regime.

Iran's Supply Jitters Rattle the Market

Traders are now laser-focused on the political instability within Iran, which produces approximately 3.3 million barrels of oil per day. Any American intervention or escalation of internal conflict could threaten this significant volume of crude supply, tightening the global market.

The tensions have escalated quickly. In a post on Truth Social, Trump declared he had "cancelled all meetings" with Iranian officials and encouraged demonstrators to continue. In response, Iran's Defense Minister Aziz Nasirzadeh stated the nation would "defend the country with full force."

This sudden geopolitical flare-up has reversed a bearish trend in the oil market, which had seen five consecutive monthly losses on expectations of a supply glut. The rally, which also follows U.S. intervention in Venezuela, has caught many investors with bearish positions off guard.

Multiple Factors Compound Bullish Sentiment

The situation in Iran isn't the only factor pushing prices higher. Existing supply chain issues and shifts in market sentiment are creating a perfect storm for a price spike.

Caspian Pipeline Disruptions

Supply concerns were already mounting due to problems at the Caspian Pipeline Consortium (CPC) terminal, a key hub for Kazakh oil exports. A combination of bad weather, drone attacks, and maintenance has threatened operations, with loadings revised down by nearly half to around 900,000 barrels a day. While Kazakhstan has redirected some flows, the disruption adds to global supply anxiety.

Options Traders Bet on Higher Prices

Market activity signals a sharp turn towards bullishness. In the options market, traders are paying the highest premiums for bullish call contracts since the U.S. and Israel launched airstrikes on Iran last year. Monday saw a record volume of bullish Brent call options trade hands, indicating that major investors are making large wagers on further price increases.

Ryan McKay, a senior commodity strategist at TD Securities, noted that "Murban-Dubai spot differentials are creeping up, now trading at near $2.50 a barrel versus $1 a barrel to start 2026." He added, "This is a sign of some Iran risk pricing."

Expert Analysis: Short-Term Spike vs. Long-Term Glut

The sudden focus on supply risk has overshadowed persistent concerns about a global oil surplus. "Geopolitical risk is at an all-time high," said Jeff Currie, chief strategy officer of energy pathways at Carlyle, in a television interview. "That's a recipe for a spike in prices now."

However, the long-term outlook remains complex. Florence Schmit, an analyst at Rabobank, offered a nuanced view, suggesting that a potential regime change in Iran could ultimately add to global supply and "amplify the downtrend in crude markets." But before that happens, she warned, "there is a potential for another rally... if the unrest, directly or indirectly, targets energy flows."

By the close of trading, WTI for February delivery had climbed 2.8% to settle at $61.15 a barrel in New York. Brent crude for March delivery also saw strong gains, rising 2.5% to settle at $65.47 a barrel.

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