Justice Department drops Federal Reserve probe, kicks to watchdog

(The Center Square) – U.S. Attorney for D.C. Jeanine Pirro said Friday she is closing the Justice Department's criminal investigation into Federal Reserve Chair Jerome Powell, days after a key hearing for his replacement.

Pirro said she is referring the matter to the Fed's own inspector general, the same watchdog Powell had formally asked to review the project months before federal subpoenas were issued.

Pirro said the IG had been asked Friday to scrutinize billions of dollars in cost overruns on Federal Reserve building renovations, and reserved the right to restart the criminal investigation "should the facts warrant."

The announcement clears an obstacle to the Senate confirmation of Kevin Warsh, Trump's nominee to replace Powell, whose confirmation hearing concluded just three days ago.

Sen. Thom Tillis, R-NC, who had stalled the Warsh nomination over the probe, told the nominee at Tuesday's hearing: "Let's get rid of this investigation, so I can support your confirmation."

The criminal investigation stemmed from a renovation of the Fed's Marriner S. Eccles Building and 1951 Constitution Avenue Building that grew from a $1.9 billion estimate in 2023 to $2.5 billion by 2025, driven by asbestos removal, lead contamination and structural repairs to buildings first constructed in the 1930s.

When Trump visited the construction site last July and suggested Powell might need to "leave for fraud," Powell was already on record requesting an IG review.

In a July 17, 2025, letter to Office of Management and Budget Director Russell Vought, Powell noted the IG had audited the project in 2021, received monthly construction reports ever since and had been asked by Powell for a fresh review.

The Fed's OIG subsequently opened a formal assessment examining whether discretionary design choices, beyond unavoidable structural costs, drove the overruns. That review remains ongoing, according to the IG's website.

The Justice Department issued grand jury subpoenas anyway in January 2026.

Powell called them a pretext in a rare public statement: "The threat of criminal charges is a consequence of the Federal Reserve setting interest rates based on our best assessment of what will serve the public, rather than following the preferences of the President."

The subpoenas drew bipartisan condemnation. Tillis and Sen. Lisa Murkowski, R-Alaska, both broke with the administration. Former Fed chairs Ben Bernanke, Alan Greenspan and Janet Yellen jointly called it "an unprecedented attempt to use prosecutorial attacks to undermine" Fed independence.

Powell said in March he had "no intention of leaving the Board until the investigation is well and truly over, with transparency and finality."

Powell's term as chair expires May 15. If Warsh is not confirmed by then, Powell said he would serve as chair pro tem until his successor is seated.

Friday's referral lands the case exactly where Powell left it before the subpoenas arrived.