Brazil's Supreme Court sank further into crisis after two justices sought sanctions against each other over a corruption probe tied to the collapsed Banco Master, a scandal that has notoriously ensnared political figures on both sides of the divide. The clash comes just weeks before an October 4 presidential election in which President Luiz Inácio Lula da Silva and challenger Flávio Bolsonaro are running neck and neck.

Justice Alexandre de Moraes, 57, who became a household name after leading the case that jailed former far-right president Jair Bolsonaro last year over an alleged coup plot following his 2022 election defeat, is at loggerheads with colleague Andre Mendonça, 53, the court's first evangelical member and a Bolsonaro appointee.

Mendonça wants Moraes suspended while the court weighs whether to investigate him over the failure of Banco Master, while Moraes wants Mendonça investigated and potentially impeached by the Senate for allegedly overstepping his authority by questioning the bank's jailed former owner, Daniel Vorcaro, without full-court authorisation.

The rift stems from a sprawling federal investigation into fraud at Banco Master, which was liquidated by Brazil's Central Bank last year after leaving a multi-million-dollar deficit.

Mendonça this week unsealed intercepted messages showing Vorcaro had repeatedly sought advice from Moraes.

"I am grateful to you for my life," Vorcaro wrote in one message. "For the love of God, see if you can block all these evil measures against Banco Master," he said in another.

Suspicion around Moraes deepened after federal police found his wife's law firm had been paid BRL130mn ($25mn) for work for Banco Master, a fee El País reported far exceeds market rates.

Flávio Bolsonaro has also been pulled into the Banco Master scandal. Messages leaked to Brazilian outlet The Intercept in May showed the senator negotiated directly with Vorcaro over funding for an international film about his father's life, with about $21mn earmarked for the project. Under a scheme called the "Havengate Dev Fund," $10.6mn of a planned $23.9mn had already been transferred, the messages showed, and Vorcaro personally tracked the payments. Flávio has previously denied any financial ties between his family and Banco Master, calling such claims a "false narrative" created by Lula.

Moraes has not been charged and cannot be formally investigated without authorisation from the full court. Supreme Court President Edson Fachin said he would seek clarifications from Mendonça, Moraes, Attorney General Paulo Gonet and federal police chief Andrei Rodrigues, AP reported, while insisting the "institutions of the Republic must be preserved."

President Lula sought to distance himself from the affair. "No one, in the name of democracy, can use their position for personal gain," he said, having called a day earlier for "transparency and firmness" from state institutions.

The turmoil comes as polling shows Lula's advantage narrowing. The latest surveys by Datafolha and Quaest put the seasoned leftist leader five to seven points ahead of Flávio Bolsonaro, 45, in the first round of the October 4 vote, but the gap closes to one or two points in a hypothetical run-off.

A third candidate, self-help author Augusto Cury, has drawn 8-10% support from voters disillusioned with both frontrunners, the newspaper said.

Adding to the government's difficulties, Brazil's economy is expected to slow sharply in the second half of the year, Valor reported, citing analysts who forecast broad stagnation in gross domestic product between July and December after 1.1% growth in the first quarter and a weaker 0.5% expansion in the second, when household consumption fell 0.4%.

Consultancy 4intelligence cut its 2026 growth forecast to 1.9% from 2%, telling Valor that high household debt-servicing costs and restrictive monetary policy were curbing consumption despite tax relief measures.

A Datafolha poll cited by Valor found 51% of Brazilians disapprove of Lula's government, against 45% who approve.

Against this backdrop, Lula marked Brazil's Independence Day on September 7 by taking part in the traditional military parade in Brasília alongside Fachin, Senate President Davi Alcolumbre and lower house Speaker Hugo Motta, Folha de S.Paulo reported.

Attorney General Gonet and federal police chief Rodrigues, both central figures in the institutional crisis, also attended but did not greet one another, according to the newspaper.

Part of the crowd shouted for an end to Brazil's "6x1" work-schedule system as Lula arrived, Folha said, while the government promoted the slogan "The Force that Unites Brazil" for the ceremony.