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As you no doubt are aware, the Department of Justice is investigating the Fed and Fed Chair Jerome Powell as part of a criminal investigation.

The crime in question concerns Fed Chair Powell’s testimony to congress regarding the Fed’s renovations of its D.C. headquarters.

The renovations were initially estimated to cost around ~$2 billion, but costs have since ballooned to $2.5 billion. To put that into perspective, it costs ~$3 billion to build a brand-new 1.5-2 million square foot NFL stadium. The Fed is spending nearly that amount renovating a 276,000 square foot building.

While testifying to Congress, Fed Chair Powell claimed the renovations would NOT include new VIP dining rooms, VIP elevators, new marble (beyond repairing existing marble) or water features, beehives, rooftop/terrace gardens, or similar extravagances.

The project does in fact include ALL of these. Thus, Powell lied under oath to Congress.

Now, I am not naïve… it is clear the Trump administration is targeting Fed Chair Powell and Congress because the former believes the latter is not cutting rates fast enough. But the reality is that Powell brought this situation on himself by playing stupid games with the Fed’s legal status as it pertains to the Trump administration’s authority.

As I noted back in early September 2025, Fed President Lisa Cook was caught red handed committing mortgage fraud (she claimed an income property was a primary residence, thereby getting a lower interest rate on the mortgage).

Whether Ms. Cook intended to commit a crime or not is irrelevant. She broke the law. Moreover, if she’s so foolish she cannot fill out a mortgage application correctly (and her attorneys can’t catch this screw-up) she has NO business running economic policy for the US.

President Trump fired her, but she refused to resign. And Jerome Powell has refused to force her to step down. By doing this, Powell set the stage for an examination of the Fed’s legal status, specifically… either the Fed is part of the government under the Executive Branch, meaning the President can fire a Fed official with cause… or the Fed is an extra-constitutional entity that works outside of the constitution.

My point here is that I’m well aware that the Trump administration is challenging Fed independence… but the Fed, specifically Jerome Powell, has no one to blame but himself. Politics is a full contact sport and if you want to play games with a President who is unstable at best, don’t act surprised when the President gets fed up with your games and starts hitting you back.

What does this mean for the markets?

In the short-term, if Jerome Powell is indicted or worse still arrested, it will be BAD for the markets. The markets do NOT like uncertainty and if the President starts arresting the top central banker in the world that introduces a LOT of uncertainty as any future President could do the same to any central banker!

However, in the longer-term the monetary policy framework is simple: President Trump will soon control the Fed.

• The President has already appointed three of the seven members of the Board of Governors. If Lisa Cook is forced to resign, that number will jump to four (a majority).
• The President will have a new handpicked Fed Chair by May 2026 (if not sooner depending on whether or not Jerome Powell is forced out).
• The President and his inner circle have suggested that rates should drop to 1% if not lower as soon as possible.

Whether we like this or not is irrelevant, the above items are a reality. And our job as investors is to make money from this. And the most obvious implication of a Trump-controlled Fed is AGGRESSIVE monetary easing that will kick the USD off the ledge of a cliff.

This is the famed “debasement trade” and smart investors are already taking steps to profit from it.

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