WASHINGTON — The Justice Department has ended its criminal investigation into Federal Reserve Chair Jerome H. Powell, clearing a major political roadblock to the Senate confirmation of Kevin Warsh, President Trump’s nominee to lead the central bank.
The decision resolves a standoff with a key Republican senator who had vowed to block Mr. Warsh’s nomination until the investigation was resolved. It also concludes a probe that a federal judge harshly criticized as “pretextual,” citing “essentially zero evidence” that Mr. Powell had committed any crime. US Attorney for the District of Columbia Jeanine Pirro announced on Friday that she had directed her office to close the investigation and refer the matter to the Federal Reserve’s inspector general to examine building cost overruns.
“This morning the Inspector General for the Federal Reserve has been asked to scrutinize the building cost overruns, in the billions of dollars, that have been borne by taxpayers,” Ms. Pirro wrote on X.
The probe, launched in January, centered on testimony Mr. Powell gave to Congress about the Fed’s $2.5 billion headquarters renovation. The original estimate for the project was $1.9 billion, and costs increased due to factors including rising material prices and asbestos damage. Prosecutors considered whether the Fed chairman had misled lawmakers about the project’s price tag. But the investigation failed to gain traction as prosecutors struggled to articulate a basis for suspecting criminal conduct, echoing earlier coverage of a criminal investigation into Federal Reserve Chair Jerome Powell.
In March, Chief US District Judge James Boasberg quashed grand jury subpoenas issued to the Fed, delivering a sharp rebuke to the Justice Department. Judge Boasberg wrote that the government had “produced essentially zero evidence to suspect Chair Powell of a crime” and that its justifications were “so thin and unsubstantiated that the Court can only conclude that they are pretextual.”
The judge went further, accusing prosecutors of using the subpoenas to pressure Mr. Powell into lowering interest rates. “There is abundant evidence that the subpoenas’ dominant purpose is to harass and pressure Powell either to yield to the President or to resign,” Judge Boasberg wrote. The Justice Department said at the time it would appeal, but Friday’s closure effectively ends the legal fight.
The closure was a direct condition set by Senator Thom Tillis, Republican of North Carolina, a member of the Senate Banking Committee. Mr. Tillis had repeatedly pledged to block Mr. Warsh’s nomination until the Justice Department ended its investigation of Mr. Powell, which he called “baseless.”
With the probe dropped, the White House expressed confidence that the confirmation would move swiftly.
“The White House remains as confident as before that the Senate will swiftly confirm Kevin Warsh as the next Federal Reserve Chairman to finally restore competence and confidence in Fed decision-making,” said Kush Desai, a White House spokesman.
Nevertheless, Ms. Pirro left open the possibility of reviving the inquiry. “I will not hesitate to restart a criminal investigation should the facts warrant doing so,” she wrote. Press Secretary Karoline Leavitt also noted that the case was “not necessarily dropped,” but rather transferred to the inspector general, who has “critical tools at their disposal to continue to look into the financial mismanagement at the Fed.”
At his Senate confirmation hearing this week, Mr. Warsh sought to reassure lawmakers that he would act autonomously. “The president never once asked me to commit to any particular interest rate decision, period,” Mr. Warsh testified. “Nor would I ever agree to do so if he had.”
His comments followed Mr. Trump’s own public statements expressing disappointment if rates were not cut immediately. The episode has intensified Federal Reserve independence concerns among economists and lawmakers about whether the central bank can set monetary policy free from political pressure.
However, the standoff has broader implications for the central bank. Mr. Powell’s term as chair expires on May 15, though he could remain a Fed governor until 2028. Democratic lawmakers, including Senator Elizabeth Warren of Massachusetts, have warned that abandoning the investigation while referring it to an internal watchdog does not provide sufficient transparency. They and others worry that appointing Mr. Warsh, whose nomination was stalled over the very probe the Justice Department has now closed, could further politicize the Fed.
The Justice Department’s decision to end its criminal investigation of Mr. Powell paves the way for the Senate to confirm Mr. Warsh as the next Fed chair. However, the transfer of the case to the inspector general ensures that questions about the renovation’s ballooning costs will continue to be examined. With Mr. Powell’s term ending in less than three weeks and a volatile political backdrop, the coming days are likely to bring high-stakes debate over the future leadership of the world’s most influential central bank.
