WASHINGTON (AP) 鈥� The Justice Department has ended into Federal Reserve chair , clearing a major roadblock to the confirmation of Kevin Warsh as his successor.
U.S. Attorney for the District of Columbia Jeanine Pirro said on X Friday that her office was ending its probe into because the Fed鈥檚 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, 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.
Republicans praised Warsh during 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, by the full Senate just 13 days after his nomination.
Investigation lacked evidence, a court says
Pirro鈥檚 investigation focused on a $2.5 billion building renovation that Trump last year for its cost overruns. Trump visited the building last July and on camera presented to Powell an inflated cost estimate, which Powell corrected as the two .
Earlier estimates for the project had put the cost at $1.9 billion. The investigation also covered Powell鈥檚 brief testimony about the renovation before the Senate Banking Committee last June.
Pirro also said on X, 鈥淚 will not hesitate to restart a criminal investigation should the facts warrant doing so.鈥� Powell has the Fed鈥檚 independent inspector general to investigate the cost overruns.
was among several undertaken by the Justice Department into Trump鈥檚 perceived adversaries. For months it had failed to gain traction as prosecutors struggled to articulate a basis to suspect criminal conduct. Other efforts by the department to prosecute Trump’s adversaries, including New York state Attorney General Letitia James, a Democrat, and former FBI Director James Comey, have also .
A prosecutor handling the Powell case conceded at a closed-door court hearing in March that the government , and a judge subsequently issued to the Federal Reserve. The judge, James Boasberg, said prosecutors had produced 鈥渆ssentially zero evidence鈥� to suspect Powell of a crime. Boasberg branded prosecutors鈥� justification for the subpoenas as 鈥渢hin and unsubstantiated.鈥�
The investigation was the most brazen attempt yet by the Trump administration to pressure the Fed to cut , which indirectly affects other borrowing costs for mortgages, auto loans and business loans. Trump has obsessively attacked Powell for not cutting the rate from its current level of about 3.6% to 1%, a level that no Fed official supports.
Probe was intended to intimidate the Fed, Powell says
Instead, Fed policymakers, including Powell, have said they want to keep rates unchanged while they evaluate the impact of the Iran war, which has sent . The increase could be a one-time shift but could also lead to more sustained inflation. The Fed seeks to restrain rising prices by keeping interest rates high, cooling borrowing and spending.
Powell said in January that the investigation was not really about the renovation or his testimony but 鈥渋s a consequence of the Federal Reserve setting interest rates based on our best assessment of what will serve the public, rather than following the preferences of the President.鈥�
More recently, prosecutors made to a construction site at the Fed鈥檚 headquarters but were turned away, drawing a rebuke from a defense attorney in the case who called the maneuver 鈥渘ot appropriate.鈥�
Warsh has promised to be independent
Warsh said on Tuesday that he never promised the White House that he would cut interest rates, even as the president renewed for the central bank to do so.
鈥淭he president never once asked me to commit to any particular interest rate decision, period,鈥� Warsh said under questioning by the Senate Banking Committee. 鈥淣or would I ever agree to do so if he had.”
Warsh鈥檚 comments came just hours after Trump, in an interview on CNBC, was asked if he would be disappointed if Warsh didn鈥檛 immediately cut rates and responded, 鈥淚 would.鈥�
Massachusetts Democratic Sen. Elizabeth Warren said during the hearing that Warsh would be a 鈥渟ock puppet鈥� for Trump. When she asked if Trump had won the 2020 presidential election 鈥� which he lost to Democrat Joe Biden but was decided by fraud 鈥� Warsh said only that the Senate had certified Biden as the winner. When asked for an example of an economic policy on which he disagreed with Trump, Warsh did not name one.
Robert Hur, an attorney for the Federal Reserve Board of Governors, didn鈥檛 immediately respond Friday to an email seeking comment.
Trump sought more control over the Fed
Trump has taken other unprecedented steps to try to pressure the Fed, including an attempt last August to , a member of the Fed’s governing board, who was appointed by Biden. Yet courts have temporarily blocked the firing, and, at in January, the Supreme Court appeared sympathetic to the argument that Cook should keep her job.
A key question still to be resolved is whether Powell will remain on the Fed’s board even after his term as chair expires next month. Powell, who serves a separate term as a governor that lasts until January 2028, has said he wouldn’t leave until the investigation was dropped. Yet he did not promise to do so if it was. By remaining on the board, Powell would deprive Trump of the opportunity to fill another seat among its seven members, three of whom are Trump appointees.
Other presidents have pressured the Fed to keep borrowing costs low, notably Presidents Lyndon Johnson and Richard Nixon, though rarely as publicly as Trump. Johnson鈥檚 and Nixon鈥檚 demands for lower rates, however, are considered key contributors to the 15-year outbreak of high inflation that only ended in the early 1980s after then-chair Paul Volcker ratcheted the Fed’s rate to an eye-watering 20%.
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Associated Press writers Michael Kunzelman and Alanna Durkin Richer contributed to this report.
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