The U.S. Justice Department has unexpectedly closed a criminal investigation into Federal Reserve Chairman Jerome Powell related to cost overruns on building renovations, marking a dramatic reversal in a politically charged probe that threatened to upend the nation's monetary policy leadership.
U.S. Attorney Jeanine Pirro announced Friday that the investigation is being transferred to the Federal Reserve's Inspector General, who will now examine the disputed renovation expenses.
"The IG has the authority to hold the Federal Reserve accountable to American taxpayers," Pirro said in a statement. "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."
However, Pirro added a significant caveat: she reserved the right to restart a criminal investigation "should the facts warrant doing so."
Political Firestorm Over Fed Independence
The decision comes after a federal judge blocked subpoenas targeting the Fed's board of governors last month, ruling they were issued for the improper purpose of pressuring Powell to resign or comply with demands to rapidly lower interest rates.
The probe had sparked fierce criticism from lawmakers across the political spectrum and former Federal Reserve leaders, who condemned it as a politically motivated attack on the institution's independence from the White House.
"Anyone who believes Donald Trump's corrupt scheme to take over the Fed is over is fooling themselves," said Senator Elizabeth Warren, a Democrat from Massachusetts and member of the Senate banking committee, noting that the administration continues pursuing the removal of Biden-appointed Fed Governor Lisa Cook.
Confirmation Battle Intensifies
The investigation had become a major obstacle in the Senate confirmation of Kevin Warsh, President Trump's nominee to replace Powell when his term expires May 15. North Carolina Republican Senator Thom Tillis, a banking committee member, had pledged to block Warsh's confirmation until the probe was dismissed, calling it a "frivolous assault" on Federal Reserve independence.
Warsh, a former Fed governor from 2006 to 2011, told senators Tuesday that "monetary policy independence is essential." The shift in the Justice Department's position clears a significant hurdle for his nomination.
Questions Linger
The renovation cost dispute has been contentious throughout. President Trump has repeatedly cited figures that Powell publicly corrected when the two stood together last year, underscoring deep tensions between the administration and the Fed chief over monetary policy direction.
The Fed's renovation expenses remain under scrutiny, but the transfer to the Inspector General suggests prosecutors found insufficient evidence to pursue criminal charges related to the building project.
This article is based on reporting from CBC World.