Fed Chair Jerome Powell
The Justice Department (DOJ) is ending a controversial investigation into building-renovation cost overruns at the Federal Reserve, potentially clearing a path to confirmation for Kevin Warsh, President Donald Trump's pick to be the next chair of the central bank. Jeanine Pirro, U.S. Attorney for the District of Columbia, said in a social media post on Friday that the Fed's Office of Inspector General (OIG) had been asked to scrutinize the cost overruns. She said she expects a report soon on the findings.
"I have directed my office to close our investigation as the IG undertakes this inquiry," Pirro said in the post. "Note well, however, that I will not hesitate to restart a criminal investigation should the facts warrant doing so."
The Fed's OIG is already conducting a review of the renovation of the central bank's headquarters, which it opened last year at the request of Fed Chair Jerome Powell.
The White House said in a statement: "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."
Pirro served subpoenas to the central bank in January as part of a criminal investigation into the cost overruns and congressional testimony Powell provided on the matter. The subpoenas prompted a sharp response from Powell, who accused the administration of launching the investigation in response to the Fed's refusal to lower interest rates to Trump's satisfaction.
Fallout from the probe then threw the Fed's expected leadership transition into chaos, as Powell's term as chair is scheduled to expire on May 15. Warsh, who appeared before the Senate Banking Committee last week, enjoys broad support among GOP lawmakers, but a key Republican senator, Thom Tillis of North Carolina, vowed to block his confirmation unless the DOJ investigation was dropped.
For his part, Powell vowed to remain at the Fed in his role as a member of its Board of Governors—his term for which extends into 2028—until the probe is resolved "with transparency and finality."
Tillis' office didn't immediately respond when asked for comment. The Fed declined to comment. However, the DOJ move brought some optimism to Republican lawmakers that it might resolve the controversy.
"I applaud it," said French Hill, chairman of the House Financial Services Committee, which has oversight authority of the Fed. "I hope that then facilitates the prompt confirmation of Kevin Warsh."
The announcement may, indeed, remove the major obstacle to Warsh's confirmation, but it may not be enough for Powell to leave the Fed, said Derek Tang of Monetary Policy Analytics Inc. "I am unsure it meets Powell's 'finality' precondition to leave the Fed," Tang said. "After all, what's to stop a probe from coming up again, once the White House gets Warsh confirmed? At that point, Tillis and Powell would have lost leverage."
Democratic Senator Elizabeth Warren made clear she was even more skeptical. "Let's be clear what the Justice Department announced today: They threatened to restart the bogus criminal investigation into Fed Chair Powell at any time while failing to drop their ridiculous criminal probe against Governor Lisa Cook," she said in a statement. "Anyone who believes Donald Trump's corrupt scheme to take over the Fed is over is fooling themselves."
The abrupt reversal came after Pirro said earlier in the week that she was committed to continuing the investigation despite the decision in March by U.S. District Chief Judge James Boasberg to quash two grand jury subpoenas that Pirro's office served in January. Pirro had said she would appeal the ruling. On Friday, her office didn't reply to questions about what had changed. Justice Department leaders also had given their support to Pirro, saying the Boasberg ruling undercut the ability of prosecutors to use grand juries during the early stages of an investigation.
Pirro said she expected the Fed's OIG to deliver "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."
The Fed's OIG released a statement noting it had announced an "evaluation" of the building renovation costs last July. "This assessment includes our independent analysis of the project's substantial cost increases and overruns. We are actively working to complete our review, and look forward to making the results available to the public and Congress upon completion," the OIG said.
Kathryn Judge, a Columbia University law professor who studies the Fed, said the timing of Pirro's announcement makes even clearer that the probe was politically motivated. Still, she said, it will leave lasting damage at the central bank. "The fact of the investigation put federal officials on notice that this administration is willing to use criminal investigations as a way of furthering the president's policy aims," she said. "That puts additional pressure on officials at the Fed and elsewhere to accommodate the president's agenda even when they believe it is bad policy."
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