Federal Reserve officials became suspicious last month after a Justice Department prosecutor requested an informal chat with them about renovations at the central bank's headquarters.
A half-dozen sources with knowledge of the situation told the Washington Post that the battle between the bank and President Donald Trump's administration heated up in recent weeks as Fed officials became concerned the DOJ was preparing a criminal case against them after receiving two two casually-worded emails from a prosecutor in U.S. attorney Jeanine Pirro's office.
"The emails, sent Dec. 19 and Dec. 29, came from Assistant U.S. Attorney Carlton Davis, a political appointee in Pirro’s office whose background includes work for House Oversight Committee Chairman James Comer (R-KY)," three sources told the Post. "The messages struck Fed officials as breezy in tone."
“'Can we hop on a call?' one of the missives read in part," according to the report.
Fed Chairman Jerome Powell, whom had been attacked repeatedly by Trump for months, retained outside counsel at that point, and Fed officials decided not to respond to Davis' request for informal engagement out of concern that his query had criminal implications.
Pirro, the former Fox News host and longtime Trump friend, then concluded the Federal Reserve was stonewalling and had something to hide, according to a Justice Department source.
“The claim that, ‘Oh, they didn’t think it was a big deal’ is naive and almost malpractice,” the DOJ official said. “We gave them a deadline. We said the first week of January.”
Investigators are looking into possible cost overruns for renovations at Fed headquarters on the National Mall and Powell's congressional testimony about the project, which has risen to $2.5 billion from about $1.9 billion before the Covid-19 pandemic.
"The emails from Davis to a Federal Reserve lawyer did not indicate the existence of a criminal investigation because prosecutors had not yet opened one, according to two people with knowledge of the matter," the Post reported. "There was no FBI involvement when Pirro’s office opened a fact-gathering inquiry in November, and the bureau remains uninvolved, according to two other people familiar with the matter."
Davis asked in the emails to discuss Powell's testimony in June and the building's renovations, but the DOJ source defended the tone that set off suspicions for Fed officials.
“The letter couldn’t have been nicer,” that official said. “About 10 days after that, we sent another, saying, ‘We just want to have a discussion with you.’ No response through January 8.”
“We low-keyed it. We didn’t publicize it. We did it quietly,” the official added.