Former Federal Reserve Chair Janet Yellen on Monday sharply criticized an investigation targeting her successor, Jerome Powell, warning that it threatens the independence of the U.S. central bank and could have serious consequences for the financial system.

Yellen, who later served as U.S. Treasury secretary after leaving the Federal Reserve, said she finds the situation deeply troubling and described it as “extremely chilling.” In her view, financial markets have not reacted strongly enough to what is unfolding.

“I’m surprised the market isn’t more concerned,” Yellen said in remarks reported by CNBC’s Sara Eisen. “It seems to me that the market should be concerned.”

Her comments came a day after Powell acknowledged that he was aware of a probe by the U.S. attorney’s office in Washington, D.C. The inquiry is reportedly examining whether Powell provided false statements during congressional testimony last June related to the costly renovation of the Federal Reserve’s headquarters. The office overseeing the matter is led by Jeanine Pirro, a former Fox News host and a close ally of former President Donald Trump.

The U.S. Department of Justice has not formally confirmed that a criminal investigation is underway, nor has it stated that perjury charges are being pursued.

Yellen rejected any suggestion that Powell may have lied to Congress. Drawing on her long professional relationship with him, she expressed strong confidence in his integrity.

“Knowing Powell as well as I do, the odds that he would have lied are zero,” Yellen said. She added that she believes the investigation is politically motivated, arguing that critics are trying to remove Powell from his position rather than address any genuine misconduct.

Yellen served as Federal Reserve chair during the first year of Trump’s initial presidency. When her term ended, she was replaced by Powell. She later returned to government as Treasury secretary under former President Joe Biden, becoming the first woman in U.S. history to hold either of those two powerful economic posts.

During her tenure at the Treasury, Yellen faced criticism from some quarters for her approach to government debt issuance, with opponents arguing that it contributed to the rapid growth of the national debt. Trump, for his part, has repeatedly pressured the Federal Reserve to cut interest rates, in part to reduce the government’s borrowing costs as federal debt has climbed to roughly $38.4 trillion.

Yellen strongly pushed back against the idea of using monetary policy as a tool to manage the government’s debt burden. She warned that politicizing interest rate decisions undermines economic stability and institutional credibility.

“You have a president that says the Fed should be cutting rates to lower interest payments on the federal debt,” Yellen said. She made clear that she fundamentally disagrees with that approach, calling it a dangerous path that resembles the practices of unstable political systems rather than a mature democracy.

Yellen is not alone in her opposition to the investigation into Powell. A group of prominent former Federal Reserve and Treasury officials also spoke out, issuing a joint statement condemning the reported inquiry.

“The reported criminal inquiry into Federal Reserve Chair Jay Powell is an unprecedented attempt to use prosecutorial power to weaken the central bank’s independence,” the statement said.

Among the signatories were former Fed Chairs Ben Bernanke and Alan Greenspan, former Treasury Secretaries Timothy Geithner and Henry Paulson, as well as several well-known economists.

The statement warned that such actions are more commonly seen in countries with weak institutions, where political interference in monetary policy often leads to high inflation and broader economic damage. The authors emphasized that this approach is fundamentally incompatible with the United States’ long-standing commitment to the rule of law.

“This has no place in the United States,” the statement concluded, stressing that institutional independence and legal integrity are core foundations of the country’s economic strength.