DOJ Ends Criminal Probe of Fed Chair Powell

The Justice Department said Friday it has closed its criminal investigation into Federal Reserve Chair Jerome Powell. Officials concluded the evidence related to the Fed’s building renovation did not meet the standard for criminal prosecution and referred questions about cost overruns to the Federal Reserve Inspector General.

DOJ attorneys reviewed testimony, records and documents tied to the renovation. U.S. Attorney for the District of Columbia Jeanine Pirro announced the end of the criminal probe and directed the Fed Inspector General to conduct an independent review of the project’s cost overruns and any potential taxpayer exposure. Pirro said the department could reopen the inquiry if new information emerges.

The decision removes the possibility of federal criminal charges related to the renovation and shifts remaining oversight to administrative channels. Congressional staff had paused consideration of Federal Reserve appointments while the criminal probe was active.

The closure renewed attention on Kevin Warsh, who has been mentioned as a possible replacement for Powell if President Donald Trump nominates a new chair. Noah Buffam, director of FICC Strategy at CIBC Capital Markets, said Warsh’s policy stance is marginally more dovish than Powell’s. Buffam noted Powell has focused more on core inflation measures that exclude food and energy, while Warsh has emphasized trimmed and median inflation metrics.

Brian Jacobsen, chief economist at Annex Wealth Management, said that with the DOJ investigation closed, Warsh can be seen as the ‘Chair-in-Waiting.’

Financial markets reacted to the announcement. The Nasdaq Composite rose 355.86 points, or 1.46 percent, to 24,794.36. The Nasdaq U.S. 500 Large Cap index added 0.66 percent to 3,710.61 and the Nasdaq-100 gained 1.75 percent to 27,251.97. The Philadelphia Stock Exchange Semiconductor Index jumped 4.2 percent and the MSCI World Index increased 0.4 percent. The Stoxx Europe 600 fell 0.6 percent and the Dow Jones Industrial Average was little changed.

Currency and Treasury markets also shifted. The Bloomberg Dollar Spot Index fell 0.2 percent to about 98.543. The British pound rose to $1.3518, the euro to $1.1718 and the Japanese yen moved to about 159.35 per dollar. The 10-year U.S. Treasury yield slipped three basis points to 4.30 percent and the two-year yield fell six basis points to 3.78 percent. Bitcoin was around $78,032.27 and Ether about $2,322.98.

The DOJ referral asks the Federal Reserve Inspector General to assess the renovation’s cost overruns, identify accountability and report on any taxpayer exposure. Pirro said the Inspector General has the authority to examine the matter independently.