Investigating the Federal Reserve: Kevin Hassett & Sen. Mark Warner 1/12/26

0:00Bring in show music please. Hi, I'm CNBC producer Katie Kramer. Today on Squawk Pod. A potential criminal investigation into Federal Reserve Chair Jay Powell, somewhat about cost overruns on the renovations at Fed HQ, may be about his relationship with the president. Our Eamon Javers reporting. It doesn't seem like this confrontation is going to end anytime soon with Powell capitulating here. And the man who may get Jay Powell's job, Kevin Hassett, now a top economic advisor to President Trump. I respect the independence of the Fed and the independence of the Justice Department, and we'll see how it goes.

0:39On the inquiry and where economic and monetary policy go from here. What really happens with my life here in the White House is I come in every day and I do my job. And I'll do that tomorrow. I'm doing it today. Plus, Democratic Senator Mark Warner. He's on the committee that will confirm the next Fed chair. He weighs in on this headline and other issues, from Venezuelan oil to the immigration battles taking place in our cities. Secure the border, absolutely. Have mass dice agents picking up moms, dropping off kids or folks going to work. I don't think that's what the American people signed up for.

1:13And now we've got this split in city after city across America. It is Monday, January 12, 2026. Thanks. Squawk Pod begins right now. Stand Becky by in three, two, one. Cue it, please. Good morning, everybody. Welcome to Squawk Box right here on CNBC. We are live from the Nasdaq market site in Times Square. I'm Becky Quick, along with Joe Kernan and Andrew Ross Sorkin. It is the story of the morning, the day, and we'll see whether it's the story of the week. The Trump administration now threatening to indict Fed Chair Jay Powell over comments to Congress about the Fed's renovation project. Eamon Jaffens is in Washington this morning with the latest.

1:54Good morning to you, Eamon. Yeah, good morning, Andrew. Federal Reserve Chairman Jay Powell struck a defiant tone in an unprecedented video statement on Sunday night, revealing that the Department of Justice had served the Federal Reserve with grand jury subpoenas in an ongoing and previously unknown criminal investigation. Powell said the subpoenas were served Friday and relate to his testimony about the Federal Reserve's building construction project before the Senate Banking Committee last June. Now, President Trump has been deeply critical of Powell over the past year and has intently scrutinized cost overruns at the Fed's construction project.

2:30But Powell said the investigation is just a pretext. The threat of criminal charges is a consequence of the Federal Reserve setting interest rates based on our best assessment of what will serve the public. rather than following the preferences of the president. This 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. A Department of Justice spokesman told CNBC on Sunday that the attorney general has instructed her U.S. attorneys to prioritize investigating any abuse of taxpayer dollars.

3:08Now, a source familiar with the investigation confirmed to CNBC last night that it is being run out of the U.S. Attorney's Office for the District of Columbia, which is run by U.S. Attorney Jeanine Pirro, a longtime political ally of President Trump. White House Press Secretary Caroline Levitt declined to comment last night. Powell's term as chairman ends in May, and President Trump has been interviewing candidates to take his place. It's not clear exactly what the Department of Justice may be investigating here, but President Trump's close political ally, FHFA Director Bill Pulte, as early as last summer, accused Powell of lying to Congress with his characterizations of the construction effort.

3:48Guys, a lot of questions here, not as many answers this morning. Back over to you. Amen, just on the merits of it, and we can get into everything else about it, because obviously the markets are reacting to it, and I think you're seeing a lot of reaction, even from some Republicans, though not many. If you actually go back and look at his testimony, is there anything in it that is suggestive that he was not truthful and is there anybody in congress that is beyond bill pulte who's not in congress but is obviously a part of this administration is there anybody in congress who's who's ever mentioned this before ever yeah look so a couple things i think you know it's going to turn on the question of you know how did powell describe the luxury items, quote unquote, that are involved in this construction project.

4:38We'll see exactly what the DOJ is investigating here, but it'll, I think, be around his language about whether there are special sets of elevators, whether there's a special lunchroom, you know, all that kind of thing. And, you know, what type of marble is being used and whether those things are materially false. The challenge for the DOJ is that they're going to have to prove that it was a material discrepancy, first of all, and then it was done sort of with knowledge of foresight. And I think those things will be relatively high bars for them. And the danger here for the Department of Justice is they investigate here and they end up coming up empty.

5:13And that could cause them two problems. One, public embarrassment. Two, the president of the United States could be very angry with them. Tom Tillis. Not Tom. No, he commented on it. But the person who forwarded the, and she's taking credit for it, Representative Anna Paulina Luna I have formally referred her own pal to the DOJ for criminal investigation and that was in back in July when she did that with with a letter so that is the person that did and then she says she was gratified yesterday by this so they're obviously that person what I was gonna bring up is Tom the Republican senator who says that at this point he's put out a statement if there were any remaining doubt about whether advisors within the Trump administration are actively pushing to end the independence of the Federal Reserve.

5:56There should be none now. He says he's going to oppose the confirmation of any nominee for the Fed, including the upcoming Fed chair vacancy until it's resolved. The other big piece is actually what Trump has said. And Eamon, I want to go over that with you because I don't know whether you've seen what he said or whether you believe in this case that what he's saying is accurate. He says the following. He says, I don't know anything about it, but he's certainly not very good at the Fed and he's not very good at building buildings. This This is what he told NBC News last night. He went on to say, when asked about whether this was about interest rates, I wouldn't even think of doing it that way.

6:36What should pressure him is the fact that rates are far too high. That's the only pressure he's got. Yeah, I mean, so one of the questions for Powell will be, will he be able to get, in the course of his defense effort, any communications between the President of the United States and the Attorney General on this? That often is very protected information, and he might not be able to get to it. I don't know the legality of that in terms of the discovery process here, but that may be privileged. But I think Powell's attorneys will certainly weigh in on this and say that this is being directed by the president.

7:10They'll look for evidence that it was directed by the president. We've seen the president issue orders to Pam Bondi before. He's done it publicly in terms of things that he's posted on social media. So did he do that in this case? That'll be one of the questions. He's going to try for cover, Amy. This is what Representative Luna said. I laid out in detail how Jerome Powell lied under oath to Congress and misrepresented facts. And I did this to administration officials, including Russ Vogt, the OMB director. Unelected bureaucrats do not get a free pass. This is exactly why oversight exists. And I am thankful the DOJ is taking this seriously, knowing it's above the law.

7:49So, you know, Trump has can say, I don't know what's going on here and point to. And that's the way that they would orchestrate it. The reality legally, though, the reality is that Congress doesn't matter here. I mean, this is a grand jury investigation. So the way it works is the grant. The prosecutors will discover evidence with these subpoenas. They'll present that to the grand jury if they feel like they have enough evidence to indict on criminal charges. They'll present that to the grand jury. If the grand jury hands down an indictment, the DOJ will indict Jay Powell. Congress is not involved in this process at all.

8:25So it matters to the extent that there's political support for it, but they can't stop it. Right. They can't stop it. Once it's put out there, they can't stop it. And so ultimately, you can have all the statements that you want. But the reality is, can the DOJ find enough evidence here to indict? If they indict, can they prove their case in court in front of a jury and in front of a judge? that's the risk here is that they'll end up bringing a case that they can't actually get a conviction on. And then the other question, though, we've talked for a long time about business executives who've been on the other side of Trump.

8:58I got a whole bunch of emails and texts from people last night, some of whom said, is this the moment that effectively is this the moment that I'm supposed to raise my hand? I mean, we've talked about sort of where there are red lines, you know, and by the way, there have been lots of red lines, essentially, that have been crossed over the past. It sounds like it's eight months. Right. We'll see. I still think the system works and we'll see. We'll see how this we'll see how this proceeds. But Andrew, you've talked to a lot of CEOs. I've talked to a lot of CEOs about this. Maybe probably not as many as you have.

9:31But all the CEOs I've talked to off the record on background in private say, you know, we're not raising our hands to object to the president because we feel that with his psychology, with the way the president responds, he'll respond badly to any direct confrontation. And so what we want to do is work around the edges, suggest alternatives, work in private, try to reach out to Susie Wiles or other figures inside the administration to try to adjust things. But they're very wary of confronting the president directly. But the question is on something like this, that'll make things worse and there's risk for them.

10:04Whether there needs to be an effort, whether there deserves to be an effort, should be an effort to try to bring the temperature down and effectively have the White House effectively end such an investigation if you think that they would do such a thing or not prosecute? That becomes the question. Well, the White House can because the White House is likely involved to a large degree in this. You're taking that a step, too. We should say the White House is doing it. Baseline in terms of... To get to that point, you have to assume the White House did it in the first place. If they put it on, they could take it off.

10:41But they're going to argue that they didn't put it on and that no one's above the law. You have to assume that Pirro is somehow completely independent of the president. That's what you have to assume. You can assume that. You know what happens when you assume. It makes an ass out of you and me. If they're taking a flyer on this without backing from the White House, that's an extreme move. So I've actually I haven't done this before, but I've actually asked for L. Arian to come on the show because I did. You see his comments. They were. They were. Did you see L. Arian's comments? Yes. I did see his comments.

11:14But just in thinking of what the next chairman, this prospective chairman thinks seeing this happen. But L. Arian says, I called for Powell to resign, I don't know, a couple of months ago because the institution itself, the institution's independence was, I guess, fragile because of some of the underlying flaws in the Powell Fed. What is required now is a person nominated to replace the chair, be committed to implementing the reforms necessary to restore the effectiveness of the world's most powerful bank. You know how much I love Mohammed. I vehemently disagree with that tweet. That doesn't mean we can't have him on to have him air his opinion.

11:58Of course. I'm just suggesting that the argument that he was making, and he can make it on our air, but the argument that he made a couple months ago was effectively take this chess piece for the president off the table as a way to protect the Federal Reserve. And that unto itself is a demonstration of just how not independent the Federal Reserve ultimately is. because it effectively says I am basically giving in to a president that is going to either try to fire me, sue me, put me in jail or something else. You're paraphrasing what Ellaria meant at the time. The guy who's now in the lead to take over for J-PAL has expressed serious doubts about a lot of underlying things going on at the Federal Reserve right now.

12:49By the way, I have more on that. I'm back on the Kevin Hassett view. I know you were thinking about Warsh. I think it's... Oh, you think Hassett's going to do that? I think Hassett's going to do that. But I'm just saying that Warsh has expressed a lot of... Oh, I know. And the crazy thing for me is that the problem I have with Powell isn't that he didn't lower rates. It's that he didn't raise rates. It's the opposite of what the president's problem is. And as much as we were complimenting Powell last week on the state of the economy right now, the GDP, inflation might be okay, labor might be okay.

13:25It looks like he's hit a sweet spot with monetary policy, but it still doesn't get around the original sin of the inflation that we had and allowing that to get out of hand. Because a lot of the affordability issues that we have right now, the reason people don't feel good about the economy is because of not raising rates quickly enough. But that also suggests, though, that the Federal Reserve would have had the power to take control of issues during COVID that were largely supply chain related. That's a different narrative. Most people think that the amount of stimulus that we got. I agree. The amount of stimulus, which he also did not control.

14:02The Fed has a lever that is not perfectly suited to deal with either of those. That's back to arguing what caused the inflation, whether it was the... I think there's a bigger issue here this morning, which is not necessarily about supply chains or whether he's done a good or bad job. I know where you're going, and I agree. It's effectively about lawfare. I agree. That's the conversation. I'm not going to argue. In a country where we think, and especially around business, you know, here we are at Business Network, the law matters. Right. And when you see an administration, and look, I recognize that this president thinks that he was unfairly targeted and that lawfare was used against him.

14:40But there's a level at which you cannot just continue this kind of lawfare against everybody. And we've seen it against, and you may disagree with it, but there was the law firms, there are universities, there are media companies, there's now the Fed chair, there's Lisa Cook, there's Jim Comey. I mean, go through the list. And at some point you have to say, you know, and I'm surprised. I know we saw one Republican sort of step out last night and say that he has a problem with this. But you have to at least raise the question about what's happening. I think you're reaching that point. And for Jay Powell to come out and say this, I mean, he's a measured guy.

15:17He has taken a lot of flack. He has taken a lot of incoming. For him to say that he's reached the point where he's going to come out and say something about this, I think that is an issue. Elon Musk retweeted something, said, does seem low. It was a tweet from someone, number of arrests under Republicans. for the Russian collusion hoax, zero. Mar-a-Lago, zero. Biden auto-pens, zero. Jeffrey Epstein, zero. Doge finding, zero. COVID, Benghazi, zero. Ukraine impeachment hoax, zero. And he's got zero for how many arrests there have been under Trump. And then he's got Republicans arrested under the Biden administration.

15:52And there's a list that's that long. So that was the point that they were making. You can throw around lawfare all you want. But in terms of what's actually proceeding, you're at zero still for who has actually been arrested under your lawfare scenario that you just gave. Lisa Cook, look, we all know that these look like pretexts. Was Jim Comey not arrested? He's indicted. Yeah. And what was that list of? It still has to go through the jury process. I don't know which thing he would fall under on that one. I guess it would be the Russians. I'm just suggesting, I think that right now in America, people are looking at what's happening, specifically at this situation.

16:28By the way, you could add in all the pardons. I mean, on the other end of things, there's been a series of pardons, whether it's about CZ of Binance. I mean, so many things, especially around business, where people have been indicted, they have been prosecuted, and they have been found guilty by a court and jurors. And for whatever reason, this administration has undone those and then decided that there are people who they have been very public about who they think of as their enemies and gone after. Jim Comey wasn't arrested. He was arraigned. Hey, guys, one quick additional piece of reporting here.

17:04Yeah. Just a Federal Reserve official told me last night in terms of this call from Muhammad Al-Aryan for Powell to resign, that doesn't seem likely. A Federal Reserve official told me last night that Jay Powell is resolute and confident. That's how they're describing his state of mind last night. So it doesn't seem like this confrontation is going to end anytime soon with Powell capitulating here. I would like I'm still interested and I agree with what the chairman said about pretext and everything else. But I still would like to see what they're pointing to in terms of the testimony about that that building.

17:38And I still don't know how you spend. I don't know how. I mean, the nicest house in the world is worth how much. I mean, palaces are worth. How much Eamon are we at right now in this refurbishment? I mean, it's I mean, I think it's billions. I have to go back. Oh, it's billions, but is it four? These things, look, if you go down to that construction site, which I've done, it's enormous. I mean, it is a couple of city blocks, right? And it's floor-to-ceiling gut jobs of these buildings. What are they saying that he perjured himself? The issue is, and I don't have the exact language in front of me, the issue is the description of any kind of luxury features in this.

18:17What congressional critics of Powell have said is that he loaded this thing up with a bunch of special features and luxury items for himself and the rest of the board, including special elevators, a special lunchroom, all that kind of thing. And that when he was testifying on Capitol Hill, he minimized, if not lied directly about what those were. And so I think that's the language and the testimony that you're going to have to look at. But these buildings are enormous and the cost overruns in government contracting are unfortunately not surprising. And in this particular case, one of the challenges is these buildings are so close to the Potomac River and they lie in such a low-lying area that apparently one of the big expenses here was the foundational work and drilling down into the ground in order to make that area watertight underground was a lot more expensive than I think that they had anticipated.

19:08But of course, there's a lot of detail in this in the Federal Reserve's disclosures over the years about exactly what they're doing and why. And it's very, very expensive. Eamon Javers, thank you, sir. Tomorrow night, we bring you a special program here on CNBC, Warren Buffett, A Life and Legacy. In a series of never-before-seen interviews, we sit down with Buffett to talk about business and life as he leaves the role of Berkshire Hathaway's CEO that he has held for over six decades. We also discuss philanthropy. Buffett has pledged to give over 90 percent of his $150 billion fortune away, actually over 99%.

19:45He shares how his thoughts are about where that money should go and how they have changed over time. And on a personal note, Buffett talks about the biggest influences on his life, including his father and many, many lifelong friends, even offering a little advice. Listen in. Well, no, you should be selective about your friends and hope they aren't too selective about theirs. Now, you should be trading up all the time, but you shouldn't be doing it in an deceptive manner. How, I mean, do you do that consciously? I don't think so. I think you're just attracted to people that, I was attracted to people who were interested in the same thing I was to an extent.

20:26Maybe not as intense as I was about some things or, you know, they had different backgrounds and all kinds of things. You know, I wouldn't have traded any of my friends for anybody else. I also sat down with his three children for the show. Susie, Howie and Peter Buffett will have the monumental task of giving away their father's fortune one day. Right now, that fortune comes to about$150 billion, but it will continue to compound over time. And by the way, that's after he has already given away more than$50 billion. I started by asking the Buffetts their reaction when their father told them of his plans.

21:00What did you think when he said that you three were going to be doing this, doing it together? It had to be unanimous. And you're in charge of all of it. Did you want the job? Nope. Peter really didn't want it. I didn't want it. And I made that clear. And honestly, when I called him up and said, you know, I want to opt out, he said, I don't blame you. We'd say that to all of us. He actually thinks it's kind of funny that we have to do this. And understands that it'll put us, obviously, enormous pressure on us. And so the idea, again, like we've been saying around what are we going to do, it's like there's too many variables.

21:43We have no idea what we're going to do in this moment. And that's great that we all know and agree that we can't start. We don't know. Yeah. Buffett says that he never imagined that he would have to decide what to do with the money. He and his first wife, Susie, assumed that she would outlive him. When she died over 20 years ago, Buffett had to come up with a plan that first involved giving a majority of his annual philanthropic distributions to the Bill and Melinda Gates Foundation and evolved to his current plan with the kids in charge. All these years pass and it started to make more sense to him to just change things.

22:22It's actually quite complimentary. Hugely. I mean, the fact that each of us can do the things we're doing has its own different value to it. And so it's better than having three people who think the same way and want to do the same thing. I mean, it's actually it's a better setup. You can hear much more from the Buffetts and, of course, Warren Buffett. That is tomorrow in Warren Buffett, A Life and Legacy. That's right here on CNBC at 7 p.m. Eastern. Cheese will be next. Coming up next on Squawk Pod. You know you're one of the two Kevins now, Kevin Hassett. Joining us from the White House North Lawn, the National Economic Council's Kevin Hassett.

23:04On rates, jobs, maybe his own, he's on the president's short list to replace Fed Chair Jay Powell. The Fed has amongst the highest interest rates on Earth right now. And President Trump is frustrated with that. But I don't think that has anything to do with what was going on this weekend.

23:28welcome back you're listening to squawk pod from cnbc here's joe kernan stand by joe in five seconds four three two one is mike here welcome back to squawk box joining us now national economic council director kevin hasett thanks for uh for being with us this morning yeah hey mr uh mr Mr. Director. If I call you Kevin, you could be, I mean, there's more than one Kevin. There's a worse, there's a half. You know, you're one of the two Kevins now, Kevin Hassett. I don't know. There's plenty of Kevin. We want to talk about the employment report, all kinds of stuff, but it was preempted, I think, our discussion by, as you can imagine, some of the developments that happened yesterday.

24:15Kevin, do you have any, what do you know exactly about the testimony that J-PAL reportedly gave that would be considered perjury or perjurious in terms of that building? Like, I've not been involved in conversations with the Justice Department about that. I've not talked to the Justice Department ahead of them contacting Jay. And so I don't really have anything to add other than I respect the independence of the Fed and the independence of the Justice Department. We'll see how it goes. Well, that's what, obviously, there's the way that things look, Kevin. And you can't, obviously, I can't, you know, definitively say that this threatens the independence of the Fed.

25:03But in terms of optics and what Jay Powell said, I'll just hang it on to what the chairman said. He said this was nothing more than a pretext to force him or to put pressure on him to do the president's bidding on lowering rates. Well, in the fullness of time, we'll find out whether it looks like a pretext. But right now, we've got a building that's got like dramatic cost overruns and plans for the buildings that look inconsistent with the testimony. But, you know, again, I'm not a Justice Department person. I hope everything turns out okay for Jeff. Some of the prospective candidates to replace Chair Powell have been outspoken about problems within the Federal Reserve.