DOJ Drops Powell Probe in Fast Reversal, Clearing Warsh Confirmation Path

The US Department of Justice (DOJ) has dropped its criminal investigation of Federal Reserve Chair Jerome Powell, ending a case that had frozen Senate work on the Trump nominee set to replace him.

US Attorney Jeanine Pirro announced the decision Friday, effectively reversing her public stance from two days earlier, when she pledged to appeal a judge’s order blocking her office’s grand jury subpoenas.

Quick Reversal After Courts Pushed Back

The probe began in January. Pirro’s office opened a grand jury inquiry into Powell’s June 2025 Senate testimony about the Fed’s headquarters renovation.

Prosecutors asked whether Powell misled senators about the scope of work on the Eccles and East buildings in Washington.

Reported costs for the project climbed to roughly $2.5 billion, up from an earlier authorization near $1.9 billion.

Inflation, asbestos and lead remediation, and historic preservation requirements drove most of the overrun. No charges were filed.

Chief US District Judge James Boasberg quashed the DOJ’s subpoenas on March 13 and reaffirmed the ruling on April 3. He wrote that prosecutors produced “essentially zero evidence” of a crime.

The judge also said the subpoenas served a “pretextual” purpose aimed at pressuring Powell over interest rate decisions. Pirro rejected that framing and said on April 22 she would appeal.

Two days later, her office referred the cost overruns to the Fed’s inspector general, an internal watchdog with access to procurement records.

“I have directed my office to close our investigation as the IG undertakes this inquiry…I will not hesitate to restart a criminal investigation should the facts warrant doing so,” wrote Pirro in the Friday afternoon post.

Tillis Ultimatum Cleared Warsh’s Path

The closure removes a political block on Kevin Warsh, the Trump nominee to succeed Powell when the chair’s term ends May 15.

Sen. Thom Tillis of North Carolina, a Republican on the Senate Banking Committee, had withheld his vote until prosecutors walked away.

“I will oppose the confirmation of any Federal Reserve nominee, including for the position of Chairman, until the DOJ’s inquiry into Chairman Powell is fully and transparently resolved,” Tillis articulated in a late January post.

Tillis called the investigation “bogus” and “frivolous” during Warsh’s April 21 hearing. He said dropping it could be done in “five minutes.”

“If we want to get Mr. Warsh confirmed, we need to drop the investigation,” Tillis made the remark at Warsh’s hearing.

Warsh, a former Fed governor under George W. Bush, told senators he would not act as Trump’s “sock puppet.”

His confirmation would place a Trump ally atop the central bank weeks before the Federal Open Market Committee’s June meeting.

Powell had publicly described the probe as retaliation for Fed rate policy. His term as chair ends next month, though he can remain as a governor until 2028.

Former Fed officials and several market economists had flagged the case as a stress test for central bank independence.

The CLARITY Act Overlap

The decision reshapes the Senate Banking Committee’s near-term calendar. Tillis is also the lead Republican negotiator on stablecoin yield language in the Digital Asset Market CLARITY Act, the House-passed crypto bill now awaiting Senate markup.

He pushed the committee to delay the CLARITY markup from April to May, citing the need for more stakeholder input from banks.

The North Carolina Bankers Association had urged members to lobby his office for tighter restrictions on rewards tied to stablecoin balances.

Banks want a full ban on passive yield. Crypto firms want activity-based incentives preserved. A partial compromise allowing rewards tied to third-party platform usage has circulated but has not been finalized.

With Warsh’s confirmation no longer tethered to the DOJ case, committee bandwidth opens heading into the week of May 11, the earliest feasible window for the crypto markup.

Industry groups have warned that further slips could push meaningful market-structure reform into 2027, or worse, beyond 2030.

The Fed inspector general’s review and Warsh’s committee vote are the next pressure points. Whether the Powell case returns in any form may hinge on what the watchdog finds inside the renovation records.