US Justice Department ends criminal probe of Fed chair Jerome Powell, clearing path for Warsh

WASHINGTON - The US Justice Department said on April 24 it is dropping a criminal probe on Federal Reserve chair Jerome Powell, paving the way for his replacement’s Senate confirmation, amid concerns over President Donald Trump’s attacks on the independent central bank.

“I have directed my office to close our investigation,” US Attorney Jeanine Pirro announced on X.

Ms Pirro said the inspector-general for the Fed would instead look into renovation cost overruns at its headquarters, which the Justice Department had been probing – under heavy pressure from Mr Trump.

However, she added that she would “not hesitate to restart a criminal investigation should the facts warrant doing so”.

Mr Trump has upended Washington norms by routinely criticising the Fed for not following his calls to cut interest rates more rapidly, while making personal attacks on Mr Powell in particular.

The probe into Mr Powell, whose term helming the Fed expires May 15, looked likely to hold up the Senate’s confirmation of Mr Trump’s pick for a new chair, Mr Kevin Warsh.

Now, Ms Pirro’s announcement is set to ease that path.

The investigation had been criticised by former Fed chiefs and lawmakers as an attempt to undermine the central bank’s independence from politics.

At Mr Warsh’s confirmation hearing this week before the Senate Banking Committee, Republican Senator Thom Tillis reiterated that he would continue blocking new appointments to the Fed if the Powell investigation were not resolved.

Mr Tillis’ vote against the appointment would have been enough to set up an impasse on the panel, which Mr Warsh needs to clear to become the next Fed chief.

“Senator Tillis should do the right thing and move to confirm Kevin Warsh as speedily as possible,” White House press secretary Karoline Leavitt urged on April 24.

“He is a phenomenal candidate to lead the Fed, and we shouldn’t be holding our nation’s economy hostage because of a disagreement with the Department of Justice,” Ms Leavitt told reporters.

‘Bogus’ investigation

But the top Democrat on the Banking Committee, Senator Elizabeth Warren, warned that the closure of the investigation does not end political pressure on the Fed.

“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.

Ms Warren was referring to a separate attempt by Mr Trump to fire Dr Cook over allegations of mortgage fraud. The case is currently before the Supreme Court, which is expected to rule on whether he can oust her.

Mr Powell first took the helm of the Fed during Mr Trump’s first presidency in 2018 and was subsequently reappointed to the position under Democratic president Joe Biden.

Apart from Mr Tillis’ objections on the Senate panel, Mr Powell himself said in March that he would not leave his post on the Fed’s board of governors until the Justice Department probe involving him was “well and truly over, with transparency and finality”.

It is rare for a former Fed chair to remain on its board after stepping down as chief, and Mr Powell’s Fed governor term ends in 2028.

It remains to be seen if Mr Powell plans to stay on with the probe now being dropped.

All eyes will be on his remarks at a press conference next week after a two-day policy meeting among Fed officials. AFP