Washington, D.C., April 24 – The United States Justice Department formally closed its inquiry into Federal Reserve Chair Jerome Powell on Thursday, delegating the remaining questions to the central bank’s Office of Inspector General (OIG). The move, announced by U.S. Attorney for the District of Columbia Jeanine Pirro, eliminates the last substantive obstacle to the Senate’s consideration of Kevin Warsh, President Donald Trump’s preferred candidate to succeed Powell at the helm of the world’s most influential central bank.
Pirro, a longtime ally of the Trump administration, said in a social‑media statement that the OIG "has the authority to hold the Federal Reserve accountable to American taxpayers" and that she expects a comprehensive report "in short order." She added that the findings should "assist in resolving, once and for all, the questions that led this office to issue subpoenas."
The investigation, which began in early 2025, centered on alleged cost overruns and procurement irregularities in a multi‑year renovation of the Federal Reserve’s headquarters on Constitution Avenue. Critics of the administration suggested that the probe was a pretext for pressuring Powell to align monetary policy with President Trump’s demand for lower interest rates ahead of the 2026 mid‑term elections. The Justice Department’s involvement, however, had been contentious from the start, raising concerns about the separation between the nation’s law‑enforcement apparatus and its independent monetary authority.
Last month, U.S. District Judge James Boasberg, presiding over a case brought by the Fed’s Board of Governors, ruled that the subpoenas issued to the central bank were "unlawful and issued for an improper purpose." In his opinion, the judge noted that prosecutors had presented "essentially zero evidence" that Powell had committed any criminal wrongdoing. The decision underscored a growing judicial skepticism toward attempts to leverage the Justice Department in disputes over monetary policy.
Republican Senator Thom Tillis of North Carolina, a member of the Senate Banking Committee, had also publicly denounced the investigation as "baseless" and refused to support Warsh’s nomination while the probe remained open. Tillis’ stance effectively stalled the confirmation process, as the Senate’s banking panel traditionally vets candidates for the Federal Reserve Board before the full Senate votes. With the DOJ’s withdrawal of the case and the judge’s rebuke now on record, Tillis signaled that he would lift his objection, clearing the way for Warsh’s consideration.
Kevin Warsh, who served as a member of the Federal Reserve Board from 2006 to 2011 under Presidents George W. Bush and Barack Obama, is widely regarded as a dovish economist who favors lower rates to stimulate growth. His return to the Fed would mark a significant shift in the institution’s policy outlook, especially after Powell’s tenure has been characterized by a gradual tightening cycle aimed at curbing inflation that surged to 4.7 percent in late 2024.
The political calculus behind Trump’s push for Warsh is rooted in the administration’s broader agenda to stimulate domestic investment ahead of the 2026 mid‑terms. By encouraging a more accommodative stance at the Fed, the White House hopes to lower borrowing costs for businesses and households, thereby bolstering consumer confidence and, ultimately, the incumbent party’s electoral prospects. Such a strategy, however, raises questions about the traditional independence of the Federal Reserve, a principle that has been a cornerstone of U.S. monetary policy since the 1950s.
International observers are watching the development closely. The Federal Reserve’s policy decisions reverberate through global financial markets, influencing capital flows, exchange rates, and sovereign debt yields worldwide. A shift toward a more dovish stance could ease pressure on emerging‑market currencies that have been under strain from higher U.S. rates, while also affecting the pricing of commodities priced in dollars.
European policymakers, in particular, have expressed concern over any perceived politicization of the Fed. In a recent briefing, a senior official at the European Central Bank noted that “the credibility of the United States’ central bank remains a key factor in the stability of the global financial system.” The official added that the ECB would monitor the nomination process and subsequent policy direction closely, given the potential impact on the euro’s exchange rate and cross‑border capital movements.
The Justice Department’s decision also reflects a broader trend of the Trump administration’s use of legal mechanisms to advance policy goals. Over the past two years, the DOJ has launched investigations into several high‑profile figures perceived as obstacles to the president’s agenda, ranging from former officials to private-sector executives. Critics argue that such actions erode the rule of law, while supporters contend they are necessary to enforce accountability.
For the Federal Reserve, the transition from Powell to a potential Warsh chairmanship could entail a recalibration of the balance between price stability and growth objectives. Powell’s tenure has been marked by a data‑driven approach, with the Fed raising the federal funds rate by 225 basis points between 2022 and 2025 to bring inflation back toward its 2 percent target. Warsh, by contrast, has historically advocated for a more flexible interpretation of the dual mandate, emphasizing the importance of supporting employment and investment.
The Senate is expected to schedule hearings on Warsh’s nomination in the coming weeks. If confirmed, he would assume the chairmanship at a time when the United States is navigating a complex economic landscape: a modest slowdown in domestic growth, lingering supply‑chain disruptions, and geopolitical tensions that continue to affect energy markets. The outcome of those hearings, and the eventual policy direction of the Fed under a new chair, will be closely scrutinized by markets and governments alike.
In the meantime, the Justice Department’s handover of the investigation to the Fed’s OIG signals a retreat from a contentious legal battle that many viewed as an overreach. The OIG, which reports directly to both the Fed’s Board and Congress, is expected to produce a report on the renovation costs and procurement processes within the next few months. Whether that report uncovers any substantive mismanagement remains to be seen, but the immediate political effect is clear: the path is now open for Kevin Warsh’s confirmation, and the Federal Reserve may soon experience a shift in its leadership philosophy that could reverberate far beyond Washington.
The episode underscores the delicate interplay between law, politics, and monetary policy in the United States, a dynamic that continues to shape global financial stability.