Financial markets faced significant volatility on Monday, January 12, 2026, as a criminal investigation into Federal Reserve Chair Jerome Powell and a surprise proposal from President Trump to cap credit card interest rates sent shockwaves through Wall Street. The dual events raised profound concerns about central bank independence and the regulatory landscape for financial institutions.
The Department of Justice, led by Trump-aligned U.S. Attorney Jeanine Pirro, launched a probe into Powell's June 2025 congressional testimony regarding the Fed's $2.5 billion headquarters renovation project. The investigation scrutinizes whether Powell downplayed the project's cost overruns, which have ballooned by roughly $700 million due to asbestos remediation and other issues. Powell called the investigation "unprecedented" and suggested it was retaliation for his refusal to slash interest rates at Trump's behest.
Simultaneously, President Trump announced a proposal to cap credit card interest rates at 10% for one year, effective January 20. While analysts doubt immediate congressional action, the announcement alone triggered a sharp sell-off in financial stocks. Synchrony Financial plunged nearly 9%, Capital One dropped over 6%, and Citigroup fell roughly 4%. Payment networks Visa and Mastercard also slid 2-3%.
The market reaction was severe but mixed. The S&P 500 initially fell 0.7% before recovering to positive territory by midday, with defensive sectors like utilities providing support. However, banking shares bore the brunt of the selling. The events underscore a precarious environment where political and regulatory risks are directly impacting asset prices and market confidence in institutional independence.
