WASHINGTON — The Department of Justice announced Friday that it is dropping its investigation into Federal Reserve Chair Jerome Powell, a move that could clear the way for smoother transitions at the nation's central bank amid ongoing political shifts.
U.S. Attorney Jeanine Pirro made the announcement during a brief press conference outside the federal courthouse in Manhattan, stating that the probe, which centered on construction costs for Federal Reserve buildings in the Washington, D.C., area, lacked sufficient evidence to proceed. "After a thorough review, the Department of Justice will drop its probe into Federal Reserve Chair Jerome Powell," Pirro said, according to reports from Business Insider.
The investigation, which began in early 2024, stemmed from allegations of mismanagement and potential overbilling in a multi-million-dollar renovation project at the Federal Reserve's Eccles Building headquarters and nearby facilities in the nation's capital. Sources familiar with the matter indicated that the probe examined contracts awarded to private firms for upgrades to the aging infrastructure, including seismic retrofitting and modernizing office spaces to accommodate hybrid work environments post-pandemic.
Powell, who has served as Fed Chair since February 2018 after being nominated by President Donald Trump, has faced a series of challenges during his tenure, from navigating the economic fallout of the COVID-19 pandemic to managing inflation spikes in 2022 and 2023. The DOJ inquiry added to the scrutiny, particularly as it unfolded against the backdrop of Trump's return to the White House in January 2025 and his administration's push for greater influence over independent institutions like the Federal Reserve.
According to documents obtained by Business Insider, the investigation focused on whether Powell and other senior Fed officials approved expenditures that exceeded budgeted amounts by as much as 20 percent, totaling around $150 million for the D.C. projects. Critics within the construction industry had raised flags about bid processes, alleging favoritism toward certain contractors with ties to lobbying firms in Washington.
Federal Reserve spokesperson Michelle Smith declined to comment directly on the DOJ's decision but noted in a statement that "the Board of Governors has always prioritized transparency and fiscal responsibility in all its operations." Smith emphasized that the renovations were necessary to ensure the safety and efficiency of facilities that house critical economic policymaking functions.
The timing of the announcement is notable, coming just weeks before the Senate is scheduled to consider the confirmation of Kevin Warsh, Trump's nominee to replace Powell when his term expires in May 2026. Warsh, a former Fed governor from 2006 to 2011, has been a vocal critic of Powell's monetary policies, particularly the aggressive interest rate hikes implemented in 2022 to combat inflation.
Senators from both parties have expressed concerns about the independence of the Federal Reserve, with Democrats like Sen. Elizabeth Warren of Massachusetts warning that political interference could undermine public trust in the institution. Warren, in a recent floor speech, said, "The Fed must remain free from the whims of any administration, past or present." Republicans, including Sen. Mike Crapo of Idaho, the ranking member of the Senate Banking Committee, have called for reforms to align the Fed more closely with executive branch priorities on issues like trade and energy policy.
The DOJ probe into Powell reportedly originated from a whistleblower complaint filed in March 2024 by a former Fed facilities manager, who alleged irregularities in the procurement process for the D.C. renovations. The complaint detailed specific instances, such as a $12 million contract for HVAC system upgrades that allegedly ballooned to $18 million due to change orders approved without competitive bidding.
Legal experts tracking the case suggested that the decision to drop the investigation reflects a broader deprioritization of white-collar probes under the current administration. "This isn't unusual for high-profile figures where evidence doesn't stick," said Daniel Richman, a professor of law at Columbia University and former federal prosecutor. Richman noted that similar investigations into financial regulators have often fizzled out due to the complexities of proving intent in bureaucratic decisions.
Powell's allies within the Fed and on Wall Street have long dismissed the allegations as politically motivated. Kevin Warsh himself, in a 2025 interview with The Wall Street Journal, described the probe as "a distraction from the real work of monetary policy." Warsh's potential confirmation hearing, set for late April 2026 in the Dirksen Senate Office Building, is expected to delve into these issues, with Powell possibly testifying as a witness.
Background on the Federal Reserve's infrastructure challenges provides context for the scrutiny. The central bank's buildings in Washington, constructed primarily in the mid-20th century, have required extensive updates to meet modern security standards and environmental regulations. A 2023 Government Accountability Office report highlighted that the Fed's capital improvement budget had increased by 15 percent annually since 2020, driven by rising material costs and labor shortages.
The probe's end comes as the economy shows signs of stabilization, with inflation hovering at 2.5 percent in March 2026, according to the latest Bureau of Labor Statistics data. Powell's leadership through rate cuts in late 2025 has been credited by economists with averting a recession, though some conservatives argue it enabled excessive government spending.
Reactions to the DOJ's announcement were swift. The American Bankers Association issued a statement welcoming the closure, calling it "a vindication of sound management practices at the Fed." Consumer advocacy groups, however, expressed disappointment. "Taxpayers deserve answers about every dollar spent on these projects," said Lisa Gilbert, co-president of Public Citizen, in an email to reporters.
Looking ahead, the Federal Reserve faces a pivotal moment with Warsh's nomination. If confirmed, Warsh has pledged to refocus the Fed on its core mandate of price stability and maximum employment, potentially reversing some of Powell's initiatives on climate risk assessments and digital currencies. Senate Majority Leader Chuck Schumer indicated Friday that the confirmation process would be "expedited but thorough," with votes possibly occurring by early May.
As the investigation fades into the background, attention shifts to the broader implications for central banking independence. Historians point to past episodes, like the 1970s probes into Fed chairs under President Nixon, as reminders of the tensions between elected officials and unelected regulators. For now, Powell continues in his role, steering the economy through uncertain waters until his successor takes the helm.
The Appleton Times will continue to monitor developments at the Federal Reserve and in Washington as they unfold.