President Trump and Federal Reserve Chair Jerome Powell tour the Fed's $2.5 billion headquarters renovation project on July 24, 2025.
The U.S. Justice Department is dropping its criminal investigation of Federal Reserve Chair Jerome Powell, paving the way for the Senate to confirm Kevin Warsh, the president's nominee to head the central bank.
The decision marks a reversal for Jeanine Pirro, the U.S. attorney for the District of Columbia, who had vowed to continue the probe into cost overruns during the renovation of two Fed buildings, even after a judge had blocked the investigation.
Pirro said she would instead ask the Fed's inspector general to look into the cost overruns, which have risen from $1.9 billion to $2.5 billion in recent years. The central bank has attributed the higher costs to unexpected developments like excess lead, asbestos and inflation, which has raised the cost of building projects nationwide.
"This morning the Inspector General for the Federal Reserve has been asked to scrutinize the building costs overruns," Pirro said in a post on X. "Accordingly, I have directed my office to close our investigation as the IG undertakes this inquiry."
The Fed's inspector general has reviewed the construction project twice. It found no wrongdoing.
Fight over central bank independence
Pirro's probe came after President Trump had repeatedly attacked the Fed and Powell for not lowering interest rates more aggressively. Trump has blasted the renovations, verbally sparring with Powell during a visit to the site.
In March, a federal judge put the brakes on the DOJ, saying its criminal investigation was part of an improper campaign by the Trump administration to pressure the central bank into cutting rates. But Pirro had vowed to appeal that decision.
Her probe has drawn widespread criticism. Powell has called it a pretext for the White House's efforts to pressure the Fed into lowering interest rates, and a federal judge has agreed, criticized the investigation as an unjustified act of intimidation.
Earlier this year, Trump nominated former Fed governor Warsh to succeed Powell, whose term as Fed chair is due to expire next month. But Sen. Thom Tillis, R-N.C., had threatened to block the nomination unless the Justice Department dropped the investigation into the Fed.
"If we put everybody in prison in federal government that had had a budget go over, we'd have to reserve an area roughly the size of Texas for a penal colony," Tillis said earlier this week, at a Senate Banking Committee confirmation hearing for Warsh.
Now Pirro's move appears to address Tillis' concerns, and pave the way for the Senate to confirm Warsh. But questions over Powell's future — and the overall shape of the Fed — remain.
Powell has not said whether he will step down from the Fed's board, which is the group that collectively decides on interest rates. His term as board member runs until 2028.
Powell has said he would make that decision based on what he thinks is in the best interest of the institution and the people the Fed serves. He may disclose more next week, when the Fed meets.
If Powell does step down from the board when his term as chair ends, it would give Trump the chance to appoint another Fed governor who may be more willing to push for the aggressive interest rate cuts the president wants.
However, if Powell does choose to remain on the Fed's board once his term as chair expires, he will still get a vote on interest rates.
All of this Fed succession drama comes at a pivotal time for the global economy. The war with Iran has led oil prices and inflation to spike not only in the U.S but also across the world. The Fed usually fights inflation by keeping rates higher — meaning that under normal circumstances, it would be less likely to undertake the rate cuts Trump has pushed for.
Transcript
A MARTÍNEZ, BYLINE: The Justice Department is dropping its criminal probe into Federal Reserve Chair Jerome Powell. Now, the investigation had been about cost overruns during the renovations of two Federal Reserve buildings, but a judge had blasted it as being politically motivated and intended to pressure the central bank into lowering interest rates. Now, this should pave the way for the confirmation of Kevin Warsh, who was nominated by President Trump to be the next Fed chair. NPR's Maria Aspan joins us now.
So what exactly did the Trump administration have to say about this decision?
MARIA ASPAN, BYLINE: So, this morning, U.S. Attorney General Jeanine Pirro posted on X that she has directed her office to close the investigation into the Federal Reserve. The DOJ launched this criminal investigation into both the Fed and Chair Jerome Powell earlier this year. As you pointed out, it was supposedly about cost overruns as the Fed renovates its headquarters, but it was widely seen as an effort for the Trump administration to put more pressure on the Fed. Powell himself said it was part of the White House's tactics to pressure him and the Fed to lower interest rates. Now, Pirro is saying she will ask the Fed's inspector general to look into the cost overruns and will therefore drop the DOJ's probe. So she seems like she's saving face a little.
MARTÍNEZ: OK. Now, I mentioned earlier how this should pave the way for the confirmation of Kevin Warsh. How so?
ASPAN: Well, so Warsh is Trump's nominee to replace Powell when Powell's term expires next month. But the DOJ investigation was becoming a real problem, including for members of Trump's own party. Senator Thom Tillis, a Republican who's a key member of the banking committee, had threatened to hold up Warsh's confirmation until the Trump administration dropped this criminal probe. And as you pointed out, the probe has been widely controversial. A federal judge had agreed with Tillis and Powell, calling the investigation an unjustified campaign to harass and intimidate Powell.
MARTÍNEZ: If Warsh is confirmed, does that mean that there should be a smooth succession at the Fed?
ASPAN: A smoother succession, at least. Powell has said he would step down as Fed chair once a new nominee is confirmed and the DOJ drops the investigation. But although his term as Fed chair ends next month, his appointment to the board runs until 2028. And Powell hasn't said whether he'll step down from the Fed's board, which is the group that collectively decides on interest rates. We might find out more next week when the Fed is holding its latest policy meeting and Powell will address reporters. That'll probably be his last time as chair. He said he'll make the decision about whether to step down overall based on what he thinks is in the best interest of the institution and the people that the Fed serves. And it's important to note that if Powell does step down from the board, it'll give Trump another chance to appoint somebody to the board who may be more willing to undertake the interest rate cuts the president has been so aggressively advocating for.
MARTÍNEZ: Yeah. And, Maria, all this is happening at a very critical time for the economy.
ASPAN: Such a critical time. I mean, the war with Iran has led oil prices and inflation to spike not only in the U.S. but also across the world. So, as much as President Trump wants rate cuts, the Fed may only have so much wiggle room to be able to do that. And again, remember that the Fed makes decisions as a group. So if Powell does stay on, he'll still get a vote on interest rates.
