Two Republican senators joined in rebuking President Donald Trump's administration and questioned the credibility of the Justice Department in targeting Powell, whom the president has long sought to replace in a push for lower interest rates.
On Sunday, Powell revealed that the Fed received grand jury subpoenas and threats of a criminal indictment relating to Senate testimony he gave in June.
The issue at hand was a $2.5 billion renovation of the Fed's headquarters. Last year, Trump floated the possibility of firing Powell over cost overruns for the historic buildings' facelift.
On Monday, ex-Fed chiefs Ben Bernanke, Alan Greenspan, and Janet Yellen joined other former economic leaders in slamming the Department of Justice's probe.
In a joint statement, they called it "an unprecedented attempt to use prosecutorial attacks" to undermine the Fed's independence.
"This is how monetary policy is made in emerging markets with weak institutions, with highly negative consequences for inflation and the functioning of their economies more broadly," the statement added.
"It has no place in the United States."
In an extraordinary statement on Sunday, Powell himself rebuked the administration, dismissing the building renovation and his testimony before Congress as "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," he said.
He vowed to carry out his duties "without political fear or favor."
Powell investigation faces criticism from both sides of the aisle
Trump has regularly slammed Powell, calling him a "numbskull" and "moron" for the Fed's policy decisions and not cutting borrowing costs more sharply.
On Monday, White House spokeswoman Karoline Leavitt told Fox News that Powell "has proven he's not very good at his job."
"As to whether he's a criminal, that's an answer the Department of Justice is going to have to find," she said.
The Justice Department probe has drawn criticism from both sides of the political aisle.
Republican Thom Tillis, who sits on the Senate Banking Committee, vowed Sunday to oppose the confirmation of any Fed nominee, including for the next Fed chief, until the legal matter is "fully resolved."
"It is now the independence and credibility of the Department of Justice that are in question," he said.
Another Republican senator, Lisa Murkowski of Alaska, supported Tillis' move, calling the investigation "nothing more than an attempt at coercion."
Top Senate Democrat Chuck Schumer earlier dubbed the probe an assault on the Fed's independence.
David Wessel, a senior fellow at Washington think tank the Brookings Institution, warned of serious consequences if the Fed came under Trump's control.
Elected politicians could be inclined to set interest rates low to boost the economy ahead of elections, whereas an independent Fed is seen as shaping policy in the best interests of managing inflation and maximizing employment.
If Trump succeeds in influencing the Fed, the US economy could see "more inflation, and the willingness of global investors to lend money to the Treasury will diminish somewhat," Wessel told AFP.