Justice Department Ends Probe of Fed Chair Powell, Clearing Path for Warsh Confirmation

The Department of Justice ended its criminal investigation into Federal Reserve Chair Jerome Powell on Friday, removing a key obstacle that had blocked Senate action on Kevin Warsh’s nomination as the next central bank leader.

The DOJ probe centered on alleged cost overruns during a $2.5 billion renovation of the Fed’s Washington headquarters. North Carolina Republican Thom Tillis, who serves on the Senate Banking Committee, had vowed to block any confirmation vote until investigators closed the case, calling the probe “bonus.”

“Tillis won,” said one unnamed Republican senator, according to Politico, which reported the Banking Committee could hold its vote on Warsh next week.

U.S. Attorney Jeanine Pirro warned in an X post she would “not hesitate to restart a criminal investigation should the facts warrant doing so.” White House spokesman Kush Desai said in an X post that the administration remains “confident” the Senate will “swiftly confirm Kevin Warsh as the next Federal Reserve Chairman to finally restore competence and confidence in Fed decision-making.”

The DOJ’s decision shifted prediction market bets dramatically. Traders on Kalshi now price 84% odds of Warsh’s confirmation before Powell’s May 15 departure, up from about 30% before Friday’s announcement. Polymarket users put odds of confirmation by May 15 at 77%, as of this writing.

Warsh has disclosed dozens of crypto startup holdings in his financial disclosures, including stakes in dYdX, Polymarket, Polychain Capital, Dapper Labs, Solana, and Optimism. During his confirmation hearing, he told senators that “digital assets are already part of the fabric of our financial services industry in the United States,” while opposing any Federal Reserve-issued central bank digital currency (or CBDC, aka a “digital dollar”) as “bad policy.”

Warsh, 56, served as a Fed governor from 2006 to 2011 and earlier worked as special assistant to the president for economic policy. The Stanford professor’s nomination has drawn sharp opposition from Senator Elizabeth Warren (D-MA), who called him a “sock puppet” for Trump during Banking Committee proceedings.

Warren warned that “having a sock puppet in charge of the Fed would also give the president access to the Fed’s powerful authorities to enrich himself, his family, and his Wall Street buddies.” She cited concerns about “granting special accounts to his family’s crypto company or bailouts to his friends on Wall Street if they get into trouble.”

The nominee has criticized the Fed’s pandemic-era monetary expansion as “the biggest policy error in 40 or 50 years.” Powell, defending Fed independence in previous testimony, described presidential criticism of rate decisions as “a consequence of the Federal Reserve setting interest rates based on our best assessment of what will serve the public, rather than following the preferences of the President.”