Tillis to Back Warsh After DOJ Ends Powell Probe

Sen. Thom Tillis of North Carolina will vote to confirm Kevin Warsh after the Justice Department closed its criminal investigation into Fed Chair Jerome Powell. Tillis sought and obtained assurances from DOJ officials over the weekend that prosecutors would step back and that the inquiry had ended.

The department announced Friday that it was dropping the criminal probe. The U.S. Attorney for the District of Columbia described the decision as creating room for a separate review by Federal Reserve Inspector General Michael Horowitz into cost overruns tied to a Fed office renovation. Horowitz is conducting a second review requested by Powell; his 2021 review found no evidence of wrongdoing.

Acting Attorney General Todd Blanche told reporters that prosecutors would let the inspector general lead the administrative review. Blanche said the inspector general can interview witnesses and examine records and that DOJ would not pre-judge the outcome.

Tillis had made his support for Warsh conditional on the end of the DOJ probe, arguing the investigation had been used to intimidate the central bank. At a recent hearing, Tillis called Warsh “a perfect candidate” and urged colleagues to advance the nomination. With Tillis’s announcement, the Senate Banking Committee is expected to send Warsh’s nomination to the full Senate on Tuesday.

Powell’s term as Fed chair expires May 15. The Senate could confirm Warsh before that date if the nomination moves quickly. That same week the Federal Open Market Committee will begin a two-day meeting that Powell is scheduled to preside over; the Fed is expected to hold interest rates steady as it assesses economic effects from the conflict in the Middle East and rising energy prices.

Powell may remain on the Federal Reserve Board as an ordinary governor after his chair term ends. His lawyers told a court that he could not resign while a criminal investigation was pending. In March, a federal judge blocked subpoenas from the U.S. Attorney’s office and described the evidence supporting them as “essentially zero.”

The dispute began after criticism of the Fed’s office renovation and public attacks on Powell’s leadership, which prompted questions about whether the DOJ inquiry was politically motivated. With prosecutors stepping back and the inspector general taking the lead on the administrative review, Tillis said he is satisfied the department will not be used to threaten the Fed’s independence and that Warsh can proceed to confirmation on schedule.