WASHINGTON—The Justice Department said it would end its criminal investigation of Federal Reserve Chair Jerome Powell, an attempt to clear the obstacle that has stalled Kevin Warsh’s confirmation as his successor.
U.S. Attorney Jeanine Pirro announced the move Friday, saying her office is closing an inquiry into Powell’s testimony to Congress about cost overruns on the renovation of two historic Fed buildings. A federal judge had already ruled that the grand jury subpoenas served on the Fed in January were improper and found “essentially zero evidence” of criminal wrongdoing.
Pirro said in a post on X that she closed the probe after asking the Fed’s inspector general to scrutinize the matter.
“I expect a comprehensive report in short order and am confident the outcome will assist in resolving, once and for all, the questions that led this office to issue subpoenas,” Pirro said.
“Note well, however, that I will not hesitate to restart a criminal investigation should the facts warrant doing so,” she said.
A Fed spokeswoman declined immediate comment.
An end of the probe would close a confrontation over Fed independence without modern precedent. In a January video statement disclosing the probe, Powell had taken the unusual step of publicly accusing the executive branch of pursuing a pretext to pressure the central bank over interest rates.
The reversal reflected how opposition to the probe from one Republican senator had forced the White House to choose between continuing the investigation or confirming Powell’s replacement. In recent days, it had become evident to other Republicans that every additional week of the investigation was another week that Powell—whom President Trump has repeatedly disparaged and threatened to fire—would likely remain in the job.
The about-face came two days after Pirro said publicly she intended to press on with the case. Trump, in an interview just before Warsh’s confirmation hearing on Tuesday, brushed aside repeated suggestions that he let Congress handle oversight of cost overruns and close the investigation. “We have to find out” where the money went, Trump said.
Powell had already asked the Fed’s inspector general to review the building project in July, and that work is ongoing. The IG published findings of an earlier audit of the renovations in 2021.
The probe had shown signs of ramping up rather than winding down as recently as last week, when two lawyers on Pirro’s staff and a federal law-enforcement agent sought access to the Fed’s construction site but were turned away.
For Warsh, the decision offers a chance to clear the central political obstacle to his confirmation. Sen. Thom Tillis (R., N.C.) had said he wouldn’t advance any Fed nominee while the probe remained open. His vote was crucial because Republicans have a 13-11 majority on the Senate Banking Committee and all Democrats have refused to consider the nomination until the probe ends.
Republican leaders of the House and Senate banking committees, which oversee the Fed, issued statements within hours welcoming the announcement. Tillis was silent and a spokesman declined to comment.
By Friday afternoon, it wasn’t clear if Pirro’s decision actually met the condition Tillis had laid out. When asked if Trump supported Pirro’s decision, White House Press Secretary Karoline Leavitt said the case was “not necessarily dropped” but “just being moved over” to the inspector general’s office.
At Warsh’s hearing this week, Tillis used his questioning time not to interrogate the nominee but to walk through a slide deck explaining the renovation costs. “You have extraordinary credentials. They’re impeccable,” Tillis told Warsh. “Let’s get rid of this investigation, so I can support your confirmation.”
Pressure on Trump and Pirro to drop the probe had built in the days after the hearing, with senior Republicans including Senate Majority Leader John Thune (R., S.D.) amplifying Tillis’s appeal to move Warsh’s nomination.
The Senate is in session next week and the week of May 11, leaving enough time for the banking committee and the full Senate to approve him. As of Friday, the committee hadn’t announced a date for a vote to move the nomination forward.
Powell, whose term as chair ends May 15, has said he would continue to serve as the central bank’s acting head, or “chair pro tempore,” if a successor isn’t in place at the end of his term.
Pirro’s statement that she reserved the right to restart the investigation raised questions Friday about whether the probe was closed or merely paused—a distinction that likely will matter for Powell, especially given the administration’s recent handling of other legal matters.
Last month, the Justice Department briefly abandoned its defense of executive orders sanctioning four law firms before reversing itself a day later at Trump’s personal direction, continuing a pattern of intervention that has extended to seeking charges against individuals the president views as political adversaries.
Upon the expiration of his term as chair, Powell faces a separate decision over whether to resign his seat as a Fed governor, which runs until early 2028. Last month, he laid out a key precondition when he said his decision would turn at a minimum on whether the investigation was “well and truly over, with transparency and finality.”
He also said that his ultimate decision to stay or leave—and almost all Fed chiefs have exited at the conclusion of their terms as chair—would be “based on what I think is best for the institution and the people we serve.”
Trump last week told Fox Business that if Powell didn’t leave, “I’ll have to fire him.”
Warsh has been nominated to fill the seat held by Fed governor Stephen Miran, whose term expired at the end of January but who can remain until Warsh is confirmed.
If Powell departs the board, Trump could appoint either Miran or a new candidate to fill that vacancy.
Trump has separately attempted to fire another Senate-confirmed Fed governor, Lisa Cook. The Supreme Court has allowed Cook to remain at the Fed while she challenges her removal, and a decision in that case is expected by the end of June.
Write to Nick Timiraos at Nick.Timiraos@wsj.com and C. Ryan Barber at ryan.barber@wsj.com
