US prosecutors have dropped their criminal investigation into Federal Reserve Chair Jerome Powell, a move that could ease the path for the Senate to confirm Kevin Warsh as the next head of the Federal Reserve.
Jeanine Pirro, the US attorney for the District of Columbia, said on Friday that she had directed her office to close the probe into cost overruns tied to a renovation project at the Federal Reserve’s Washington headquarters.
The matter has instead been referred to the central bank’s inspector general.
Probe dropped amid political and legal pressure
The Department of Justice investigation had focused on whether Powell misled Congress regarding a $2.5 billion renovation of the Fed’s headquarters.
Powell has denied the allegations and described the probe as an attempt by the White House to pressure central bank officials to lower borrowing costs.
Pirro announced the decision in a post on X, stating: “I have directed my office to close our investigation as the IG undertakes this inquiry.” She added, “Note well, however, that I will not hesitate to restart a criminal investigation should the facts warrant doing so.”
The probe had faced setbacks in court.
US District Chief Judge James Boasberg in March quashed two grand jury subpoenas issued by Pirro’s office earlier in the year, limiting the Justice Department’s ability to pursue the case.
Pirro said the Fed’s inspector general has now been tasked with examining the cost overruns. “The IG has the authority to hold the Federal Reserve accountable to American taxpayers,” she said, adding that she expects a report soon.
“I expect a comprehensive report in short order and am confident the outcome will assist in resolving, once and for all, the questions that led this office to issue subpoenas,” Pirro said.
Move clears hurdle for Warsh nomination
The decision to drop the investigation removes a key obstacle to Warsh’s nomination as Federal Reserve chair. President Donald Trump has put forward Warsh to replace Powell, whose term is set to expire on May 15.
Warsh’s confirmation process had been stalled in the Senate due to opposition from some Republican lawmakers.
Senator Thom Tillis had indicated he would block the nomination unless the Justice Department ended its probe into Powell.
With the investigation now closed, the path appears clearer for the Senate to proceed with a confirmation vote. Warsh, who recently appeared before the Senate Banking Committee, has broad support among Republican lawmakers.
Fed independence under scrutiny
The episode has underscored tensions between the Federal Reserve and the Justice Department, raising questions about central bank independence.
Trump last year sought to remove Federal Reserve Governor Lisa Cook, accusing her of mortgage fraud tied to property disclosures, an allegation she denied.
The move triggered a legal battle over whether a president can dismiss a sitting Fed governor, a step widely seen as testing central bank independence.
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