The US Department of Justice is dropping its criminal investigation against the Federal Reserve chair, Jerome Powell, clearing the path for Donald Trump’s new nominee for chair to be confirmed.
Jeanine Pirro, Trump’s appointed US attorney for the District of Columbia, said in a social media post that she had directed her office to close its investigation into renovations at the Fed headquarters that went over budget.
“I have directed my office to close our investigation as the [inspector general’s office] undertakes this inquiry,” Pirro wrote. “Note well, however, that I will not hesitate to restart a criminal investigation should the facts warrant doing so.”
The investigation was first made public in January after Powell released a video announcing he had been subpoenaed by the justice department. In rare, pointed remarks about the White House, Powell said the investigation was not actually about the Fed’s renovation but was a pretext meant to pressure the central bank to lower interest rates.
“This is about whether the Fed will be able to continue to set interest rates based on evidence and economic conditions – or whether instead monetary policy will be directed by political pressure or intimidation,” Powell said at the time.
The White House received bipartisan criticism over the investigation, including from Thom Tillis, the Republican senator who said he would block the nomination of Kevin Warsh, Trump’s pick to replace Powell, until the justice department ends its investigation.
“Let’s get rid of the investigation so I can support your nomination,” Tillis told Warsh during his Senate hearing on Tuesday.
Trump has been at loggerheads with Powell over interest rate policy – branding the Fed chair a “moron” for voting against rate cuts.
Despite the growing pressure to end the investigation, Trump last week doubled down on the search, saying that “whether it’s incompetence, corruption or both, I think you have to find out”.
But Republicans needed Tillis’s tie-breaking vote to get Warsh through the Senate’s banking committee. Powell’s term will end on 15 May.
A former investment banker and Fed governor, Warsh in his hearing made clear that he is aligned with Trump on wanting lower interest rates, drawing concerns from Democrats over whether he would be able to keep the central bank independent from the White House.
The Democratic senator Elizabeth Warren was highly critical of Warsh at the Senate hearing. After the announcement that the Powell investigation had been dropped, she said: “This is just an attempt to clear the path for Senate Republicans to install President Trump’s sock puppet Kevin Warsh as Fed Chair.”
Economists largely agree that a non-political, independent central bank is essential for a stable economy.
Even with the end of Powell’s investigation, Trump’s prolonged battle with the Fed is not over yet. The supreme court still has to rule on whether Trump’s firing of Lisa Cook, the Fed governor who was temporarily reinstated by a federal court, was constitutional. The court is expected to release a ruling by June.
