Justice Department drops criminal probe of Fed chair Powell, likely clearing the way for Warsh

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WASHINGTON (AP) — The Justice Department has ended its probe into Federal Reserve chair Jerome Powell, clearing a major roadblock to the confirmation of his successor, Kevin Warsh.

U.S. Attorney for the District of Columbia Jeannine Pirro said on X on Friday that her office was ending its probe into the Fed’s extensive building renovations because the Fed’s inspector general would scrutinize them instead.

The move could lead to a swift confirmation vote by the Senate for Warsh, a former top Fed official whom President Donald Trump, a Republican, nominated in January to replace Powell. Powell's term as chair ends May 15. Sen. Thom Tillis, a North Carolina Republican, had said he would oppose Warsh until the investigation was resolved, effectively blocking his confirmation.

With the investigation completed, the leadership transition at the world's leading central bank may proceed quickly. Republicans praised Warsh during a Tuesday hearing even as Democrats questioned his independence from Trump, the lack of transparency around some of his financial holdings, and what they said was his flip-flopping on interest rates. Still, Trump's previous appointment to the Fed's board of governors, Stephen Miran, was approved by the full Senate just 13 days after his nomination.

The investigation was among several undertaken by the Justice Department into Trump’s perceived adversaries. For months it had failed to gain traction as prosecutors struggled to articulate a basis to suspect criminal conduct.

A prosecutor handling the case conceded at a closed-door court hearing in March that the government hadn’t yet found any evidence of a crime, and a judge subsequently quashed subpoenas issued to the Federal Reserve. The judge, James Boasberg, said prosecutors had produced “essentially zero evidence” to suspect Powell of a crime. Boasberg branded prosecutors’ justification for the subpoenas as “thin and unsubstantiated.”

More recently, prosecutors made an unannounced visit to a construction site at the Fed’s headquarters but were turned away, drawing a rebuke from a defense attorney in the case who called the maneuver “not appropriate.”

Warsh said during the Senate hearing Tuesday that he never promised the White House that he would cut interest rates, even as the president renewed his calls for the central bank to do so.

“The president never once asked me to commit to any particular interest rate decision, period,” Kevin Warsh, a former top Fed official, said under questioning by the Senate Banking Committee. “Nor would I ever agree to do so if he had. ... I will be an independent actor if confirmed as chair of the Federal Reserve.”

Warsh’s comments came just hours after Trump, in an interview on CNBC, was asked if he would be disappointed if Warsh didn’t immediately cut rates and responded, “I would.”

The decision to abandon the investigation represents a rare pullback for a Justice Department that over the last year has moved aggressively, albeit unsuccessfully, to prosecute public figures the president does not like.

Robert Hur, an attorney for the Federal Reserve Board of Governors, didn’t immediately respond Friday to an email seeking comment.

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Associated Press Writers Michael Kunzelman and Alanna Durkin Richer contributed to this report.

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Follow the AP's coverage of the Federal Reserve System at https://apnews.com/hub/federal-reserve-system.