The US Department of Justice has dropped its criminal investigation into Federal Reserve Chair Jerome Powell, removing a key obstacle to the confirmation of Kevin Warsh, President Donald Trump's nominee to replace him. The decision was announced by Jeanine Pirro, Trump's appointed US attorney for the District of Columbia, who stated on social media that she directed her office to close the probe into renovations at the Fed headquarters that exceeded budget.
Investigation Closure and Conditions
Pirro wrote that she ordered the closure as the inspector general's office takes over the inquiry. However, she warned that a criminal investigation could be restarted if warranted by the facts. The probe had been publicly revealed in January after Powell released a video stating he had been subpoenaed by the Justice Department. In rare pointed remarks about the White House, Powell claimed the investigation was not truly about the Fed's renovation but rather a pretext to pressure the central bank into lowering interest rates.
Political and Bipartisan Reactions
The investigation drew bipartisan criticism, including from Republican Senator Thom Tillis, who had vowed to block Warsh's nomination until the probe ended. During Warsh's Senate hearing on Tuesday, Tillis told him: "Let's get rid of the investigation so I can support your nomination." Trump has been at odds with Powell over interest rate policy, previously calling the Fed chair a "moron" for opposing rate cuts. Despite pressure to end the investigation, Trump had last week insisted on continuing the search, stating that "whether it's incompetence, corruption or both, I think you have to find out."
Impact on Warsh's Confirmation
Republicans needed Tillis's tie-breaking vote to advance Warsh through the Senate Banking Committee. Powell's term ends on 15 May. Warsh, a former investment banker and Fed governor, indicated during his hearing that he aligns with Trump on lowering interest rates, raising Democratic concerns about the central bank's independence from the White House. Economists generally agree that a nonpolitical, independent central bank is crucial for economic stability.
Ongoing Legal Battles
Even with the investigation concluded, Trump's conflict with the Fed continues. The Supreme Court is expected to rule by June on whether Trump's firing of Fed Governor Lisa Cook, temporarily reinstated by a federal court, was constitutional. This case underscores the ongoing tensions between the administration and the central bank.
