DOJ Won’t Reopen Powell Probe Over Fed Renovation Costs

The Justice Department will not reopen the Powell probe Fed renovation criminal investigation, Attorney General Todd Blanche said Friday, closing a chapter that had kept former Federal Reserve Chair Jerome Powell under a legal cloud months after he stepped down as chair.

Blanche told Bloomberg News that prosecutors are not reviving the case, after the Fed’s Office of Inspector General concluded earlier this week that it found no grounds for a criminal referral and no evidence of administrative misconduct tied to cost overruns on the central bank’s headquarters renovation project. A DOJ spokesperson confirmed the position to Reuters on Friday.

The decision lands just days after President Donald Trump demanded Powell resign from the Fed’s Board of Governors over the watchdog’s findings. Trump had ordered Blanche on Wednesday to examine the inspector general report to determine a future course of action. Powell has remained at the Fed as a governor since stepping down as chair in May.

What the Powell Probe Fed Renovation Review Found

The inspector general’s report examined the roughly $2.4 billion renovation of the Fed’s headquarters in Washington. The watchdog found significant shortcomings in the project’s management and oversight, but no evidence warranting a criminal referral, according to Reuters and the Washington Examiner.

Blanche said he was satisfied with the inspector general’s findings. He did not fully close the door to future action. He noted that the Fed plans to bring in an independent auditor to scrutinize construction costs, and said the Justice Department could investigate if that review uncovers evidence of criminal wrongdoing.

• Inspector general: no criminal referral, no administrative misconduct found
• Watchdog finding: lax oversight contributed to cost growth
• Project cost: about $2.4 billion, up from an initial estimate near $1.3 billion in 2020
• DOJ position: no reopened criminal probe at this time

His successor as Fed chair, Kevin Warsh, said Thursday he would hire an independent auditor to verify accuracy and compliance for all of the project’s costs, according to Reuters reporting. Blanche echoed that expectation, saying he anticipates an auditing process and that the department would act if it reveals criminal misconduct.

Why the Renovation Became a Political Flashpoint

The renovation has been a recurring source of friction between Trump and Powell. The two clashed for years over interest rate policy, with Trump repeatedly pressing the Fed to lower rates and Powell defending the central bank’s independence in setting monetary policy.

As the renovation’s price tag grew, Trump criticized Powell over management of the project, saying costs had risen by more than $1 billion above early estimates. The dispute became a public test of how far presidential pressure could reach into the Fed’s internal operations.

At his final press conference as Fed chief in April, Powell said he would not leave the Board until the investigation was, in his words, well and truly over, with transparency and finality. He has not announced a departure date, and a Fed spokesperson had no immediate comment on Blanche’s statements, Reuters reported.

What Blanche Left Open

Blanche was careful to distinguish between closing the criminal probe and ending scrutiny of the project itself. In comments reported by Bloomberg and Reuters, he said he has not ruled out continuing to look into the project’s oversight and potentially taking action if evidence of wrongdoing comes to light.

That leaves two tracks running in parallel: a closed criminal matter for Powell personally, and an open administrative review of how a major federal construction project ballooned in cost. The independent audit Warsh promised will now be the key document to watch. If it finds only management failures, the matter likely ends as a governance story. If it finds evidence of fraud or false statements, Blanche has signaled prosecutors would return.

What It Means for the Fed

For the Federal Reserve as an institution, the immediate effect is relief from a criminal overhang that has hung over its former chair and, by extension, its credibility. Central banks rely on public confidence that their decisions are made on economic grounds, not under legal duress. Removing the threat of prosecution reduces one source of political noise around monetary policy.

It does not remove the governance questions. A project that grows from about $1.3 billion to about $2.4 billion invites legitimate oversight, and the inspector general’s criticism of lax management gives Congress and the public a factual basis to demand better controls. The Fed will need to show, through the independent audit and clearer reporting, how it will prevent a repeat.

For Powell personally, the decision vindicates his decision to remain on the Board. Had prosecutors reopened the case, his continued service would have been difficult to sustain. With the probe closed, he can serve out his term as governor without the distraction of a criminal defense, though the political argument over the renovation is unlikely to disappear entirely.

For markets, the news is a small stabilizer. Investors watch Fed independence closely because it affects the credibility of inflation fighting. A criminal probe into a former chair, especially one still sitting as a governor, would have been an unusual and unsettling precedent. Its closure returns focus to the usual drivers: inflation data, employment data, and the path of interest rates under Warsh.

What Happens Next

The next milestone is the independent audit Warsh announced. No timeline has been published, but Blanche’s comments suggest the Justice Department will read it closely. Lawmakers may also hold hearings on the renovation’s cost controls, using the inspector general report as a starting point.

Powell’s future remains a secondary storyline. He has given no indication he plans to resign, and Trump has no direct authority to remove a Fed governor except for cause. With the criminal question answered, any further pressure would be political rather than legal.