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Decision on Powell is now clear

The US Department of Justice said it will not reopen its criminal investigation into former Federal Reserve Chair Jerome Powell over the cost-overrun renovation project at the Fed’s headquarters. The decision means there will be no new criminal step, for now, in the legal dispute surrounding a project whose cost rose into the billions and exceeded its original budget.

While the department signaled that the criminal investigation into Powell will not be reopened, it did not completely rule out the possibility of a separate review if an independent audit of the renovation turns up new findings that could amount to criminal conduct. The case may appear closed, but debate continues over the Fed’s project management and internal oversight structure.

What do the court process and audit report say?

The development comes after the Fed inspector general’s latest review. The report said there was no reasonable basis to conclude that a federal crime had been committed that would warrant referral to the Justice Department, while also pointing to serious management and oversight failures that drove costs sharply higher.

In the investigation opened in January, prosecutors issued grand jury subpoenas for related records. But a federal judge canceled those subpoenas in March, saying they had been issued for an improper purpose, and found that the government had failed to present substantial evidence that Powell had committed a crime. Although the Justice Department challenged that ruling, it later closed the investigation rather than appeal.

  • The investigation was launched in January.
  • The grand jury subpoenas were canceled in March.
  • Fed leadership passed to Kevin Warsh in May.
  • Powell’s term on the Fed Board of Governors ends on January 31, 2028.

Key implications for Fed leadership and markets

Powell no longer holds the chairmanship, but he remains on the Fed’s Board of Governors. New Fed Chair Kevin Warsh said an independent auditor would be appointed for the renovation project and that oversight mechanisms would be strengthened.

The decision reduces the risk of criminal action against Powell, but it does not eliminate questions about the Fed’s spending discipline and governance standards. Donald Trump has argued that Powell should also leave the board, following a long-running dispute over interest-rate policy. For financial markets, the move lowers legal uncertainty around the Fed’s top leadership while signaling that political pressure on the institution remains.

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