DOJ drops criminal probe of Fed Chairman Powell, paves way for Warsh

The Justice Department is dropping its criminal investigation of Federal Reserve Chairman Jerome Powell, a move that opens the way for President Trump's nominee, Kevin Warsh, to head the central bank.

Jeanine Pirro, the U.S. attorney for Washington, said Friday her office is closing the Powell probe, which launched in January.

She wrote on X that she is turning the probe over to the Federal Reserve's inspector general, an internal watchdog that investigates corruption allegations.

Prosecutors were exploring whether Mr. Powell lied to Congress in his testimony last summer about the cost of renovating the Fed's Washington headquarters.

"This morning, the Inspector General for the Federal Reserve has been asked to scrutinize the building cost overruns — in the billions of dollars — that have been borne by taxpayers," Ms. Pirro wrote on X.

"The IG has the authority to hold the Federal Reserve accountable to American taxpayers," she continued. "I expect a comprehensive report in short order and am confident that the outcome will assist in resolving, once and for all, the questions that led this office to issue subpoenas.

"Accordingly, I have directed my office to close our investigation as the IG undertakes this inquiry.

"Note well, however, that I will not hesitate to restart a criminal investigation should the facts warrant doing so."

The criminal probe of Mr. Powell focused on two historic buildings that the Fed was renovating. Initially pegged at $1.9 billion, the cost has since reached $2.5 billion.

Mr. Trump and some of his allies alleged Mr. Powell misled lawmakers about the cost of the overruns. The Fed has tied the increase to soaring construction costs.

White House press secretary Karoline Leavitt told reporters Friday that the case has not been dropped but was moved to the inspector general, "who has the critical tools at their disposal to look into the financial mismanagement at the Fed."

She added, "The president has a point. This is a project that's been going on for a very long time. It's costing taxpayers billions of dollars, and I think it's in the best interest of the taxpayer to get to the bottom of it. So the investigation still continues. It's just under a different authority."

The Fed's inspector general has already reviewed the project twice and found no wrongdoing. Mr. Powell last year asked the watchdog to review it again amid pressure from the White House.

The decision clears the way for Mr. Warsh to advance toward a confirmation vote in the Senate.

Sen. Thom Tillis, North Carolina Republican, had threatened to block Mr. Warsh's confirmation until the Justice Department dropped the criminal investigation.

During Mr. Warsh's confirmation hearing on Tuesday, Mr. Tillis voiced full-throated support for the nominee, but cautioned that he wouldn't vote yes unless the probe ended.

"Let's get rid of this investigation so I can support your confirmation," he told Mr. Warsh.

Mr. Tillis had the power to derail Mr. Warsh's nomination. For the Trump choice to advance, he must earn a majority of votes on the Senate Banking Committee, which is composed of 13 Republicans and 11 Democrats.

If Mr. Tillis votes against the nominee, the panel would be evenly split at 12-12, and the nomination would fail.

The Federal Reserve declined to comment on the Justice Department's announcement.

White House spokesman Kush Desai said in a statement that the administration remains confident that the Senate will "swiftly" confirm Mr. Warsh to "restore competence and confidence in the Fed's decision-making."

"American taxpayers deserve answers about the Federal Reserve's fiscal mismanagement, and the Office of the Inspector General's more powerful authorities best position it to get to the bottom of the matter," Mr. Desai said.