DOJ Backs Off Powell Probe, Clearing the Runway for Warsh

CNBC, CNN, NPR, the Washington Post, and FOX Business contributed to this report.

The legal cloud hanging over the Federal Reserve just lifted – and it could reshape who runs America’s central bank next.

The US Department of Justice has dropped its criminal investigation into Jerome Powell, a sudden reversal that removes a major obstacle to confirming Kevin Warsh as the next Fed chair.

The decision came from Jeanine Pirro, the top federal prosecutor in Washington, who announced she was closing the case and handing the matter off to the Federal Reserve’s internal watchdog instead. That office – the inspector general – is already digging into the ballooning costs of the Fed’s multibillion-dollar headquarters renovation, a project that helped spark the probe in the first place.

For weeks, the investigation had stalled both the Fed and the Senate.

Republican Senator Thom Tillis had effectively blocked a confirmation vote on Warsh, making it clear he wouldn’t move forward while a criminal case against Powell was still active. With the probe now shelved, that roadblock disappears.

The timing isn’t subtle. Warsh testified before lawmakers just days ago, and Powell’s term is nearing its end. Suddenly, the path to a leadership change looks much smoother.

Pirro didn’t completely shut the door. She warned that her office could reopen a criminal case if new findings justify it. For now, though, the focus shifts to the inspector general’s review – a slower, less explosive process that will eventually report back to Congress and the public.

The investigation itself had been shaky. A federal judge recently tossed out key subpoenas, undercutting the case. Behind the scenes, critics – including Powell – argued the probe had less to do with construction costs and more to do with political pressure, particularly over interest rates.

That tension has been building for months. Donald Trump has repeatedly pushed for lower rates and clashed with Powell, whom he originally appointed. The probe only intensified concerns that the Fed’s independence was being tested.

Now, with the legal threat gone, attention shifts back to the bigger question: who controls monetary policy going forward.

The White House is already signaling confidence that Warsh will be confirmed quickly. Supporters say the change will bring fresh direction. Critics, including some Democrats, see it differently – warning the move could open the door to more political influence over the Fed.

Meanwhile, the renovation project that triggered all this isn’t going away. Costs have surged due to everything from structural issues to security upgrades, and the inspector general’s investigation is expected to take a closer look at how things got so expensive.

For Powell, the immediate pressure eases. For Warsh, the finish line moves closer. And for the Fed, the spotlight isn’t dimming anytime soon.