The U.S. Department of Justice (DOJ) has dropped its criminal investigation into Federal Reserve Chair Jerome Powell, removing a major obstacle to the Senate confirmation of President Donald Trump's nominee, Kevin Warsh, to replace him. The decision, announced by U.S. Attorney Jeanine Pirro, shifts the inquiry to the Fed's internal watchdog, the Office of Inspector General (IG), to examine cost overruns in the central bank's Washington headquarters renovation.
Powell's term as Fed Chair is set to end soon, and his successor's confirmation has been delayed by political tensions. Sen. Thom Tillis (R-NC), a key Republican on the Senate Banking Committee, had threatened to block Warsh's nomination unless the DOJ dropped its probe into Powell. With the investigation now closed, Tillis is expected to support Warsh's confirmation, which is now seen as highly likely by prediction markets.
The Fed's renovation project, estimated to cost $2.5 billion, has faced scrutiny from Trump, who criticized the rising expenses. The IG has previously reviewed the project twice and found no wrongdoing. Powell had offered to stay in his role until Warsh's confirmation, but the DOJ's decision may influence his decision to remain or step down.
White House spokesman Kush Desai stated that the IG is best positioned to investigate the Fed's fiscal management, while Powell and others have dismissed the DOJ probe as politically motivated. The Fed has argued that the renovations will reduce long-term costs, but Trump has demanded lower interest rates and threatened to fire Powell if he does not leave voluntarily.
The DOJ's move follows a federal judge's ruling that quashed subpoenas issued to the Fed, which had stalled the investigation. Pirro emphasized that the IG's report will address the questions that led to the subpoenas and that the DOJ could reopen the criminal probe if necessary. The Senate is now expected to swiftly confirm Warsh, who has been criticized by some Democrats as a Trump loyalist.