Justice Dept drops investigation into Fed Chair Powell, removing obstacle to Warsh

Highlights:

• Pirro asks Fed watchdog to take over investigation
• Probe had stalled confirmation of Trump's central bank pick
• Judge found no evidence of a crime

The Justice Department is closing its investigation into Federal Reserve Chair Jerome Powell, US Attorney Jeanine Pirro said on Friday, removing an obstacle to the confirmation of Kevin Warsh, President Donald Trump's pick to lead the central bank.

The move by Pirro, a Trump ally and the top federal prosecutor in Washington, DC, for now ends an inquiry involving renovation costs for Fed buildings that had been rebuked by a federal judge and prompted a key Republican senator to block Trump's nominees to the central bank.

Pirro said she had instead asked the Fed's internal watchdog, the Office of Inspector General, to examine cost overruns in renovations of the central bank's Washington headquarters. The inspector general has already been examining the project after Powell requested a review last year.

"The IG has the authority to hold the Federal Reserve accountable to American taxpayers," Pirro said in a social media post. "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."

Judge halted probe

The Powell probe, which had been examining the renovation and Powell's statements to Congress last year about the project, became the latest flashpoint in the Justice Department's pursuit of adversaries and critics of Trump.

A federal judge last month blocked subpoenas to the Fed's Board of Governors, finding they were issued for the improper purpose of pressuring Powell to cave to Trump's demands to rapidly lower interest rates or resign. Chief US District Judge James Boasberg found prosecutors had shown "essentially zero evidence" Powell committed a crime.

As recently as this week, Pirro had vowed to continue the investigation and appeal the ruling, which DOJ lawyers have not yet filed in court. She said reports of cost overruns in the $2.5 billion project were enough of a basis to conduct an inquiry.

Republican Senator Thom Tillis of North Carolina, a member of the Senate Banking Committee, has vowed not to support Warsh until the DOJ ends what he has called a baseless investigation into Powell. Tillis' blockade had effectively stalled Warsh's confirmation.

A spokesperson for Tillis had no immediate comment on Friday, but Tillis indicated during Warsh's confirmation hearing this week that he would support Warsh if the Justice Department abandoned the probe into Powell.

The chair of the Senate Banking Committee, Republican Tim Scott of South Carolina, on Friday said he would ask the inspector general to brief the panel within 90 days on its findings.

A spokesperson for the Fed declined to comment. A White House spokesperson said the inspector general was best positioned "to get to the bottom of the matter" and said it was confident the Senate would confirm Warsh.

The decision to end the probe may clear the way for Warsh's Senate confirmation as Fed chair, potentially by 15 May when Powell's leadership term ends. It's less clear if the move meets Powell's own bar for stepping down as governor.

"I have no intention of leaving the Board until the investigation is well and truly over, with transparency and finality," Powell said last month. Pirro said on Friday that she may resume her investigation depending on the inspector general's findings.

Watchdog review already underway

The Fed's current $2.46 billion budget for overhauling the two buildings is about $1.1 billion more than it had originally allocated in 2020, with most of the increase attributable to rising costs for material and labour driven by the post-pandemic surge in inflation, Fed budget documents show.

A spokesperson for the Fed's inspector general said on Friday that the office has been reviewing the renovation project since July 2025, including examining "substantial cost increases and overruns."

"We are actively working to complete our review, and look forward to making the results available to the public and Congress upon completion," the spokesperson said.

The Fed's inspector general has already conducted two published audits on the renovations, one issued in March 2021 that suggested improvements in project management, and another issued in February 2022 that found the process for modifying the renovations "generally effective."

Powell revealed the existence of the DOJ investigation in January, calling it a pretext for Trump to gain influence over monetary policy in a blunt video statement.

Trump has for months hectored Powell for resisting his pressure to rapidly lower interest rates, and publicly supported an investigation into the renovation project. Trump has called Powell a "numbskull," a "major loser" and "very incompetent," comments Boasberg cited in quashing subpoenas.