The US Department of Justice, under President Donald Trump, has dropped its investigation into Federal Reserve Chair Jerome Powell, potentially paving the way for Trump's nominee, Kevin Warsh, to take over as Fed chair. Warsh, who has significant personal wealth, including investments in cryptocurrency, is awaiting a Senate vote after a recent confirmation hearing. Trump has been critical of Powell's handling of interest rates and had chosen Warsh to replace him.
However, Republican Senator Thom Tillis had threatened to block Warsh's confirmation as long as the DOJ investigation into Powell was ongoing. The investigation, which was related to cost overruns in a Fed building project, has been passed on to the Fed's inspector general.
Following the news, betting odds on Warsh's confirmation before May 15 surged from around 30% to over 80%. US Attorney for the District of Columbia Jeanine Pirro stated that the DOJ would close its investigation but may restart it if necessary. The development could give Trump more influence over US monetary policy and leave him with more allies on the Fed board. Senator Elizabeth Warren, the ranking Democrat on the Senate Banking Committee, dismissed the move, calling it an attempt to clear the path for Warsh's confirmation.
Warren noted that the administration is still pursuing a separate investigation into Fed Governor Lisa Cook.