Points of Focus

• A criminal probe into Jerome Powell has intensified political pressure on the Fed and its independence.
• Markets showed “sell America” signals as gold surged and Treasury yields climbed.
• Bitcoin held above $90,000, reviving debate over its role as a hedge against political risk.

Federal Reserve Chair Jerome Powell faces an unprecedented criminal investigation after the U.S. Department of Justice (DoJ) served grand jury subpoenas to the Fed on January 9, 2026. The probe, ostensibly targeting Powell’s congressional testimony about a $2.5 billion building renovation, has ignited concerns about central bank independence and triggered defensive positioning across traditional and crypto asset markets.

In a forceful public response on January 11, 2026, Powell directly linked the investigation to political pressure over interest rate policy. He argued that the core conflict involves the Fed’s autonomy to determine interest rates based on economic data rather than political coercion or threats, as he stated in a video released through the Fed’s official channels. 

The investigation centers on Powell’s June 2025 Senate Banking Committee testimony regarding cost overruns on Fed headquarters renovations. The project exceeded initial estimates by $700 million, drawing criticism from Office of Management and Budget Director Russ Vought, who compared the expenditure to “building the Palace of Versailles.” However, Powell maintained the probe serves as pretext for undermining Fed autonomy rather than legitimate oversight.

Bipartisan alarm over Fed independence

An extraordinary coalition emerged in Powell’s defense. All three former Fed chairs, Janet Yellen, Ben Bernanke, and Alan Greenspan, joined former Treasury secretaries in condemning what they termed an “unprecedented attempt to use prosecution as an attacking tool” against institutional independence. Their joint statement warned that political interference in monetary policy mirrors emerging market dysfunction “with extremely negative consequences for inflation.”

If there were any remaining doubt whether advisers within the Trump Administration are actively pushing to end the independence of the Federal Reserve, there should now be none. It is now the independence and credibility of the Department of Justice that are in question. 
 
I… https://t.co/wDMH6twcD5

— Senator Thom Tillis (@SenThomTillis) January 12, 2026

The backlash extended beyond Democratic officials. Republican Senator Thom Tillis announced opposition to any Fed nominations pending resolution of the investigation, while reports indicate Treasury Secretary Scott Bessent privately expressed concerns about the move. President Trump denied involvement while criticizing Powell’s competence.

Markets reprice Fed independence risk

Markets rapidly incorporated Fed independence concerns into pricing. Spot gold surged to record highs above $4,600 per ounce on January 12, 2026, gaining over 2%, while silver jumped more than 7%. The 10-year Treasury yield climbed to 4.19% as investors demanded higher compensation for perceived political risk infiltrating monetary policy decisions.

The simultaneous decline in stocks, bonds, and the dollar, an unusual market configuration, signaled what ING strategists described as a return to “sell America” dynamics last seen during tariff volatility in April 2025.

Most people aren’t watching this. 🦅

I was scrolling this morning, half-awake, coffee still doing nothing, and saw the DOJ headline about Powell. Didn’t even flinch but Bitcoin didn’t either.

That’s the part that stood out to me tbh. No panic wick. No drama bid.

Just BTC… pic.twitter.com/hsKtc4YliG

— Yusuf (@YusufGemz) January 12, 2026

Cryptocurrency markets showed nuanced responses. Bitcoin maintained support above $90,000 despite broader risk-off sentiment, with some analysts interpreting price resilience as early evidence of decoupling from traditional risk assets. Trading volumes spiked to $44.35 billion as market participants debated whether threats to Fed independence strengthen Bitcoin’s narrative as a politically neutral, inflation-resistant asset or introduce excessive institutional uncertainty.

Rate cut expectations compressed following the investigation’s disclosure. CME FedWatch data now prices only 51 basis points of easing throughout 2026, down from 70-80 basis point projections before recent employment data and the Powell probe. ABN Amro economist Rogier Quaedvlieg suggested that Fed officials may adopt a slightly more hawkish stance to guard the institution’s credibility against perceived political encroachment, reducing the chances of near-term rate cuts. Powell’s chairmanship expires in May 2026, though his board seat extends through 2028.