US opens criminal investigation into Fed chair

0:03Good morning from the Financial Times. Today is Monday, January 12th, and this is your FT News briefing. U.S. prosecutors have opened a criminal investigation into the chair of the Federal Reserve. And as protests in Iran intensify, the government there warns America against military action. Plus, geopolitics has been dominating the news cycle, but U.S. banks are poised to kick off earnings season this week. This is the start of what people are calling a potential investment banking super cycle for the next year or two. I'm Victoria Craig, and here's the news you need to start your day.

0:48The Fed said late Sunday that U.S. federal prosecutors have opened a criminal investigation into Chair Jay Powell. The legal action is related to the central bank's$2.5 billion renovation of its headquarters and testimony Powell gave to the Senate Banking Committee last summer about the project. The move is a major escalation of a long-running pressure campaign by U.S. President Donald Trump on the chair. In a recorded statement, Chair Powell said he has a, quote, deep respect for the rule of law and accountability and that no one is above the law. But he said he believes the administration's action is a pretext to rein in the central bank's independence.

1:26This is about whether the Fed will be able to continue to set interest rates based on evidence and economic conditions or whether instead monetary policy will be directed by political pressure or intimidation. Powell, whose term expires in May, pledged to continue his job. President Trump, meanwhile, is expected to announce his replacement in the coming days.

1:53Iran has warned America against a, quote, miscalculation after U.S. President Donald Trump doubled down on his readiness to, quote, help as two weeks of civil unrest continues in the Islamic Republic. Protests, which began over outrage over economic hardship in Iran, continued Saturday and Sunday despite a government crackdown. Andrew England is the FT's Middle East editor, and he joins me now to talk about the latest developments. Hi, Andrew. Hi, Victoria. How big is this threat becoming for the Iranian government? Just give us a sense of how things have escalated over the past several days. It looks very serious indeed.

2:30certainly the most serious since 2022, when there were the women, life and freedom protests that spread across the nation. These latest protests seem to have escalated on Thursday evening, which was the start of the Iranian weekend. The government imposed near virtual, complete internet communications blackout. So it's very hard for us to verify information or have a clear idea of what's going on. But from the reports we've seen and with some activists getting videos out through Starlink, we assume. We can see that on Thursday night, massive crowds taking to the streets of Tehran and other cities.

3:07We know from state media reports that there have been lots of casualties within the security forces, which suggest there have been violent clashes. So it's extremely serious. Iran's president has pledged to sit down and listen to people's concerns. And he said that it's the government's responsibility to solve the problems that the protesters are so upset about. But what does that process look like? And if it happens, is it too little too late? Yeah, the president, Masoud Pazeshgian, he's a reformist president. He was elected about 18 months ago, and he promised to turn around the economy. He talked about reengaging with the West.

3:46None of that's happened. In fact, the economic situation has deteriorated. Now, he has tried to assuage protesters' concerns, But at the same time, the regime has been very clear it's cracking down, it's blaming protests on foreign forces. So, you know, the president can say one thing and the regime can do another thing. Whilst clearly the government does want to try and stabilise the situation, it's been very clear that it's willing to crack down very, very firmly as it's done in the past. And there are reports of dozens, possibly hundreds of protesters being killed, hundreds being detained, hundreds being wounded.

4:25It's very, very hard, I should say, for us to know any idea about the real numbers simply because of this communications blackout. So we're relying on what activists are saying. We're relying on human rights groups. But we really have no real insight into the sheer scale of what's going on. And as we said, President Trump has said that the U.S. is willing to help. And there are reports that say the administration is weighing or considering some military options. But do we know what it might take for America to actually get involved? But more importantly, what the consequences could look like if that does happen?

5:00President Trump has been very clear that if Iran kills protesters, the U.S. is locked and loaded and ready to rescue the protesters. I've made the statement very strongly that if they start killing people like they have in the past, we will get involved. We'll be hitting them very hard where it hurts. And that doesn't mean boots on the ground, but it means hitting them very, very hard where it hurts. Now, we don't know if that's rhetoric. We don't know how real that is. Obviously, President Trump has shown a willingness to use the military. He joined Israel in bombing Iran's nuclear facilities during the 12-day war that Israel launched against Iran in June.

5:42I think the Iranians will take it very seriously. If he did strike, it's very unclear what his options would be. I mean, he could try and target the Iranian leadership. He could just send a warning signal. We just don't know. We're totally in the realms of speculation. The regime has been weakened militarily and economically since the war with Israel in June. And regional conflicts before that, the moment the language coming out of Tehran is very defiant. So we're just waiting to see, really. Andrew, given how quickly the story is developing, are there some key inflection points that we should be watching for this week?

6:20I guess just if the protests continue, on what scale, the degree of the authorities crackdown, and what either Trump or Israel decide to do. Do they decide to intervene or not? All these factors will determine which direction it takes. At the moment, we just really don't know. Andrew England is the FT's Middle East editor. Thanks, Andrew, for wrapping this all up for us. Thank you. Thank you.

7:14This quarter, a lot of it's going to be about investment banking. The big bankers on Wall Street looking like they had a good quarter to end a good year, probably the best year since the pandemic. And what a lot of people in the industry are hoping for right now is this is the start of what people are calling a potential investment banking super cycle for the next year or two, where just things are so teed up for huge stock market listings, mergers, corporate dealmaking with a supportive regulatory environment, rising stock markets, plus this big pressure around what's going to happen with AI.

7:47So that's the optimism there. And I think we're starting to see that in the numbers. Now it's just up to the banks to show that they delivered in Q4 and also that they can continue to deliver in 2026. And part of that optimism is due to all the deal-making that happened last year, right? What is the landscape looking like this year? So part of it is deal-making can beget deal-making. A player in one sector does something and then others think, okay, we need to respond somehow. But also, there has just been all this pent-up demand to do big strategic things on the acquisition front, but they just felt like they haven't been able to, whether or not that's regulatory uncertainty or higher borrowing costs because interest rates have been higher.

8:24But a lot of that is potentially going to be easing, certainly this year it did, and continuing to do so in 2026. So I think there's just a lot of optimism. Bankers will always tell you it's a good time to buy a company, but I think this potentially is going to be where we're starting to really see it come through in the numbers. Okay, so possibly a good time to buy a company, but what about a good time to invest? Because the elephant in the room is geopolitics. And we've spent a lot of time in the last week talking about what's been happening in Venezuela. Big focus on the possibility of American oil companies restarting operations there.

8:56To do that, they're going to need a lot of cash. So are U.S. banks lining up to provide that cash? It's the sort of thing where the opportunity is potentially quite significant when you look at the oil reserves, the natural resources reserves in a country like Venezuela. But there is a lot of caution, certainly as it relates to the big banks in the U.S., about stepping too deep into a country that is still under U.S. sanctions, has a very questionable history when it comes to rule of law, contract law, paying its debts. And these are all things that from a finance perspective you need to have in order to be comfortable.

9:30So I think it's a funny one because it's not just a business case. There's a political question here that obviously you have an administration that wants the private sector to go into Venezuela in a meaningful way. So whether or not that's going to be part of the equation here of showing that you have to at least attempt to be supportive to what the administration wants, this could be something where banks are fast followers rather than first movers. When we talk about the individual players potentially involved, could it be slightly easier for some to dive back in? Because you reported that JP Morgan has actually had an operation in Venezuela for quite some time.

10:06Yeah, the bank themselves, they proudly talk about their near 60-year history in Caracas. They have an office there still, but it's pretty much a dormant office right now. There's one European bank, BBVA, that still has a presence there. But I think, especially in a situation where the environment is so supportive for banks broadly, I don't think they feel like they need to take risk in Venezuela when there's so much money to be made elsewhere. Does the potential for a public backlash factor in at all for the bank's decision? And if it isn't the banks that end up funding all of this activity in oil or other industries, who else might be stepping up to the plate?

10:40Banks, they're never normally the public's best friends, and yet they do spend a lot of time thinking about their public image and how that will affect it. I don't think that's their top concern that's going to be an impediment for them going in to finance projects in Venezuela. I think it is much more any legal concerns or credit concerns that are going to be the impediments there. I think you will see potentially the banks could follow the industry. Otherwise, you know, you are potentially talking about dedicated like private credit investors or hedge funds or people who have a higher tolerance for risk to be able to get on the ground sooner before the banks.

11:11So plenty to keep our eyes on for the rest of this year. For sure. Josh Franklin, the U.S. banking editor. Thanks so much for your time. Thanks very much.

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12:18Thank you.