U.S. Attorney for the District of Columbia Jeanine Pirro announced Friday she directed her office to close its investigation into the Federal Reserve over a building project, a move that could clear a key Senate holdout to advance President Donald Trump’s nominee for Fed chair.
Pirro said the Fed’s inspector general, Michael Horowitz, would take over the investigation, moving it from federal prosecutors to a longtime government watchdog. The move relieves pressure on the central bank amid a fight over anticipated leadership change in mid-May, when Fed Chairman Jerome Powell’s term is set to end.
Retiring Sen. Thom Tillis, R-N.C., had been threatening to block Kevin Warsh, Trump’s successor to Powell, over the Department of Justice probe.
“This morning the Inspector General for the Federal Reserve has been asked to scrutinize the building costs overruns—in the billions of dollars—that have been borne by taxpayers,” Pirro wrote on social media. “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.”
“Accordingly, I have directed my office to close our investigation as the IG undertakes this inquiry,” Pirro said, adding that she would “not hesitate” to reopen a criminal investigation “should the facts warrant doing so.”
Pirro’s announcement comes after Powell revealed in January that the Department of Justice had opened an investigation into the Fed, calling it an unprecedented attempt to use “intimidation” to force him to lower interest rates.
White House press secretary Karoline Leavitt emphasized that the case was not over and was “just being moved over to the inspector general who has critical tools at their disposal to continue to look into the financial mismanagement at the Fed.”
Leavitt added that the Fed renovations have been “going on for a very long time. It is costing taxpayers billions of dollars, and I think it is in the best interest of the taxpayer to get to the bottom of it. So the investigation still continues. It is just under a different authority.”
The DOJ investigation had encountered a significant roadblock after Judge James Boasberg, chief judge of the federal district court in Washington, D.C., blocked the department from subpoenaing the Fed.
In the lead-up to the investigation, Trump and Powell’s relationship had grown increasingly rocky. Trump became frustrated over interest rates and began targeting Powell, whom he nominated in 2017. Trump called Powell a “fool” and demanded in March that he drop rates “immediately.”
Tillis, who has a background in finance and sits on the Senate Banking Committee, had vowed to block Warsh’s confirmation because of the DOJ investigation. Tillis had claimed the investigation was political and would improperly interfere with markets.
“It is not cute,” Tillis said during a television interview in February. During his confirmation hearing, Tillis told Warsh, who previously served on the Fed’s Board of Governors, that he had “extraordinary credentials” but that he could not vote to advance his nomination until the DOJ ended its investigation.
Horowitz, who will now investigate the Fed building renovation costs, served as DOJ inspector general for more than a decade. He was one of the few high-profile inspectors general spared during Trump’s historic cull of government watchdogs last year.
Horowitz became known for investigating the FBI’s probe of the Trump 2016 campaign’s ties to Russia. He found in 2019 that the bureau made “significant errors or omissions” when seeking approval from the court of Foreign Intelligence Surveillance Act warrants—a finding that sparked widespread demands for FISA reforms that remain controversial on Capitol Hill.
Some in Trump’s base were disappointed when Horowitz released a report finding that while the FBI had roughly two dozen sources around D.C. during the January 6 Capitol breach, the bureau had not directed any of them to enter the Capitol or otherwise break the law, debunking a theory that federal authorities had helped cause the riot.
Horowitz left the DOJ last year after Powell appointed him to oversee the Fed and Consumer Financial Protection Bureau.