Federal Reserve says keep Jerome Powell subpoenas quashed

The Federal Reserve’s Board of Governors urged a judge to reject prosecutors’ request that he reconsider his recent decision to block subpoenas issued in a criminal investigation of Chair Jerome Powell over pricey renovations of the central bank’s headquarters and his congressional testimony about that.

The Fed’s lawyers, in a court filing unsealed Thursday, told Judge James Boasberg that the U.S. Attorney’s Office for the District of Columbia failed to come even remotely close to meeting the legal threshold for its motion for reconsideration.

“The Motion for Reconsideration … does not even mention — let alone meet — the demanding legal standard that applies to the extraordinary relief it seeks,” the Fed’s lawyers wrote in the motion in U.S. District Court in Washington.

The attorneys said “reconsideration is warranted only” when there has been a change in the law related to the issues in the case, when there is new evidence, or if “there is a need to correct clear error or prevent manifest injustice.” None of those have occurred, the lawyers said.

“The Motion [by prosecutors] does not try to clear these high hurdles, resorting instead to mischaracterizations of the Court’s opinion … and the record on which it rests,” the lawyers wrote.

The Fed’s argument was expected, given that the board sought to block the subpoenas to the central bank in the first place, having said that they and the criminal probe were mere pretexts to get Powell to agree to cut interest rates more quickly and more sharply, as President Donald Trump has repeatedly demanded.

Trump, during comments to reporters at the White House on Thursday, called Powell a “moron at the Fed.”

That echoed similar past scathing remarks Trump has made about the chair, which Boasberg quoted at length in his decision as evidence that, “In sum, the President spent years essentially asking if no one will rid him of this troublesome Fed Chair.”

Trump also railed on Thursday over the cost overruns of the Federal Reserve building’s renovations, and griped that he was getting sued for demolishing the White House’s East Wing to build a ballroom, while Powell appeared to be escaping legal liability.

It is not clear when Boasberg will rule on the dueling motions, or whether U.S. Attorney Jeanine Pirro will drop her office’s investigation of Powell if she loses her bid to get the judge to reverse his March 11 ruling.

Pirro’s office, in its March 12 motion for reconsideration, argued that Boasberg’s ruling “applied an incorrect legal standard, erred with respect to certain significant facts, and overlooked other relevant facts.”

It is extremely rare for a judge to reverse a ruling in such cases and also rare for appellate courts to overturn such decisions.

Sen. Thom Tillis, R-N.C., has promised to block Kevin Warsh’s confirmation to succeed Powell as Fed chair until the probe ends.

Boasberg, in his blistering ruling, quashed two subpoenas served by Pirro’s prosecutors on the Fed’s board, which sought records about the multi-billion-dollar project to renovate the central bank’s headquarters, and Powell’s testimony to a Senate committee in which he “briefly discussed those renovations.”

The judge agreed with the Fed board’s argument that the subpoenas were issued for an improper purpose.

“There is abundant evidence that the subpoenas’ dominant (if not sole) purpose is to harass
and pressure Powell either to yield to the President or to resign and make way for a Fed Chair who will,” Boasberg wrote in the ruling.

That decision was issued more than a week after Boasberg asked a prosecutor at a sealed court hearing, “What evidence is there of fraud or criminal misconduct in relation to the renovations?”

The prosecutor, G.A. Massucco-LaTaif, replied, “We do not know at this time,” an unsealed transcript of the proceeding shows.

“However, there are 1.2 billion reasons for us to look into it,” added Massucco-LaTaif, referring to the dollar amount of cost overruns of the project.

“And I would submit to the Court that a $1.2 billion overrun of cost … doesn’t seem right,” said the prosecutor, who leads the criminal division of Pirro’s office.

“That’s the GDP [Gross Domestic Product] of some smaller countries, yet we are going to overlook it as, oh, it’s just overrun because it’s a historical building? That doesn’t seem right,” Massucco-LaTaif said. “And are we prohibited from looking into it? That would seem to, you know, put a chilling effect on any investigation the government ever did.”

Boasberg, in his written ruling, called prosecutors’ arguments for the subpoenas “a tenuous assertion of a legitimate purpose.”

“In its briefing, the Government’s sole justification for investigating the renovation is that it went “far over budget, raising the specter of fraud,'” Boasberg wrote. “But buildings often go over budget. That fact, standing alone, hardly suggests that a crime occurred.”

“Nor is there any reason to think that this project was especially prone to fraud,” the judge wrote, noting that the Fed’s “independent Inspector General … has had full access to project information on costs, contracts, schedules, and expenditures and receives monthly reports on the construction program.”

“He audited the renovation several years ago and raised no concerns about fraud,” Boasberg noted.

Trump, in his comments Thursday at the White House, blasted the cost of the renovations and their slow progress.

“I would have done that building for $25 million; it’s going to cost maybe $4 billion,” Trump said. “I passed that building the other day. It’s a ‘see-through.’ You know what ‘see-through’ means? There’s no walls up.”

“But the National Trust for Historic Preservation, which is a joke, by the way, they didn’t sue that building, Trump said.

“They sue me. I get sued. This could only happen to Trump,” the president said.

“But they don’t sue the guy whose interest rates are too high. That’s why we call him too late. His name is Jerome Powell,” Tump said. “We call him Jerome “Too Late’ Powell and done a terrible job so you can have crummy little walls, a flat little ceiling eventually, but right now, you don’t have anything, and nobody sues this guy.”