NextFin News - The U.S. Department of Justice has dropped its criminal investigation into Federal Reserve Chair Jerome Powell and the central bank’s headquarters renovation costs, a move that effectively clears a political logjam threatening the leadership transition at the world’s most influential monetary authority. Jeanine Pirro, the U.S. Attorney for the District of Columbia, announced the decision on Friday morning, stating that her office would close the inquiry as the Federal Reserve’s Office of the Inspector General (OIG) takes over the review of the multi-billion dollar project.
The investigation, which focused on cost overruns at the Fed’s Eccles Building, had become a flashpoint in the relationship between the central bank and the White House. U.S. President Trump has frequently criticized Powell for maintaining restrictive interest rates, leading many critics to characterize the DOJ probe as a tool of political intimidation. Pirro, a former judge and television personality who was appointed to her current post by U.S. President Trump, has long been a vocal supporter of the President’s "America First" agenda. Her decision to drop the probe follows months of legal friction, including a March ruling by a federal judge who described the investigation as an unjustified act of pressure against the Fed.
The closure of the case is not merely a legal reprieve for Powell, whose term expires on May 15, but a tactical necessity for the administration’s economic agenda. Kevin Warsh, U.S. President Trump’s nominee to succeed Powell, saw his confirmation path blocked in the Senate Banking Committee by a bipartisan group of lawmakers. Senator Thom Tillis, a North Carolina Republican, had joined Democrats in vowing to stall Warsh’s nomination until the DOJ ended what he termed a "bogus" investigation. With the probe now shuttered, the Senate is expected to move swiftly toward a final vote on Warsh, who testified earlier this week that the Fed’s independence "has to be earned."
While the criminal threat has dissipated, the financial scrutiny remains. Pirro noted in a statement on X that the Fed’s OIG will continue to investigate "billions of dollars" in taxpayer-borne costs. The renovation of the 1930s-era headquarters has seen its budget swell significantly, a fact the administration has used to question the Fed’s internal management. However, institutionalists argue that the timing of the DOJ’s withdrawal suggests the probe had served its purpose as a leverage point rather than a pursuit of criminal wrongdoing. Senator Elizabeth Warren remarked that the administration only dropped the investigation to ensure their "sock puppet" could be installed at the helm of the central bank.
The transition comes at a delicate moment for the U.S. economy. Warsh, a former Fed governor and Morgan Stanley executive, is viewed by markets as more likely to align with U.S. President Trump’s preference for lower interest rates, though he has publicly pledged to follow the Constitution and Fed tradition. The resolution of the Powell probe removes a significant layer of "headline risk" for the Treasury and bond markets, which had grown uneasy over the prospect of a leadership vacuum or a protracted legal battle involving the sitting Fed Chair. As Powell prepares to exit, the focus shifts entirely to whether Warsh can maintain the central bank's credibility while navigating the most politically charged environment in the institution's history.
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