The Justice Department abruptly shut down its criminal investigation into Federal Reserve Chair Jerome Powell and the central bank on Friday, citing a parallel review by the Federal Reserve's inspector general. U.S. Attorney for D.C. Jeanine Pirro announced the closure in a post on X, saying she had directed her office to suspend the probe while the IG undertakes its own examination of the renovation project's cost overruns. She cautioned, however, that she would reopen the case if new facts emerged to justify criminal charges.
The move eliminates a major political obstacle for Kevin Warsh, Trump's nominee to chair the Federal Reserve. Republican Senator Thom Tillis had blocked Warsh's confirmation specifically over the investigation, which he called "bogus." Within hours of Pirro's announcement, Senator Tim Scott, the Republican chairing the committee that advances Fed nominees, welcomed the development and invited the inspector general to brief the panel within 90 days.
Yet the White House immediately muddied the waters. Press Secretary Karoline Leavitt suggested the investigation had not truly been dropped but rather transferred to a different authority. "So the investigation still continues," she said. "It's just under a different authority, and that's what you'll continue to see."
The Federal Reserve's inspector general said the review referenced by Pirro was not new. The office had been conducting an evaluation of the renovation project since July and continued working to complete that assessment. The IG had previously reviewed the project and found no wrongdoing, though Powell requested another look in 2025 under pressure from Trump and his allies.
The renovation centers on two historic buildings owned by the central bank that have not undergone comprehensive renovations since the 1930s. The Fed initially estimated the project would cost $1.9 billion but the price tag ballooned to approximately $2.5 billion. The bank blamed unforeseen design changes, rising material and labor costs, unexpected asbestos contamination, and a sinkhole discovered during construction.
Trump and his political allies, however, weaponized the project to portray Powell as a fiscal disaster. Trump toured the construction site last summer and confronted Powell about the costs, claiming he had heard the total reached $3.1 billion. Powell publicly contradicted him on live television. Russell Vought, Trump's budget chief, compared the project to the Palace of Versailles and accused Powell of "fiscal mismanagement."
The controversy erupted in early January when Powell released a rare Sunday evening video statement revealing that Pirro's office had served the Federal Reserve with subpoenas. Tillis immediately announced his block on Fed nominees, declaring that no one, including the Fed chair, stands above the law. Powell countered that the subpoenas represented part of a broader campaign of threats and pressure aimed at forcing him to vote for lower interest rates or resign.
In March, U.S. District Judge James Boasberg rejected the subpoenas. His ruling was scathing. Boasberg found that "the Government has produced essentially zero evidence to suspect Chair Powell of a crime" and concluded that "a mountain of evidence suggests that the Government served these subpoenas on the Board to pressure its Chair into voting for lower interest rates or resigning."
The White House quickly seized on Pirro's announcement to declare renewed confidence in Warsh's nomination. Spokesman Kush Desai said the IG's "more powerful authorities" position it better to investigate the matter and expressed certainty that the Senate would swiftly confirm Warsh to restore "competence and confidence in Fed decision-making."
Author Sarah Mitchell: "This looked like a coordinated shutdown of a legally dubious investigation that a federal judge already eviscerated, timed perfectly to unlock Warsh's path to the chairmanship. The question is whether the IG review will become window dressing for closing the entire matter."
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