The U.S. Department of Justice (DOJ) has shifted the investigation concerning Federal Reserve Chair Jerome Powell to the Fed’s own inspector general, a decision that may facilitate the confirmation of President Donald Trump’s nominee, Kevin Warsh. This development follows a confirmation hearing for Warsh, who has been nominated to replace Powell amid ongoing debates about U.S. monetary policy.
Warsh’s nomination comes at a time when Trump has criticized Powell for maintaining high interest rates. The DOJ’s previous investigation into Powell was linked to alleged cost overruns in a Federal Reserve building project. Republican Senator Thom Tillis had indicated he would oppose Warsh’s confirmation as long as the investigation remained active.
On Friday, U.S. Attorney for the District of Columbia, Jeanine Pirro, announced that the DOJ would no longer pursue the investigation and has requested the Fed’s inspector general to conduct a review of the renovation project. Kalshi, a prediction market platform, reflected this shift in sentiment, with the odds of Warsh’s confirmation rising from approximately 30% to over 80% following the announcement.
“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,” Pirro stated on social media. “Accordingly, 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.”
The implications of Warsh’s confirmation extend beyond personnel changes. A shift in leadership at the Federal Reserve could allow Trump to exert greater influence over U.S. monetary policy, particularly as the Fed navigates regulations affecting the cryptocurrency sector and stablecoin issuers. Warsh has indicated his intent to act independently of White House directives, a stance that may be tested if confirmed.
Senator Elizabeth Warren, the leading Democrat on the Senate Banking Committee, criticized the DOJ’s decision, asserting that it serves to pave the way for Warsh’s confirmation. Warren pointed out that the administration continues to pursue legal action against Fed Governor Lisa Cook, suggesting that the DOJ’s actions are politically motivated.
“This is just an attempt to clear the path for Senate Republicans to install President Trump’s sock puppet Kevin Warsh as Fed chair,” Warren remarked. “Let’s be clear what the Justice Department announced today: They threatened to restart the bogus criminal investigation into Fed Chair Powell at any time while failing to drop their ridiculous criminal probe against Governor Lisa Cook.”
In response to the DOJ’s announcement, Senator Tillis expressed support for Warsh, labeling him a “great nominee.” He reiterated his commitment to vote in favor of Warsh’s confirmation once the DOJ concluded its investigation into Powell.
The political maneuvering surrounding Warsh’s nomination occurs against a backdrop of broader legislative challenges. A separate debate regarding stablecoin regulations has delayed progress on a significant market structure bill, with advocates pushing for the Clarity Act, which aims to establish comprehensive regulations for the cryptocurrency industry.
- Some analysts are forecasting a decline in the chances for the Clarity Act to pass, despite ongoing advocacy from Senate members and industry stakeholders.
- Negotiations continue, with sources indicating that a narrow window remains for the legislation to advance in 2026.
The DOJ's transfer of its investigation into Fed Chair Jerome Powell to the Fed's inspector general may expedite the confirmation of Kevin Warsh as Powell's successor. This shift reflects ongoing political dynamics influencing U.S. monetary policy and the regulatory landscape for cryptocurrencies.