Decision on criminal probe

The US Department of Justice will not reopen its criminal investigation into former Federal Reserve Chair Jerome Powell regarding cost overruns on the central bank's headquarters renovation project. US Attorney General Todd Blanche confirmed the decision on Friday during an interview with Bloomberg News, two days after the Federal Reserve's independent watchdog published its investigative findings. Blanche distinguished management shortfalls from unlawful behavior during his remarks.

“Making mistakes and not having any sort of oversight over the folks doing billion-dollar projects isn't necessarily a crime.”

Blanche stated that the Department of Justice is satisfied with the watchdog report, though he maintained that Powell had not properly supervised the construction. He also noted that federal prosecutors could examine the project again or take action if separate reviews reveal evidence of criminal conduct in the future.

Inspector general findings

The decision follows a report released on 30 September by the Fed's Office of Inspector General. The watchdog concluded that there were deficiencies in the management of the project across two headquarters buildings in Washington, where construction costs escalated by approximately $1 billion, more than doubling initial estimates to reach $2.5 billion.

The inspector general stated that its months-long evaluation found no reasonable grounds to believe that a violation of federal criminal law had occurred, nor did it find administrative misconduct requiring a referral to the attorney general.

Executive branch pressure

President Donald Trump had asked Blanche to review the inspector general's findings and decide what legal steps to take regarding Powell. Following the release of the report on Wednesday, Trump renewed public criticisms of the former central bank leader, calling the budget overruns evidence of incompetence and asserting that Powell should face immediate removal from the Federal Reserve.

Trump previously criticised Powell over interest rate decisions and threatened to fire him. Powell, whose four-year term as Fed chair expired in May, chose to remain on the Fed's Board of Governors, where his governor term runs through January 2028. Powell stated that he decided to stay in office to protect the central bank's institutional independence and intended to remain until legal inquiries concluded with finality.

Background and next steps

Federal scrutiny of Powell began publicly in January, when the Federal Reserve received grand jury subpoenas concerning Powell's testimony before Congress about the building renovation. The Justice Department dropped that inquiry in April while the inspector general proceeded with its administrative evaluation. That closure had followed resistance from Republican lawmakers who refused to confirm Donald Trump's nominee for the Fed chair position, Kevin Warsh, while the probe was pending.

Following the release of the inspector general's findings, current Fed Chair Kevin Warsh announced that the central bank will commission an independent audit of the $2.5 billion renovation. Blanche confirmed that the Department of Justice could review any evidence of criminal wrongdoing uncovered by that upcoming audit. Representatives for Powell and the Federal Reserve did not immediately provide comment.