The United States Justice Department has decided to close its criminal investigation into Federal Reserve Chair Jerome Powell, a move that effectively removes a significant obstacle to the confirmation of Kevin Warsh, President Donald Trump's nominee to lead the central bank. Powell's term as chair is set to conclude on May 15.
US Attorney Jeanine Pirro announced that the criminal probe into cost overruns associated with renovations at the Federal Reserve's Washington headquarters would be terminated. However, scrutiny will continue through the Office of Inspector General (OIG), which has been reviewing the project. "I have directed my office to close our investigation as the (inspector general's office) undertakes this inquiry," Pirro stated in a social media post, adding that she could reinstate a criminal investigation "should the facts warrant doing so."
Background of the Investigation
The investigation had focused on the Federal Reserve's $2.46 billion headquarters renovation project, examining cost overruns and Powell's statements to Congress last year. According to Reuters, the current budget is approximately $1.1 billion above its 2020 allocation, with increases largely attributed to rising labor and material costs. The Guardian reported that the probe was first made public in January after Powell disclosed in a video that he had been subpoenaed by the Justice Department, claiming the investigation was being used to pressure the Fed over monetary policy.
The investigation suffered a significant setback last month when Chief US District Judge James Boasberg blocked subpoenas issued to the Fed's Board of Governors. Boasberg stated that prosecutors had shown "essentially zero evidence" that Powell committed a crime and found that the subpoenas were issued for an improper purpose.
Impact on Warsh's Confirmation
The probe had stalled Kevin Warsh's path to confirmation as Fed chair. Republican Senator Thom Tillis had indicated he would not support the nomination while the investigation remained active. During Warsh's confirmation hearing, Tillis remarked, "Let's get rid of the investigation so I can support your nomination."
President Trump had defended the scrutiny of Powell, stating last week, "whether it's incompetence, corruption or both, I think you have to find out."
Powell's Stance and Future Steps
Powell had previously stated that he had no intention of leaving the Federal Reserve Board until the matter was resolved "with transparency and finality." Pirro noted that the Fed's internal watchdog would continue examining the matter, and Senate Banking Committee Chair Tim Scott has requested a briefing within 90 days.
The US Supreme Court is also expected to rule by June on whether Trump's firing of Federal Reserve Governor Lisa Cook was constitutional, leaving broader questions about central bank independence under scrutiny.
