Can the Hill save the Fed?

IN THIS EDITION

The fight for the Fed’s future

Cornyn gets GOP cavalry, but is it enough?

What to expect this week on the Hill

Defense: GOP’s tough love for contractors

THE TOP

The fight for the Fed’s future

Happy Monday morning.

The Trump administration’s decision to open a criminal investigation into Federal Reserve Chair Jay Powell has set off a political firestorm on Capitol Hill and across official Washington. This is a long-feared and unwelcome chapter in the battle between President Donald Trump and “independent” federal agencies.

The criminal probe is focused on allegations that Powell lied to Congress about long-running renovations of Federal Reserve office buildings in D.C. But at stake is the central bank’s ability to resist White House coercion on monetary policy.

After the news broke on the criminal probe, Powell responded with his own video address. In his most defiant public remarks yet after months of Trump’s attacks, Powell accused the administration of jeopardizing the future of the Fed, a critical component of the global economic order.

“This new threat is not about my testimony last June or about the renovation of the Federal Reserve buildings,” Powell said in a stunning two-minute video Sunday night. “It is not about Congress’ oversight role. … Those are pretexts. 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.”

Trump’s legal push will force Republicans to choose between maintaining the independence of the Fed — a key tenet for both parties — and a president who argues that high interest rates are hampering the U.S. economy.

Trump told NBC News on Sunday night that he had no role in initiating the criminal probe against Powell. “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,” the president said of Powell.

But Trump’s poll ratings on the economy have fallen dramatically, and the entire GOP is looking at a tough political environment heading into the midterms. Trump has blamed Powell, in part, for that reality.

One public check has already emerged. Retiring GOP Sen. Thom Tillis (N.C.), who sits on the Senate Banking Committee, quickly threatened to block any Trump “nominee for the Fed — including the upcoming Fed Chair vacancy — until this legal matter is fully resolved.”

Powell’s term as chair expires in May. If the Senate can’t replace him, Powell will remain chair. The Banking Committee has 13 Republicans and 11 Democrats, giving Tillis the power to deadlock the committee over Fed nominees.

Senate Minority Leader Chuck Schumer said the Trump administration’s effort to “intimidate” the Federal Reserve was “threatening the strength and stability of our economy.” Sen. Elizabeth Warren (Mass.), the top Democrat on the Banking Committee, said the panel and the Senate “should not move forward with any Trump nominee for the Fed, including Fed chair.”

Fed red. At the heart of the DOJ criminal probe is Powell’s June appearance before the Senate Banking Committee. As Trump increasingly itched to fire Powell, some Banking Republicans, led by Chair Tim Scott (R-S.C.), hammered Powell over the ballooning costs and slow pace of the central bank’s renovation project, which now has its own FAQ page.

Powell testified that contrary to some initial planning documents, the new Federal Reserve building didn’t have luxury features such as beehives, water features and “special elevators.” Powell told Scott that some of the attacks levied against him and the project were “flatly misleading.”

But Scott’s approach formed the foundation for much of MAGA world’s attacks on Powell. A GOP spokesperson for the Senate Banking Committee declined to comment.

Democrats have been in a somewhat cooperative mood with Republicans lately. The House passed a funding measure with more than 300 votes last week, and another FY2026 package is slated to hit the floor this week. Several Banking Democrats have been seeking bipartisan agreement with the GOP on a push to reshape the regulated financial system to incorporate crypto firms.

Yet between the fatal shooting of a woman in Minnesota last week by an ICE officer and this new Fed crisis, the tenor is sure to change on Capitol Hill.

GOP pushback. Trump — who is scheduled to offer a major economic address on Tuesday — is already facing challenges from within his own party.

Five Senate Republicans broke with Trump by backing a bipartisan resolution to limit U.S. military involvement in Venezuela. Trump responded with an angry tirade in public and private against the GOP senators, who face a vote on the final passage of the war powers resolution this week.

And 17 House Republicans broke with Trump and Speaker Mike Johnson to vote for a clean three-year extension of Obamacare premium subsidies, sending the measure to the Senate. Trump has riled a bipartisan group of senators trying to find a compromise by suggesting Republicans “be a little flexible” on abortion, leading to a huge pushback from anti-abortion groups.

But Trump’s war against Powell, whom the president has called “truly one of my worst appointments,” has raged since the president returned to office.

Trump has repeatedly suggested he could fire Powell, but he received pushback from Hill Republicans and Treasury Secretary Scott Bessent. Trump did attempt to fire Lisa Cook, a member of the Fed Board of Governors, only to see the case bogged down in court.

The president took the extraordinary step in July of going to the Fed construction site and touring it with Powell and Scott. The two argued, live and on camera, about just how much that the Fed had spent on renovations under Powell’s watch.

— John Bresnahan, Brendan Pedersen, Andrew Desiderio and Jake Sherman

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THE SENATE

Cornyn gets GOP cavalry, but is it enough?

McALLEN, Texas — The Senate Leadership Fund and One Nation — the two main arms of Senate Majority Leader John Thune’s political operation — raised $180 million in 2025. Compare that to 2023, when they raised $94 million, or 2021, when the pair raised $95 million.

SLF will file its FEC report later this month and will show $100 million in the bank. One Nation transferred SLF $35 million.

Tens of millions of dollars have already been spent in Texas — and a lot more is coming — as Republicans try to keep Sen. John Cornyn (R-Texas) afloat in his three-way Republican primary. SLF and One Nation are key parts of a critical project for Senate Republicans: saving Cornyn’s political career and keeping Texas red.

Operation: Save Cornyn. On paper, Senate Republican leaders’ One Nation-sponsored event at the U.S.-Mexico border on Friday served as the kickoff for their One Big Beautiful Bill Act sales pitch to voters.

But it wasn’t a coincidence that Thune and nearly every GOP senator and candidate who spoke here made sure to praise Cornyn and highlight his work on border security over the years.

“Did I tell you I was endorsed by the Border Patrol Union?” Cornyn said in an interview. “If I was a little squishy on the border, I doubt that would happen.”

SLF has been dumping huge sums into Texas on Cornyn’s behalf. That’s money that could otherwise be spent in the battlegrounds of Michigan and North Carolina, both of which are expected to shatter spending records.

Those states’ GOP candidates — former Rep. Mike Rogers (Mich.) and Michael Whatley, respectively — appeared here with Thune, Cornyn, Senate Majority Whip John Barrasso and other in-cycle GOP senators. And they know how important it is to have the leadership’s backing.

“This is going to be the most expensive Senate race in the history of the country,” Whatley said, predicting a $600 million to $800 million race. “So having the support of Sen. Thune and the rest of the leadership team is going to be very important for us.”

Some of the irony here is that Cornyn — who’s turning 74 in a few weeks — has long been a powerhouse fundraiser for Republicans.

Despite the GOP leadership’s rescue mission, Cornyn still trails Texas Attorney General Ken Paxton in most polls. Rep. Wesley Hunt’s (R-Texas) more recent entrance into the race dramatically increases the likelihood of a runoff.

“I think they’ve seen a lot of movement in the numbers, but a three-way race obviously is a complicating factor. The runoff potential extends the primary election in a way that can become fairly expensive and costly,” Thune told us in an interview here.

SLF will keep its foot on the gas for Cornyn. Thune insisted that, “as a business proposition,” the current strategy still makes the most sense because SLF would need to spend a lot more money in the general election if Paxton or Hunt won the GOP nomination. This “will allow us to deploy resources to places like Michigan and North Carolina, where we’re going to have some really expensive races,” Thune asserted.

That may bear out. But Republicans are getting dangerously close to their nightmare scenario — spending more than $100 million to boost Cornyn, only to see Paxton or Hunt win the primary anyway.

The Trump factor. With less than two months to go, President Donald Trump is staying on the sidelines for now. Paxton and Hunt regularly highlight Cornyn’s criticism of Trump from when the president’s first term ended, especially relating to the Capitol attack on Jan. 6.

“We’ve been advocating fiercely with the White House on [an endorsement] for some time,” Thune said.

The value of a Trump endorsement in a GOP primary is indisputable. But many Republicans privately doubt a Trump endorsement would even help at this point.

— Andrew Desiderio and Jake Sherman

THE CALENDAR

What to expect this week on the Hill

Congress may look to fund the Department of Homeland Security with a continuing resolution for the rest of FY2026, according to multiple aides and lawmakers familiar with the planning.

GOP and Democratic negotiators tell us that the wave of protests against ICE nationwide following Wednesday’s fatal shooting of Renee Good in Minneapolis make it impossible for Congress to craft a spending bill that can get 60 votes in the Senate. Democrats want tough new restrictions on ICE and Republicans will resist.

Sen. Chris Murphy (D-Conn.) has been somewhat of a lonely voice on the idea of Democrats using their leverage in the government funding bills to demand language restricting the Trump administration’s authority. Murphy said on NBC’s “Meet the Press” Sunday that Democrats want to ensure DHS is “operating in a safe and legal manner.”

However, Democrats have been reluctant to hold up the government funding process or flirt with another shutdown.

That’s just one of the problems that Congress will face this week, with the House and Senate back in session for the second week in a row. Both chambers return this evening.

The Senate. The Senate will hold an initial procedural vote today on the minibus spending bill that the House passed last week. The bill — which includes the Energy and Water, Interior and Commerce-Justice-Science spending bills — passed the House last week with 397 votes.

Complicating matters for Senate Majority Leader John Thune is the fact that he’ll need to burn more floor time this week on the Venezuela war powers resolution. Five Senate Republicans joined all Democrats in voting to advance the measure last week, prompting an angry outburst from President Donald Trump.

There will be another procedural vote on the war powers resolution, followed by 10 hours of debate and then a vote-a-rama with germane limitations on amendments. After that, there’s a vote on final passage.

Senate Minority Leader Chuck Schumer suggested last week that he doesn’t want this to interfere with the Senate’s ability to pass the minibus.

And remember: There’s a recess on the other end of the week. Thune has assured senators he won’t cancel it.

The House. Senate and House negotiators released the next funding package Sunday night, which is slated to hit the floor this week. The House Rules Committee will meet Tuesday to consider the bill. This package includes Financial Services-General Government, and National Security-State, which used to be known as SFOPS. Hardline conservatives have wanted additional time to review the bills, so that’s something we’ll be watching this week.

The bill includes a few interesting nuggets. It requires Treasury to report on the Strategic Bitcoin Reserve and U.S. digital asset stockpile. OMB can only stop Army Corps of Engineers water projects for 60 days. And every executive order must now come with a statement on the “budgetary impact, including costs, benefits.”

Don’t forget: The House has had significant problems with attendance of late.

Also. The Supreme Court is issuing opinions on Wednesday this week. Two outstanding cases of interest to the Hill: the constitutionality of Trump’s tariff regime and Section Two of the Voting Rights Act. If the VRA is struck down, congressional maps across the South could be torn up.

— Jake Sherman, John Bresnahan, Andrew Desiderio and Samantha Handler

Defense: GOP’s tough love for contractors

Memo to leading defense contractors: Members of Congress are fed up and backing President Donald Trump’s efforts to reorient the industry.

Trump roiled the defense world last week with an executive order, plans for which we scooped in mid-December, that would cap contractor executive pay while limiting dividends and stock buybacks. Trump said he is making the move to address “how slowly these Companies are delivering vital Equipment to our Military, and our Allies.”

Fired-up leading defense lawmakers made clear that the major so-called “defense prime” contractors shouldn’t look to Congress for help.

“I haven’t been happy with performance, especially some of the primes,” Rep. Ken Calvert (R-Calif.), the chair of the House Defense Appropriations Subcommittee, told us. “And I think the president’s aware of the frustrations we have — with cost, production — and we got to get better performance out of these primes.”

House Armed Services Committee Chair Mike Rogers (R-Ala.) also expressed frustration with big weapons makers.

“We’re down to the six prime defense contractors now, and they seem more concerned about Wall Street and their quarterly reports than they are about our defense production,” Rogers said. “And we’ve given more money — we did them as a supplemental [funding package] for Ukraine — they did nothing. And we’re all exasperated with it right now.”

The order and a separate post from Trump going after RTX came as the president simultaneously proposed boosting military spending by 50% to $1.5 trillion. But Republicans said the cumulative set of announcements should amount to a clear wakeup call for the industry.

“The industry is getting a clear signal that there’s going to be a demand signal, but they’re not going to just automatically be awarded these contracts,” Rep. Rob Wittman (R-Va.) said. “Don’t expect that things are going to come automatically.”

— Anthony Adragna and Briana Reilly

THE CAMPAIGN

Endorsement news. ASPIRE PAC, the political arm of the Congressional Asian Pacific American Caucus, is backing three candidates in contested House Democratic primaries.

ASPIRE is backing Rep. Valerie Foushee (D-N.C.) in North Carolina’s 4th District. Foushee is facing a progressive challenger.

In California’s 48th District, the group is endorsing former candidate Ammar Campa-Najjar. ASPIRE is backing Pia Dandiya to knock off Rep. Brian Mast (R-Fla.) in the Sunshine State’s 21st District.

Warren dings DSCC. Sen. Elizabeth Warren (D-Mass.) will take a swipe at the DSCC in a speech at the National Press Club later today.

Per excerpts from her comments, Warren will call for Democratic candidates to embrace an unabashedly populist message. Warren says “a tepid, nibble-around-the-edges approach” is “a good way to appeal to the Democratic Senatorial Campaign Committee as they decide which primary candidates they will support,” but won’t win general elections.

— Max Cohen

MOMENTS

CLIPS