Questions abound about the future path of the Federal Reserve now that the Department of Justice abruptly dropped its criminal probe into whether Fed Chair Jerome Powell lied to Congress over the costs of the central bank’s $2.5 billion renovation of its Washington headquarters.
Top concerns from Main Street to Wall Street are:
- Will Republican Sen. Thom Tillis of North Carolina remove his opposition to the confirmation of Kevin Warsh, President Donald Trump’s pick to lead the central bank?
- Does this mean Powell will retire from the Fed when his term as chair expires May 15, or will Powell remain as a Fed governor until his term expires in 2028?
- Would a Warsh-led Fed result in more frequent and immediate interest-rate cuts, which the president has been demanding?
- How will the bond market react?
- And perhaps most importantly, how does this unprecedented move protect Fed independence from political and partisan coercion by the executive branch?
Powell and others called the unprecedented criminal probe of a sitting Fed Chair a “pretext” from the White House to force the Fed into drastically slashing the benchmark Federal Funds Rate to 1% or below.
U.S. Attorney Jeanine Pirro, a longtime Trump ally, said in an April 24 social media post that she had asked the Fed’s internal watchdog, the Office of Inspector General (IG), to examine cost overruns in the $2.5 billion renovations of the Washington headquarters.
“Note well, however, that I will not hesitate to restart a criminal investigation should the facts warrant doing so,’’ Pirro said in her post.
However, the Fed IG said in a statement following Pirro’s X post that it has been investigating the renovations since July 2025 and was looking forward to completing its review. CNBC reported that Powell had asked the IG to look into the cost overruns at that time.
A federal judge last month blocked two subpoenas from Pirro’s office to the Fed’s Board of Governors, according to Reuters. It found they were issued for the improper purpose of pressuring Powell to cave to President Trump’s demands to rapidly lower interest rates or resign.
Tillis vowed to block Warsh due to DOJ probe
As recently as this week, Pirro had vowed to appeal the ruling and continue the investigation. Those comments came the day after the Senate Banking Committee’s confirmation hearing on Warsh’s nomination, in which Tillis told the former Fed governor he would not approve the nomination until the DOJ probe was dropped.
It was nothing personal, Tillis stressed.
More Federal Reserve:
“You have extraordinary credentials. They’re impeccable,” Tillis told Warsh, adding that the DOJ probe was “bogus.”
“Let’s get rid of this investigation, so I can support your confirmation,’’ Tillis said.
A spokesperson for the Fed declined comment.
A White House spokesperson said the inspector general was best positioned “to get to the bottom of the matter” and that it was confident the Senate would confirm Warsh, Reuters reported.
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Senate could confirm Warsh by May 15 deadline
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 Warsh.
The surprise DOJ reversal came one day after a meeting of Warsh, Treasury Secretary Scott Bessent, and Senate Majority Leader John Thune, CNBC reported.
Related: Investors question Warsh’s future impact on markets
Senator Elizabeth Warren of Massachusetts, the top Democrat on the Senate Banking Committee, said the DOJ decision to drop its investigation into Powell was not enough to allow Warsh’s nomination to proceed.
In a statement, Warren seized on Pirro’s comment that the government could restart the investigation into Powell if conditions warranted.
“Anyone who believes Donald Trump’s corrupt scheme to take over the Fed is over is fooling themselves,” Warren said, according to The New York Times.
President Trump repeats claim he would fire Powell
As I’ve previously reported, Trump said once again earlier this month that he would fire Powell if the Fed Chair didn’t resign by May 15.
A decision by the Supreme Court is expected soon regarding whether the president can fire Fed Governor Lisa Cook for cause over unsubstantiated allegations of mortgage fraud.
The high court has indicated in the past that the Fed is an independent agency that is exempt from executive control.
Related: Fed Chair nominee discloses stunning vast wealth in court filings
