US Justice Department Ends Criminal Investigation into Fed Chair Jerome Powell

The U.S. Department of Justice closed its criminal investigation into Federal Reserve Chair Jerome Powell on Friday, with U.S. Attorney for the District of Columbia Jeanine Pirro announcing she had directed her office to drop the probe into cost overruns in renovations at the Fed's Washington headquarters. Pirro said the Fed's Inspector General had been asked to take over the inquiry into the building costs. The decision removes the primary obstacle to the Senate confirmation of Kevin Warsh, President Donald Trump's nominee to succeed Powell as Fed chair. Powell's term expires on May 15, 2026, and he has indicated he plans to remain in post until his successor is confirmed.

Tillis blockade ends, Warsh path now clear Republican Senator Thom Tillis of North Carolina had blocked the Senate Banking Committee's endorsement of Warsh's nomination, making his support conditional on the Justice Department ending its investigation into Powell. Tillis told Warsh directly during a Senate hearing on Tuesday: „Let's get rid of the investigation so I can support your nomination” — Thom Tillis via The Guardian Without Tillis's tie-breaking vote, the banking committee could not advance Warsh's candidacy, creating the prospect of a Senate deadlock that might have left Powell in office beyond May 15. A senior White House official said the Fed Inspector General is "in the best position to get to the bottom of the problem" regarding renovation costs, and expressed confidence the Senate would quickly confirm Warsh. Warsh, a former investment banker and former member of the Federal Reserve Board of Governors, told senators during his hearing that he "will not be a puppet" of Trump, though he declined to name specific policy disagreements with the president. The White House said it remained confident the Senate would "swiftly confirm Kevin Warsh as the next Federal Reserve Chairman to finally restore competence and confidence in Fed decision-making."

Powell called probe a pretext for rate-cut pressure The investigation became public in January 2026 when Powell took the unusual step of releasing a video disclosing that the Justice Department had served the Fed with subpoenas and threatened a criminal indictment over testimony he gave to a Senate committee about the building renovations. Powell described the probe as "unprecedented" and said he believed it was opened because of Trump's anger over the Fed's refusal to cut interest rates despite repeated public pressure from the president. „This is about whether the Fed will be able to continue to set interest rates based on evidence and economic conditions, or whether instead monetary policy will be directed by political pressure or intimidation” — Jerome Powell via BBC A federal court in Washington had previously ruled Pirro's investigation groundless and politically motivated, canceling subpoenas issued for Fed employees to testify in the case, according to reporting by wnp.pl. Trump had publicly called Powell a "moron" and a "numbskull" for voting against rate cuts, and as recently as last week threatened to fire him if he did not step aside at the end of his term. Despite the closure of the probe, Pirro left open the possibility of resuming it. „I will not hesitate to restart a criminal investigation should the facts warrant doing so” — Jeanine Pirro via The Guardian

Fed independence battle not fully resolved despite probe closure The closure of the investigation drew a positive reaction from financial markets, with interest rates on U.S. Treasury bonds falling in response to the news, according to wnp.pl. The broader conflict between Trump and the Fed over monetary policy, however, remains unresolved. The Supreme Court still has to rule on whether Trump's firing of Lisa Cook, a Fed governor who was temporarily reinstated by a federal court, was constitutional, with a ruling expected by June. Economists broadly hold that an independent, nonpolitical central bank is essential for a stable economy, a principle Powell had invoked repeatedly during the standoff with the White House. The Fed's Inspector General had previously conducted an audit in 2021 regarding the building renovations, which had been ongoing since 2017, and Powell had personally requested another audit in light of Trump's allegations. The episode marked the most direct public confrontation between a sitting Fed chair and a sitting U.S. president in recent memory.

The Federal Reserve has operated as an independent institution since its founding in 1913, with its chair serving fixed terms to insulate monetary policy from political interference. Trump nominated Powell as Fed chair in 2017 during his first term, and Powell was later renominated. The renovation of the Fed's Washington headquarters became the stated basis for the Justice Department investigation, though critics and a federal court characterized the probe as politically motivated. The Fed Inspector General had already audited the renovation costs in 2021 before the Justice Department opened its criminal inquiry.

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