Setback for Trump as US Justice Department Drops Criminal Probe Against Jerome Powell

Washington, D.C.: In a surprise development that eases tensions between the White House and the Federal Reserve, the U.S. Department of Justice announced on Friday that it is dropping its criminal investigation into Federal Reserve Chair Jerome Powell over the central bank's costly headquarters renovation project.

U.S. Attorney for the District of Columbia Jeanine Pirro, who oversaw the probe, confirmed the decision in a post on X, stating that her office would close the investigation. She noted that the Federal Reserve's Inspector General has now been tasked with scrutinizing the multi-billion-dollar building cost overruns borne by taxpayers.

The move marks a significant reversal after months of high-profile friction. The investigation, which began in late 2025, focused on whether Powell made misleading statements to Congress in June 2025 about the scope and expenses of the Fed's Washington headquarters renovation, estimated at around $2.5 billion. Powell had pushed back strongly, describing the subpoenas served in January 2026 as a "pretext" to undermine the Fed's independence amid ongoing disagreements with President Trump over interest rate policy.

A federal judge had already dealt major blows to the effort earlier this year. In March, Chief U.S. District Judge James Boasberg quashed key grand jury subpoenas, ruling there was "essentially zero evidence" of a crime and that the probe appeared designed primarily to pressure the Fed into more aggressive rate cuts, a priority repeatedly voiced by the Trump administration. The judge upheld that decision in early April, rejecting the DOJ's attempt to revive the subpoenas.

The decision to drop the criminal probe removes a key obstacle to the Senate confirmation of President Trump's nominee to succeed Powell as Fed Chair: former Federal Reserve Governor Kevin Warsh. Powell's term as chair formally ends on May 15, though he could remain on the Board of Governors until 2028. The investigation had complicated Warsh's path forward, drawing criticism from lawmakers concerned about political interference in monetary policy.

White House officials have not yet issued a detailed reaction, but the development is being viewed in political circles as a pragmatic step to clear the decks for Trump's economic agenda while shifting oversight of the renovation spending to an internal watchdog.

This latest twist underscores the complex relationship between the Trump administration and the central bank, as both sides navigate differing views on interest rates, inflation control, and economic growth priorities heading into the latter half of 2026.