Wharton professor warns of Fed's 'already fragile' image as Powell faces probe

Core Viewpoint - A criminal investigation has been opened into Federal Reserve Chair Jerome Powell, focusing on his June testimony regarding a $2.5 billion renovation of the Fed's headquarters, amid allegations of excessive luxury spending [1]. Group 1: Investigation Details - The investigation centers on Powell's defense of the renovation project as necessary for safety and infrastructure, where he denied claims of luxury expenditures and explained cost changes [1]. - Powell stated that the investigation is a result of "ongoing pressure" from the administration concerning interest rate policy, indicating a potential political influence on the Federal Reserve's decisions [2]. Group 2: Political Context - President Trump has criticized Powell for rate hikes, suggesting that monetary policy should align with his administration's economic goals, and has indicated he will not renominate Powell when his term ends in May 2026 [3]. - Trump has expressed a desire to influence rate decisions, which raises concerns about the independence of the Federal Reserve [3]. Group 3: Implications for Cryptocurrency - The investigation could undermine the credibility of the U.S. financial system, potentially benefiting cryptocurrencies like Bitcoin, which are viewed as decentralized alternatives to politicized monetary systems [4]. - Investors may increasingly consider Bitcoin as a hedge against government interference in monetary policy, similar to the dynamics observed during the Trump-Powell standoff in 2019-2020 [5]. - During that period, Bitcoin's appeal as "digital gold" grew as investors sought refuge in non-sovereign assets amid concerns over political influence in central banking [6].