Command Palette

Search for a command to run...

Discover

Justice Department Ends Criminal Probe of Fed Chair Powell, Clears Warsh Nomination

No image

The Justice Department closed its criminal investigation into Federal Reserve Chair Jerome Powell on Friday, ending an unprecedented clash between the Trump administration and the central bank over a $2.5 billion headquarters renovation and alleged false statements to Congress.nbcnews +1 The move removed a major obstacle to confirming Trump’s chosen successor, former Fed governor Kevin Warsh, and immediately rippled through financial markets.cnn +1

U.S. Attorney Jeanine Pirro, the top federal prosecutor in Washington, said her office had “closed the probe” but formally referred the renovation to the Fed’s inspector general, reserving the right to reopen a criminal case if new evidence emerges.nbcnews +1 Powell, whose four‑year term as chair expires May 15 but whose Fed board seat runs to 2028, has denied wrongdoing and said he viewed the inquiry as political retaliation for resisting Trump’s demands for steeper interest‑rate cuts.politico +1

How a Building Renovation Turned Into a Constitutional Flashpoint

The investigation, launched in January, focused on ballooning costs at the Fed’s multi‑year renovation of its monumental Washington headquarters, a project now valued at roughly $2.5 billion with more than $1 billion in overruns versus earlier estimates.theguardian +1 Prosecutors examined whether Powell or other officials misled Congress about the project and whether there was fraud in contracts or construction.theguardian

But the case quickly drew sharp legal and political pushback. In March, Chief U.S. District Judge James Boasberg quashed grand jury subpoenas for Fed records, finding “essentially zero evidence” of a crime and warning that the probe appeared to be part of an improper campaign to pressure Powell over interest‑rate policy.axios +1 A prosecutor later acknowledged in a closed hearing that the government lacked evidence of misconduct by Powell, undercutting Trump’s public claims of “criminality” at the central bank.cbsnews

Powell had already asked the Fed’s inspector general in 2025 to take a harder look at the renovation, and a previous IG review years earlier found no criminal violations.nbcnews +1 By shifting scrutiny fully to the inspector general, Pirro effectively moved the matter into an administrative channel that can recommend reforms or, if warranted, refer new evidence back to the Justice Department.nbcnews +1

Politics, Markets and the Path to a New Fed Chair

The end of the probe immediately altered the politics of Fed leadership. Sen. Thom Tillis (R‑N.C.) had vowed to block any Trump Fed nominee until the investigation was dropped; within hours of Pirro’s announcement, Republicans said the decision cleared the way for Warsh’s stalled nomination to move forward in the Senate Banking Committee.cnn +1 “This gives the president a clear path for a new Fed chair,” said Rep. French Hill (R‑Ark.), who chairs the House Financial Services Committee.cnn

Democrats framed the closure as confirmation that the case had been baseless from the start. Sen. Elizabeth Warren (D‑Mass.) called it a “bogus” probe designed to “install a Trump loyalist at the Fed,” warning that shifting the review to the inspector general did not end what she described as a broader campaign to bend monetary policy to the White House’s will.bbc +1 Even some Republicans and former Fed officials had earlier warned that criminalizing policy disputes risked chilling future central bank decisions.nytimes

Financial markets took the announcement as a mixed signal: a reduction in immediate legal uncertainty for the Fed but a clearer path to a more Trump‑aligned chair. The dollar slipped and the S&P 500 closed at a fresh record on Friday, as traders priced in higher odds of faster or larger rate cuts under Warsh if he is confirmed.cnn +1

The Bigger Picture

The collapse of the Powell probe marked a tactical retreat by prosecutors but left unresolved questions about how far a White House can go in using criminal law to pressure an independent central bank. While the inspector general’s review could still expose embarrassing mismanagement on the Fed’s balance sheet, the episode already signaled to future chairs that monetary policy decisions may carry personal legal risks as well as macroeconomic ones.theguardian +1 With Powell’s term set to expire within weeks and Warsh’s confirmation now likely to dominate Capitol Hill, the battle over the Fed has shifted from the courtroom back to the Senate — but the precedent of a criminal inquiry into a sitting chair is likely to shadow debates over Fed independence for years.