Trump's DOJ drops probe that stood in way of president's pick to run Federal Reserve

President Donald Trump's command of U.S. financial and economic policy may have taken a step closer now that his Department of Justice has backed down from an investigation of Federal Reserve Chair Jerome Powell, meaning his nominee to replace Powell may now have an open path to confirmation.

Fed chair nominee Kevin Warsh, whose own considerable wealth includes some crypto-world assets, is awaiting a final vote from the Senate after appearing in a confirmation hearing this week. Trump, who has relentlessly blamed Powell for maintaining overly high U.S. interest rates, chose Warsh to remedy that, but Republican Senator Thom Tillis had promised to block the confirmation as long as the DOJ pressed an investigation against Powell for cost overruns in a Fed building project.

That criminal probe was dropped on Friday, and Attorney General Jeanine Pirro said the DOJ asked the Fed's inspector general to look into the renovation situation and issue a report. When the news emerged, Kalshi's prediction betting on Walsh's confirmation before May 15 shot up from about 30% odds to more than 80%.

"I expect a comprehensive report in short order and am confident the outcome will assist in resolving, once and for all, the questions that led this office to issue subpoenas," Pirro wrote in a post on social media site X. "Accordingly, I have directed my office to close our investigation as the IG undertakes this inquiry. Note well, however, that I will not hesitate to restart a criminal investigation should the facts warrant doing so."

Putting his own people atop the Federal Reserve not only equates with Trump's greater influence over U.S. monetary policy, but it also leaves him with more allies on the Fed board as it makes decisions about financial policy — including implementing rules that govern the crypto industry and stablecoin issuers.

Because of Tillis' threat, Warsh may have been in a holding pattern as long as the DOJ pursued its investigation, which could have left Powell in charge of the Fed indefinitely, well beyond the May 15 expiration of his term. Now, the Republican-majority Senate may be able to move more quickly toward confirmation of the nominee, who insisted during his hearing that he would act independently of White House direction.

Senator Elizabeth Warren, the ranking Democrat on the Senate Banking Committee that's considering his nomination, dismissed the move and noted the administration is still pursuing Fed Governor Lisa Cook in court.