The US Justice Department has abandoned its criminal investigation into Federal Reserve Chairman Jerome Powell over alleged cost overruns at the central bank's building renovations, opting instead to refer the matter to an internal probe by the Fed's inspector general.
The decision, announced by US Attorney Jeanine Pirro on social media, comes as Powell's term nears its end and the Senate weighs the nomination of Kevin Warsh, President Donald Trump's pick to replace him. A key Republican, Senator Thom Tillis, had reportedly withheld support for Warsh unless the administration dropped its investigation into Powell.
"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. Pirro added she would not "hesitate to restart a criminal investigation should the facts warrant doing so."
The probe centered on renovations to the Fed's Eccles Building and 1951 Constitution Avenue headquarters—the first major overhaul since the 1930s, including asbestos and lead removal. Trump has repeatedly criticized the project's cost, claiming it ballooned to $3.1 billion versus the Fed's $2.5 billion estimate. The Fed maintains the renovations will save money over time.
Powell, in a highly unusual January video, disclosed that the Justice Department had served subpoenas and threatened criminal indictment over his Senate testimony about the renovations. He called the investigation "unprecedented" and argued it stemmed from Trump's anger over the Fed's refusal to cut interest rates. Trump has denied involvement.
The clash underscores a long-standing feud between Trump and Powell, whom Trump nominated in 2017. Trump has called the Fed chair a "knucklehead" and accused him of "doing a lousy job" for keeping rates elevated. Lower rates tend to boost economic activity and are favored by Trump, a former real estate developer.
Powell's term expires on May 15, but he plans to stay until the Senate confirms Warsh. Last week, Trump threatened to fire Powell if he does not step aside voluntarily. Powell has warned that the Fed's independence is at stake, saying the investigation tests "whether monetary policy will be directed by political pressure or intimidation."
The Fed declined to comment. The inspector general's office said it is "actively working to complete our review" but did not provide a timeline.