The Justice Department has dropped its investigation into Federal Reserve Chair Jerome Powell after the Trump administration criticized his June testimony to Congress about the cost of a major renovation of Fed buildings.
U.S. Attorney Jeanine Pirro said the criminal investigation was ended in favor of an inspector general review.
"The IG has the authority to hold the Federal Reserve accountable to American taxpayers. 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 said.
She added that she would "not hesitate to restart a criminal investigation should the facts warrant doing so."
The decision comes as the Trump administration works to confirm Kevin Warsh as the next Fed chair, with Powell’s term expiring next month. Powell is expected to remain on the Federal Reserve Board as a governor.
After the Justice Department opened an investigation into Powell for potential perjury charges, Sen. Thom Tillis, R-N.C., accused Trump of undermining the Fed’s independence. Sen. Lisa Murkowski, R-Alaska, also said she would not support moving forward with a nomination amid the investigation.
"The stakes are too high to look the other way: if the Federal Reserve loses its independence, the stability of our markets and the broader economy will suffer. My colleague, Senator Tillis, is right in blocking any Federal Reserve nominees until this is resolved," she said.
The Federal Reserve’s most important function is setting the federal funds rate, which influences the interest rates banks charge each other for overnight loans. This indirectly affects consumer lending rates for mortgages, auto loans and credit cards, as well as borrowing costs for businesses.
Trump has expressed frustration with Powell for the Federal Reserve not lowering interest rates as much as he wanted.
