The US Department of Justice has closed its criminal investigation into the Federal Reserve and Chair Jerome Powell over the central bank's Washington headquarters renovation project. According to reports from CNBC TV18 and The Economic Times, US Attorney for DC Jeanine Pirro announced that the investigation has been terminated as the Federal Reserve's Inspector General takes over the review process. The decision ends an investigation that had failed to gain traction for months as prosecutors struggled to articulate a basis to suspect criminal conduct.
A prosecutor handling the case conceded at a closed-door court hearing in March that the government hadn't yet found any evidence of a crime, and a judge subsequently quashed subpoenas issued to the Federal Reserve. As reported by The Economic Times, Judge James Boasberg said prosecutors had produced 'essentially zero evidence' to suspect Powell of a crime, with the judge calling prosecutors' justification for the subpoenas 'thin and unsubstantiated'. More recently, prosecutors made an unannounced visit to a construction site at the Fed's headquarters but were turned away, drawing a rebuke from a defense attorney who called the maneuver 'not appropriate'.
The criminal probe was dropped specifically due to billions of dollars in building cost overruns that have been borne by taxpayers. As reported by CNBC TV18, Pirro stated that the Inspector General for the Federal Reserve has been tasked with scrutinizing these cost overruns, with the DOJ directing its office to close the investigation while the IG conducts this inquiry.
The move could lead to a swift confirmation vote by the Senate for Warsh, a former top Fed official whom Trump nominated in January to replace Powell, whose term as chair ends May 15. According to Yahoo Finance, Sen. Thom Tillis, a North Carolina Republican, had said he would oppose Warsh until the investigation was resolved, effectively blocking his confirmation. Warsh has maintained his independence stance, telling the Senate Banking Committee that 'I will be an independent actor if confirmed as chair of the Federal Reserve' and never promised the White House that he would cut interest rates. Market analysts expect Warsh to be confirmed quite quickly, with the Senate likely scheduling the vote as soon as possible so he can take charge of the June meeting.
While the criminal investigation has been closed, authorities have maintained flexibility for future action. As reported by CNBC TV18, Pirro cautioned that authorities would 'not hesitate to restart a criminal investigation should the facts warrant doing so'. This approach allows for potential reopening of the case if new evidence emerges during the Inspector General's ongoing review, while clearing the immediate obstacle to Warsh's confirmation. The Inspector General is still looking into the situation, though it appears the investigation is being dropped.
