Federal prosecutors are abandoning a criminal case against Federal Reserve chairman Jerome Powell in an apparent effort to clear the way for Donald Tump’s pick to lead the powerful global economic institution.
The president pushed for a criminal probe over the $3 billion renovations at the central bank’s home in Washington, D.C., while the president demanded Powell’s removal over his refusal to lower interest rates.
The president’s choice to lead the Fed, Kevin Warsh, faces a key obstacle for his confirmation in the Senate, where Republican Thom Tillis vowed to vote against his nomination unless the Justice Department backed off the probe.
U.S. Attorney for Washington, D.C. Jeanine Pirro announced Friday that she has directed her office to close the investigation.
She said the office of Inspector General for the Federal Reserve has instead taken up an investigation into building cost overruns.
“The IG has the authority to hold the Federal Reserve accountable to American taxpayers,” she said. “I expect a comprehensive report in short order and am confident the outcome will assist in resolving, once and for all, the questions that led this office to issue subpoenas.”
She said she will “not hesitate to restart a criminal investigation should the facts warrant doing so.”
Powell has denied any wrongdoing.
In his first public hearing this week before a confirmation vote, Warsh faced several rounds of questions from members on the Senate Banking Committee about his loyalty to the president as Trump looks to reshape the Fed.
Warsh denied that his nomination hinged on the president’s demands to lower interest rates and repeatedly dodged questions about Trump’s politicized overhaul of the central bank.
Tillis, who has repeatedly criticized the investigation into Powell, signaled that he’s more than willing to support Warsh’s nomination if the Justice Department were to drop it altogether.
“If we put everybody in prison in federal government that had had a budget go over, we’d have to reserve an area roughly the size of Texas for a penal colony,” Tillis said during Tuesday’s hearing. “The problem that I have here is that we had some U.S. attorney … thinking it would be cute to bring Chair Powell under an investigation just a few months before the position was going to be open.”
He urged the administration to “get rid of this investigation so I can support your nomination.”
Senator Elizabeth Warren, the committee’s top Democrat, warned that the president’s attempt to install a “sock pocket” at the Fed would be an “invitation for corruption and economic catastrophe.”
Trump has presided over “one economic failure after another,” with plummeting consumer sentiment and surging costs on fuel, housing and everyday goods in the wake of his “chaotic tariffs” and the Iran war, she told the committee.
Warren said Trump is trying to install a loyalist to the Fed in an attempt to “artificially juice the economy” before midterm elections, with the balance of power in Congress — and the future of Trump’s agenda in his final years in office — at stake.
“The Senate should not be aiding and abetting Trump’s takeover of the Fed,” she said Tuesday.
Warsh denied throughout his sworn testimony that the president ever personally instructed him to lower interest rates.
“The president never asked me to commit to interest rate cuts,” he said. “He didn’t ask for it, he didn’t demand it, he didn’t require it, and nor would I have done so.”
Warsh, a former Morgan Stanley banker who served as a Fed governor during the 2008 financial crisis, would likely be the wealthiest Fed chair if confirmed. According to financial disclosures, his fortune tops more than $100 million, including assets in AI and cryptocurrency.
Warsh told the committee that the Fed’s independence in setting interest rates is “essential” — but before the hearing, Trump told CNBC that he would be disappointed if Warsh doesn’t immediately cut rates.
Powell’s term ends May 15.
The chairman has said he would continue to serve as “chair pro tempore” if a successor isn’t in place by the time his term expires.
The Fed’s rate-setting committee is set to meet June 16-17.
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