US Justice Department drops investigation into Fed chair
What's the story
The US Justice Department has decided to end its investigation into Federal Reserve Chairman Jerome Powell over alleged cost overruns in building renovations. Instead, an internal probe will be conducted by the central bank's inspector general. This decision comes amid President Donald Trump's criticism of the Fed's renovation expenses and his nomination of Kevin Warsh as Powell's potential successor.
Transition period
Republican Thom Tillis withholds support for Warsh
As Powell's term nears its end, the US Senate is deliberating on Trump's nomination of Warsh as his replacement. However, Republican Thom Tillis has withheld his support for Warsh unless the Trump administration drops its investigation into Powell. This political maneuvering highlights the tension between the White House and the Federal Reserve over renovation costs and leadership changes at the central bank.
Official statement
White House spokesman on inspector general probe
White House spokesman Kush Desai said, "American taxpayers deserve answers about the Federal Reserve's fiscal mismanagement and the Office of the Inspector General's more powerful authorities best position it to get to the bottom of the matter." He added that the inspector general's office has more powerful authorities to get to the bottom of this matter. Desai expressed confidence that the Senate will swiftly confirm Warsh as the next Federal Reserve Chairman, restoring competence and confidence in Fed decision-making.
Chairman's defense
Powell calls investigation 'unprecedented'
In January, Powell released a video revealing that the Justice Department had served subpoenas on the Fed and threatened a criminal indictment over his Senate testimony about Federal Reserve building renovations. He called the investigation "unprecedented" and suggested it was launched due to Trump's anger over rate cuts. Trump has repeatedly criticized Powell, calling him a "knucklehead" for ignoring his calls for rate cuts.
Policy disagreements
Trump criticizes Fed's renovation costs
Trump has called for the Fed to lower interest rates since returning to office last year. He has also criticized the rising costs of renovations, arguing it will cost $3.1 billion, much higher than the Fed's forecast of $2.5 billion. The Fed has maintained that these renovations will save money in the long run. The buildings being renovated are Eccles and 1951 Constitution Avenue, which haven't seen any major work since their construction in the 1930s.
Leadership uncertainty
Threat to fire Powell adds uncertainty to Fed leadership
Powell, whom Trump nominated as Fed chair in 2017, plans to stay on until his successor is confirmed by the Senate. Last week, Trump threatened to fire Powell if he doesn't step down at the end of his term next month. This threat adds another layer of uncertainty to the leadership at the Federal Reserve amid ongoing political tensions over renovation costs and interest rate policies.