The Department of Justice dropped its criminal investigation of Federal Reserve Chair Jerome Powell on Friday, removing the last major obstacle to the Senate confirming Kevin Warsh as the central bank's next leader.
U.S. Attorney Jeanine Pirro, the top federal prosecutor in Washington, D.C., announced the decision in a post on X. Her office had been investigating Powell over alleged cost overruns in the multibillion-dollar renovation of the Fed's headquarters, a probe that Powell and others had characterized as political pressure to force the central bank to cut interest rates.
The timing was notable. Pirro had said as recently as Wednesday that she was committed to continuing the investigation. Her reversal came three days after Warsh testified before the Senate Banking Committee on his nomination to replace Powell, and it directly addressed a political standoff that had stalled Warsh's confirmation.
Sen. Thom Tillis, a North Carolina Republican and Banking Committee member, had been effectively blocking a full Senate vote on Warsh until the criminal probe ended. With Pirro's announcement, that hold is lifted.
Rather than shutting down the inquiry entirely, Pirro redirected it. She said the Fed's inspector general "has been asked this morning" to investigate the renovation cost overruns instead. The inspector general has been examining the project since last summer, after Powell himself requested a review in July following public criticism from President Trump about the renovation's price tag. A spokesperson for the inspector general told CNBC the office is "actively working to complete" its evaluation and will release findings to the public and Congress when finished.
In her post, Pirro said the inspector general "has the authority to hold the Federal Reserve accountable to American taxpayers" and called for "a comprehensive report in short order." She left the door open to resuming criminal proceedings, writing: "I will not hesitate to restart a criminal investigation should the facts warrant doing so."
The White House welcomed the move. Spokesman Kush Desai said in a statement that "American taxpayers deserve answers about the Federal Reserve's fiscal mismanagement" and that the inspector general's office is better positioned to investigate.
The investigation had been seriously weakened before Pirro dropped it. A federal judge had quashed subpoenas her office issued to the Fed, significantly limiting the probe's reach. Powell had pushed back publicly on the investigation's premise, noting that the inspector general had already conducted a renovation audit in 2021 and that he had proactively called for the current review.
Warsh, a former Fed governor and Wall Street figure, is now one Senate floor vote away from becoming the next chair of the world's most influential central bank. No date for that vote has been announced.
