The Justice Department wrapped up its criminal investigation into Federal Reserve Chairman Jerome Powell on Friday, clearing the last major hurdle to Senate confirmation of Kevin Warsh as the central bank’s next head — a development with implications for monetary policy and Bitcoin.
U.S. Attorney for the District of Columbia, Jeanine Pirro, announced the closure of the probe, which had been launched due to alleged cost overruns on a $2.5 billion renovation of the Fed headquarters in Washington.
Pirro said she turned the matter over to the Fed’s own inspector general and called for “a comprehensive report in a short period of time.” She left open the possibility of reopening the criminal case if it was warranted.
The investigation had no legal basis. A federal judge, James Boasberg, quashed the DOJ subpoenas in March after a prosecutor admitted the government had found “essentially zero evidence” of a crime, labeling the reasoning “flimsy and unsubstantiated.” Powell himself called the survey a political weapon, saying in January that it was “a consequence of the Federal Reserve setting interest rates based on our best judgment of what will serve the public, rather than following the president’s preferences.”
A ‘fake’ investigation of Powell
Senator Thom Tillis, a North Carolina Republican on the Senate Banking Committee, had vowed to block Warsh’s confirmation until the investigation concluded, describing it as “bogus.” His opposition, combined with unified Democratic opposition, had stopped the nomination. With the investigation now complete, management expects a quick committee vote and word of confirmation before Powell’s term expires on May 15.
Warsh, 56, a former Fed governor and Stanford professor, testified before the Senate Banking Committee on Tuesday and pledged “strict independence” from the White House on interest rate decisions. “The president has never once asked me to commit to a particular rate decision, period,” Warsh said.
Senator Elizabeth Warren called him a “sock puppet” for Trump, while Republicans praised his qualifications.
For Bitcoin, the stakes are significant. The cryptocurrency has traded in the $70,000-$92,000 range this year as the Fed held rates steady at 3.5%-3.75%, with traders monitoring every signal from the central bank.
Lower interest rates historically reduce returns on conventional assets, pushing capital towards riskier assets like Bitcoin. When the DOJ first launched its investigation in January, Bitcoin surged toward $92,000 as institutional investors read the attack on the Fed as a threat to the dollar’s credibility and a potential catalyst for rate cuts.
Warsh is considered more hawkish than Powell on inflation, having called the Fed’s post-pandemic interest rate response “the biggest policy mistake in 40 or 50 years.”
Should he take the helm on May 15 and maintain a restrictive stance, Bitcoin bulls betting on interest rate cut-driven liquidity expansion may have to wait longer than expected.