Justice Department ends Powell probe, paving way for Warsh confirmation

The Justice Department has ended its investigation into Federal Reserve Chair Jerome Powell, removing a significant barrier to the confirmation of his successor, Kevin Warsh. U.S. Attorney for the District of Columbia Jeanine Pirro announced on X that her office would cease its probe into the Fed's extensive building renovations, stating that the Fed's inspector general would take over the scrutiny instead.

This decision marks the conclusion of an investigation that had struggled to find any basis for criminal conduct. A prosecutor admitted during a closed-door court hearing in March that the government had not found evidence of a crime, leading Judge James Boasberg to quash subpoenas issued to the Federal Reserve, citing "essentially zero evidence" against Powell. Recently, prosecutors attempted an unannounced visit to a construction site at the Fed's headquarters but were turned away, prompting criticism from a defense attorney who deemed the action "not appropriate."

With the investigation concluded, a swift confirmation vote for Warsh, nominated by President Donald Trump in January, appears imminent. Warsh, a former top Fed official, has faced opposition from Sen. Thom Tillis, a Republican from North Carolina, who stated he would block Warsh's confirmation until the investigation was resolved. In his Senate Banking Committee testimony, Warsh asserted that he never promised the White House to cut interest rates, emphasizing his intention to act independently if confirmed as chair of the Federal Reserve. This comes as President Trump expressed disappointment at the prospect of Warsh not immediately lowering rates.

Power Read: The conclusion of the investigation into Powell strengthens the position of the Trump administration, allowing for a smoother transition to Warsh, who is expected to align more closely with the President's monetary policy preferences. This development potentially enhances Trump's leverage over the Federal Reserve, as Warsh's independence remains to be seen amid the President's public pressure for rate cuts. Meanwhile, Powell, previously seen as a target, emerges with diminished scrutiny, although the political dynamics surrounding the Fed remain fraught.

What to watch: The upcoming Senate confirmation vote for Kevin Warsh will be a critical indicator of the administration's influence over the Federal Reserve's direction.