The Justice Department has dropped a criminal investigation into the Federal Reserve after months of probing the independent central bank’s $2.5 billion building renovations and failing to turn up evidence of a crime.
U.S. Attorney Jeanine Pirro, the top federal prosecutor in D.C., said in a social media post Friday that she had closed the probe, though she added that it could resume later if the Fed’s inspector general finds evidence of wrongdoing in its own review of the construction project’s cost overruns.
“I will not hesitate to restart a criminal investigation should the facts warrant doing so,” Pirro said in a post on X.
A bipartisan group of lawmakers and a federal judge in D.C. had criticized the criminal investigation into Fed Chair Jerome H. Powell as an abuse of power by the Justice Department, which has pursued President Donald Trump’s perceived foes with often shaky allegations of criminal conduct since last year.
Pirro’s inquiry also became a political obstacle for the Trump administration’s planned succession at the Fed. Powell’s term as chair expires May 15, and Trump has nominated Kevin Warsh, a former Fed governor, to be the central bank’s next leader. But a key Republican senator, Thom Tillis of North Carolina, has been blocking that nomination until Pirro ended her “bogus” investigation.
Pirro’s emphasis on the potential to reopen the case may dampen the impact of her announcement on Capitol Hill. Neither Tills nor the Fed commented Friday, and the GOP-led Banking Committee has yet to schedule a vote to advance Warsh’s nomination to the full Senate.
White House press secretary Karoline Leavitt told reporters that “the case is not necessarily dropped; it’s just being moved over to the inspector general.” Still, a review by the inspector general does not carry the consequences of a criminal investigation.
Trump had threatened to fire Powell if he did not step down to make way for Warsh, but Fed officials said the law called for Powell to remain as acting chair until the Senate confirmed a successor. Separately, Powell’s term as one of seven members of the Fed’s board of governors runs until 2028.
“I have no intention of leaving the board until the investigation is well and truly over with transparency and finality,” Powell said last month.
Pirro opened the criminal inquiry last year over brief congressional testimony that Powell gave about a large-scale renovation of the Fed’s historic headquarters overlooking the National Mall and the project’s cost overruns of more than $1 billion. She said she was investigating whether Powell made false statements to Congress and whether the cost overruns were driven by fraud, but a prosecutor from Pirro’s office admitted at a court hearing that the Justice Department did not have evidence of a crime, The Washington Post reported.
A Trump ally who is seen as a contender to become the next attorney general, Pirro had dismissed concerns that the criminal probe could delay Warsh’s Senate confirmation. For his part, Trump had repeatedly expressed support for the investigation, brushing off concerns that it could stall his succession plans for the Fed.
“I can’t imagine that [Powell] is taking money on construction. I can’t, but it’s possible,” Trump said in a CNBC interview this week, providing no evidence for such a suspicion. “But we have to find out.”
Powell has denied wrongdoing and called the investigation an attempt to erode the central bank’s independence.
Trump’s push for the criminal investigation of Powell has resulted in occasional theatrics. In July, Trump visited Fed headquarters, a rarity for any president, to spotlight the cost overruns with Powell standing beside him. “It looks like it’s about 3.1 billion. It went up a little bit. Or a lot,” Trump said.
With news cameras rolling, Trump pulled out a piece of paper from his pocket and handed it to Powell as if to prove his point. Powell, glancing at it, said the number was significantly inflated because it included the costs of a third building reopened in 2021.
This month, prosecutors from Pirro’s office appeared without warning at Fed headquarters seeking a tour of the construction site as part of their probe but were told they would need prior clearance before getting access.
Trump has long waged an aggressive campaign against Powell, whom he installed as Fed chair during his first term. President Joe Biden then extended Powell’s term as chair. Trump for months has demanded that the Fed approve steep interest rate cuts while hurling public insults at Powell and at times threatening to oust him.
Those threats and insults led Chief U.S. District Judge James E. Boasberg of D.C. to conclude that the Justice Department had issued two subpoenas to the Fed and Powell as a pressure tactic to force lower interest rates or Powell’s resignation. In a March ruling, Boasberg said “the Government has offered no evidence whatsoever that Powell committed any crime other than displeasing the President.”
Pirro’s office faced a May 3 deadline to file an appeal of Boasberg’s ruling, which could have taken months to resolve.
Top administration officials, including housing finance regulator Bill Pulte, repeatedly pressed the president last year to investigate Powell, and Trump liked the idea, The Post previously reported.
Past administrations have also pressured the central bank, whose independence rests both on federal law and norms that most recent presidents, wary of rattling financial markets, have been reluctant to test. President Richard M. Nixon pushed then-Fed Chair Arthur Burns to cut rates before the 1972 election. Top aides to President George H.W. Bush publicly pushed Fed Chair Alan Greenspan to cut rates before the 1992 election.
But no modern president has gone as far as Trump, and the extraordinary investigation of a sitting Fed chairman marked the most significant confrontation yet between Trump and Powell.
Pirro said in her announcement Friday that she had asked the Fed’s inspector general to review the cost overruns connected to the renovation — which the inspector general had already been doing since last summer at Powell’s request. A previous investigation of the construction project conducted five years ago by the inspector general did not find evidence of a crime.
The Trump administration also has accused a Fed governor, Lisa Cook, of mortgage fraud and attempted to remove her from the central bank’s board. The Supreme Court appeared likely to block that firing during oral arguments this year and is expected to issue a ruling in the case by this summer. Cook has denied wrongdoing.
Sen. Elizabeth Warren of Massachusetts, the top Democrat on the Senate Banking Committee, said Pirro’s announcement that she could restart the investigation showed the Trump administration was not done pursuing baseless criminal allegations against the central bank. She made it clear the move would not persuade her to back Warsh’s nomination.
“This is just an attempt to clear the path for Senate Republicans to install President Trump’s sock puppet Kevin Warsh as Fed Chair,” Warren said in a statement. “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.”
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