Scott Bessent says Jerome Powell probe likely due to the chairman's 'construction incompetence'

• DOJ launched a criminal investigation into whether Powell lied to Congress about the scope of renovations at the Fed's Washington headquarters
• Bessent stated the Fed needs 'a thorough overhaul' and called for more transparency and accountability at the institution
• Trump is expected to announce Powell's replacement in January, either before or after the Davos trip, with Kevin Hassett effectively removed from consideration as Trump wants him to remain as NEC director

Treasury Secretary Bessent Comments on Powell Probe and Fed Chair Succession

U.S. Treasury Secretary Scott Bessent stated that the criminal investigation into Federal Reserve Chairman Jerome Powell likely stems from "construction incompetence" related to renovations at the Fed's Washington headquarters. The Department of Justice probe examines whether Powell misled Congress about the scope of these renovations, with potential criminal indictment threatened.

Key Developments:

Bessent suggested the investigation could advance his push for greater Fed transparency and accountability, calling the institution in need of "a thorough overhaul." He emphasized that while the Fed has "tremendous sway and influence" over Americans' lives, there is insufficient accountability.

Powell characterized the probe—approved by U.S. Attorney Jeanine Pirro—as "unprecedented" and warned it threatens the Fed's ability to set interest rates based on economic evidence rather than political pressure. President Trump has been a vocal Powell critic, regularly threatening termination and accusing him of political bias.

Succession Planning:

Bessent confirmed final interviews for Powell's successor are complete, with an announcement expected either before or after Trump's Davos trip in January. Kevin Hassett, previously considered a leading contender, was effectively removed from consideration when Trump indicated preference to keep him as National Economic Council director.

Bessent stated Trump has not confided decision-making details but emphasized the president seeks someone capable of bringing order to the "sprawling" Federal Reserve. Trump has been contemplating this decision "almost since day one of Trump 2.0."

Market Implications:

The ongoing probe and succession uncertainty create potential volatility around Fed policy independence and future monetary policy direction, key concerns for market participants navigating interest rate expectations.