The American Justice Department ends its criminal investigation against the Chairman of the Federal Reserve economy

A political knot that has preoccupied Washington over the past weeks has been released after the US Department of Justice announced on Friday the end of its criminal investigation into Federal Reserve Chairman Jerome Powell, in a move that the Wall Street Journal saw as removing the most prominent obstacle that was obstructing the confirmation process of Kevin Warsh in Congress, who is President Donald Trump’s nominee to succeed Powell.

The American newspaper explained that the Office of the Attorney General in Washington, Jeanine Pirro, decided to close the investigation related to Powell’s testimony before Congress regarding cost overruns for the restoration of two historic buildings belonging to the Federal Reserve (the US central bank) in Washington, DC.

A federal judge had previously deemed the subpoenas issued in January invalid, citing “almost non-existent evidence” of criminal wrongdoing.

Peru said, according to what was reported by the Wall Street Journal, that she had asked the Federal Inspector General to review the file, adding that she expected a comprehensive report soon, but at the same time she warned of the possibility of reopening the investigation if new facts emerged.

The US Department of Justice opened a criminal investigation against Jerome Powell last January, and this step was preceded by US President Donald Trump’s criticism of the Federal Reserve Chairman, who called more than once for his dismissal.

Powell’s term as president ends at the end of next May, but he can remain on the Board of Governors of the US Federal Reserve for an additional two years.

A breakthrough in front of Warsh

The newspaper believes that the decision raises the biggest political obstacle to the confirmation of Kevin Warsh, after Republican Senator Thom Tillis announced that he would not support any federal candidate as long as the investigation continues. Tillis’s positions are of particular importance because Republicans have a narrow majority in the Senate Banking Committee, 13 to 11, while Democrats have refused to consider the nomination before concluding the investigation.

During this week’s hearing, Tillis told Warsh, “You have exceptional qualifications… Let’s finish this investigation so I can support your confirmation,” according to the newspaper.

The newspaper added that the Senate will remain in session until the second week of next May, giving enough time for the Banking Committee and then the full Senate to vote on Warsh’s nomination.

Powell’s fate

Powell’s term as Fed Chairman expires on May 15, and he has previously said that he will continue to serve as interim chairman if his successor is not approved before that date. The central bank is scheduled to hold its next monetary policy meeting on June 16-17.

But the newspaper indicates that Powell has another decision to make, which is whether he will also resign from membership in the Board of Governors, as he can legally remain in his seat until January 2028. He had made clear that his final decision will be based on “what is best for the institution and the people we serve.”

Federal independence

The Wall Street Journal believes that closing the investigation ends, albeit temporarily, an unprecedented confrontation in the modern era regarding the independence of the Federal Reserve, after Powell, last January, accused the executive authority of trying to pressure the central bank through a pretext related to interest rates.

While the way is open for Warsh, the most important question in the markets remains not only who leads the Fed, but also how US interest policy will change under the next leadership.