The U.S. Justice Department has officially dropped its investigation into Jerome Powell, a move that could significantly reshape the leadership of the Federal Reserve and ease political tensions surrounding the central bank.
The decision, announced by U.S. Attorney Jeanine Pirro, removes a major obstacle to the confirmation of Kevin Warsh, who has been nominated by Donald Trump to lead the central bank.
Investigation Ends After Legal Setback
The probe into Powell centered on alleged cost overruns related to the renovation of Federal Reserve buildings in Washington, D.C. However, the investigation had already suffered a significant blow when a federal judge ruled that prosecutors had presented “essentially zero evidence” of any criminal wrongdoing.
The ruling also found that subpoenas issued during the probe were improperly motivated, suggesting they were intended to pressure Powell amid ongoing political disagreements over interest rate policies.
Following this setback, Pirro confirmed that the Justice Department would step back, instead requesting the Federal Reserve’s internal watchdog—the Office of Inspector General—to continue reviewing the renovation costs.
Political and Economic Implications
The now-closed investigation had become a flashpoint in the broader conflict between the Federal Reserve and the Trump administration. President Donald Trump has repeatedly criticized Powell for resisting calls to aggressively cut interest rates.
The probe also had direct consequences for Warsh’s nomination. Republican Senator Thom Tillis had blocked progress on the confirmation process, calling the investigation baseless and politically motivated.
With the probe dropped, Tillis is now expected to lift his opposition, potentially clearing the way for Warsh’s confirmation before Powell’s term as Fed chair expires in mid-May.
Watchdog Review Still Underway
Although the Justice Department has ended its involvement, scrutiny over the renovation project is far from over. The Federal Reserve’s Inspector General is already conducting a detailed review of the project, which has seen its budget rise to approximately $2.46 billion, significantly higher than initial estimates.
Officials say the increase is largely due to inflation-driven costs for materials and labor following the pandemic.
Pirro emphasized that the watchdog has the authority to ensure accountability and suggested that the Justice Department could revisit the matter depending on the findings of the review.
Powell’s Position Remains Firm
Despite the investigation’s closure, Powell has indicated he does not intend to step down immediately. He previously stated he would remain in his role until the matter is fully resolved with “transparency and finality.”
His stance reflects ongoing concerns about maintaining the independence of the Federal Reserve, particularly amid political pressure from the executive branch.
What Happens Next?
The decision to drop the probe marks a turning point in a high-stakes political and economic saga. With the path potentially cleared for Kevin Warsh, attention now shifts to the Senate confirmation process and the outcome of the Inspector General’s review.
As the situation evolves, the leadership of the Federal Reserve—and the direction of U.S. monetary policy—hangs in the balance.
