The decision could clear the way for Trump's nominee to chair the Fed, Kevin Warsh, to advance toward a confirmation vote in the Senate.
The Justice Department on Friday dropped a criminal investigation into the Federal Reserve and its chair, Jerome Powell, regarding a renovation project at the central bank's Washington headquarters.
"This morning the Inspector General for the Federal Reserve has been asked to scrutinize the building costs overruns – in the billions of dollars – that have been borne by taxpayers," U.S. Attorney for D.C. Jeanine Pirro said in a post on X.
"Accordingly, I have directed my office to close our investigation as the IG undertakes this inquiry."
Pirro added that she would "not hesitate to restart a criminal investigation should the facts warrant doing so."
The inspector general for the Federal Reserve has already reviewed the renovation project, and found no wrongdoing. It was asked again to review the project in 2025 by Powell, amid unrelenting pressure from President Donald Trump and his top allies.
The Inspector General's office said that the review mentioned by Pirro on Friday was not new and that it was continuing to compile the review requested by Powell last year.
"In July of last year, the OIG announced that it was conducting an evaluation of the Board’s building renovation project," a spokesperson said. "This assessment includes our independent analysis of the project’s substantial cost increases and overruns."
"We are actively working to complete our review, and look forward to making the results available to the public and Congress upon completion," the spokesperson added.
Hours later though, White House Press Secretary Karoline Leavitt cast doubt on status of the investigation.
Leavitt described the probe as "not necessarily dropped" but "just being moved over to the inspector general."
"So the investigation still continues," she said. "It's just under a different authority, and that's what you'll continue to see."
The decision could clear the way for Trump's nominee to chair the Fed, Kevin Warsh, to advance toward a confirmation vote in the Senate.
Warsh's confirmation has been blocked by Sen. Thom Tillis due to what the Republican from North Carolina called a "bogus" investigation of Powell.
Tillis and numerous other lawmakers have said it did not appear Powell committed any crime.
South Carolina Republican Sen. Tim Scott, who chairs the panel charged with advancing Warsh's nomination, quickly welcomed the news Friday.
"These serious concerns warrant scrutiny, and I’m pleased this matter is continuing to receive it," Scott said in a statement. "I welcome the Inspector General’s review and expect a full accounting of how these costs spiraled out of control."
Scott also extended an invitation for the inspector general to brief the committee "within the next 90 days."
The Federal Reserve declined to comment on Pirro's announcement.
"American taxpayers deserve answers about the Federal Reserve’s fiscal mismanagement, and the Office of the Inspector General’s more powerful authorities best position it to get to the bottom of the matter," White House spokesman Kush Desai said in a statement.
"The White House remains as confident as before that the Senate will swiftly confirm Kevin Warsh as the next Federal Reserve Chairman to finally restore competence and confidence in Fed decision-making," Desai added.
The criminal probe from Pirro's office centered on the renovation of two historic buildings owned by the central bank.
The Fed, which said that the buildings "have not been comprehensively renovated since their construction in the 1930s," initially pegged the cost for the project around $1.9 billion. However, the cost rose to around $2.5 billion in the years since that first estimate.
The central bank said the cost increases were due to unforseen changes to the plans, the rising cost of raw materials, equipment and labor. It also said that it uncovered more asbestos on the site than expected, as well as a sinkhole.
But Trump and his top political allies seized on the project in an attempt to show that Powell was mismanaging the Fed.
Trump has been pressuring Powell to support a dramatic cut to benchmark interest rates set by the Fed's Open Market Committee since taking office again in 2025. But he has insulted and attacked Powell since long before that, accusing him of setting monetary policy to favor Democrats, among other unfounded claims.
Trump toured the construction site last summer, joined by Federal Housing Finance Agency Chief Bill Pulte, Senate Banking, Housing and Urban Affairs Committee Chair Tim Scott, R-S.C., and other White House officials. During the visit, Trump confronted Powell about the cost, saying that he heard it had risen to "about $3.1 billion."
In a remarkable moment on live television, Powell told the president he was wrong. “I haven’t heard that," he said.
Other White House officials, such as budget chief Russell Vought, had likened the project to the Palace of Versailles in France.
Vought also claimed that Powell was "guilty" of “fiscal mismanagement” at the Fed. The project was first approved by the Fed's seven board members in 2017, a year before Powell became its chair.
The controversy over the renovation project rocked the central bank and the Republican-controlled Senate in early January, when Powell released a rare Sunday evening statement announcing that Pirro's office had served the Fed with subpoenas.
Almost instantly, Tillis announced his block on any Fed nominees.
“No one—certainly not the chair of the Federal Reserve—is above the law,” Powell said in the video release. “But this unprecedented action should be seen in the broader context of the administration’s threats and ongoing pressure.”
On March 13, Chief Judge James Boasberg, of the U.S. District Court for Washington, D.C. blocked the subpoenas served to the Fed from Pirro’s office. In his ruling, Boasberg wrote that “the Government has produced essentially zero evidence to suspect Chair Powell of a crime.”
"A mountain of evidence suggests that the Government served these subpoenas on the Board to pressure its Chair into voting for lower interest rates or resigning," Boasberg added.
https://www.nbcnews.com/business/economy/justice-dept-drops-probe-federal-reserve-powell-rcna341876
