The US Department of Justice, led by President Donald Trump, has relinquished its investigation into Federal Reserve Chair Jerome Powell, potentially smoothing the path for Trump's nominee, Kevin Warsh, to take the reins. Warsh, who boasts significant personal wealth, including assets in the cryptocurrency sector, has been awaiting a Senate vote after his confirmation hearing. Trump, who has consistently criticized Powell for maintaining high interest rates, selected Warsh to address this issue. However, Republican Senator Thom Tillis had vowed to block Warsh's confirmation as long as the DOJ pursued its investigation into Powell regarding cost overruns in a Federal Reserve building project.
The dropping of the criminal probe on Friday has led US Attorney for the District of Columbia, Jeanine Pirro, to request the Fed's inspector general to investigate the matter and submit a report. Following this development, the odds of Warsh's confirmation before May 15 have surged from approximately 30% to over 80%, according to Kalshi's prediction betting. Pirro stated that she expects a comprehensive report soon and is confident that the outcome will resolve the questions that prompted the investigation. She also warned that she would not hesitate to restart the investigation if the facts warrant it.
Trump's ability to install his preferred candidate at the helm of the Federal Reserve would grant him greater influence over US monetary policy and provide him with more allies on the Fed board, particularly in decisions related to the crypto industry and stablecoin issuers. The dropping of the investigation may allow the Republican-majority Senate to expedite Warsh's confirmation, which had been potentially stalled due to Tillis' threat. During his hearing, Warsh assured that he would act independently of White House direction.
Senator Elizabeth Warren, the ranking Democrat on the Senate Banking Committee, dismissed the move, pointing out that the administration is still pursuing Fed Governor Lisa Cook in court. Warren stated that the DOJ's decision is an attempt to clear the path for Senate Republicans to install Warsh as Fed chair. Tillis, on the other hand, expressed his support for Warsh, calling him a 'great nominee' and stating that he would vote in favor of him once the DOJ drops its investigation into Powell.