The United States Justice Department has abruptly ended a controversial investigation into building-renovation cost overruns at the Federal Reserve, a move that could clear the path for Kevin Warsh to be confirmed as the next Fed leader. The decision marks a significant reversal, as U.S. Attorney Jeanine Pirro had earlier stated her commitment to continuing the probe.
Background of the Investigation
The investigation centered on cost overruns related to renovations at the Federal Reserve's headquarters. It had thrown the central bank's expected leadership transition into chaos, with Chair Jerome Powell's term set to expire on May 15. President Donald Trump nominated Warsh, a former Fed governor, to succeed Powell.
Pirro's Announcement
In a social media post on Friday, Pirro announced that she had directed her office to close the investigation, as the Federal Reserve Inspector General had been asked to scrutinize the matter. She stated, "I have directed my office to close our investigation as the IG undertakes this inquiry. Note well, however, that I will not hesitate to restart a criminal investigation should the facts warrant doing so."
Pirro had previously initiated a legal battle to serve subpoenas to the central bank as part of the criminal investigation into the cost overruns and Powell's congressional testimony on the issue. U.S. District Chief Judge James Boasberg quashed two grand jury subpoenas in March, and Pirro had indicated she would appeal that ruling.
Political Implications
The White House issued a statement saying, "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." Warsh, who appeared before the Senate Banking Committee this week, enjoys broad support among GOP lawmakers. However, Senator Thom Tillis of North Carolina, a key Republican, had vowed to block Warsh's confirmation unless the DOJ investigation was dropped. Tillis's office did not immediately respond to requests for comment.
What Changed?
The reversal was abrupt, as Pirro had earlier this week expressed her commitment to continuing the investigation. Her office did not respond to questions about what prompted the change. Justice Department leaders had previously supported Pirro as a matter of principle, challenging a ruling that they believed undercut prosecutors' ability to use grand juries during early stages of an investigation.
Pirro emphasized that the Federal Reserve inspector general "has the authority to hold the Federal Reserve accountable to American taxpayers." She added, "I expect a comprehensive report in short order and am confident the outcome will assist in resolving, once and for all, the questions that led this office to issue subpoenas."
Next Steps
With the DOJ investigation closed, the path appears clearer for Warsh's confirmation. The Federal Reserve declined to comment on the development. Powell's term as chair is scheduled to expire on May 15, making the timing of the decision critical for the leadership transition.
The investigation had cast a shadow over the Fed's governance, but now the focus shifts to the Inspector General's review. Whether this will satisfy lawmakers and allow for a smooth confirmation process remains to be seen.
