The Department of Justice (DOJ) has officially terminated its criminal investigation into Jerome Powell, the Chair of the Federal Reserve. This conclusion removes a significant barrier to the Senate confirmation of Kevin Warsh as the next leader of the central bank—an occurrence that may have meaningful implications for both monetary policy and Bitcoin.
U.S. Attorney for the District of Columbia, Jeanine Pirro, announced the closure of this investigation, which was initiated over alleged cost overruns associated with a $2.5 billion renovation of the Federal Reserve’s headquarters in Washington, D.C.
Pirro indicated that she would be transferring the case to the Federal Reserve’s own inspector general, calling for a “comprehensive report in short order,” while also leaving the possibility open for the reopening of criminal proceedings should the need arise.
It is worth noting that the investigation was deemed to lack legal grounding. A federal judge, James Boasberg, quashed the DOJ’s subpoenas in March after a prosecutor conceded that the government had uncovered “essentially zero evidence” of criminal wrongdoing and described the basis for the investigation as “thin and unsubstantiated.” Powell himself referred to the probe as a political weapon, asserting in January that it was a result of the Federal Reserve exercising its mandate to set interest rates based on public welfare rather than on Presidential preferences.
Characterization of the Investigation as ‘Bogus’
Senator Thom Tillis, a Republican from North Carolina and member of the Senate Banking Committee, had previously pledged to obstruct Warsh’s nomination until the investigation was resolved, labeling the inquiry as “bogus.” His opposition, along with united Democratic resistance, had effectively stalled Warsh’s nomination. With the investigation now concluded, it is anticipated that the committee will expedite a vote, leading to a floor confirmation ahead of Powell’s term expiration on May 15.
Kevin Warsh, a 56-year-old former Federal Reserve governor and Stanford professor, testified before the Senate Banking Committee on Tuesday, affirming his commitment to “strict independence” from the White House regarding interest rate decisions. “The president never once asked me to commit to any particular interest rate decision, period,” Warsh stated.
While Senator Elizabeth Warren has characterized him as a “sock puppet” for former President Trump, others within the Republican party have commended his qualifications.
The implications for Bitcoin are substantial. The cryptocurrency has fluctuated between the $70,000 and $92,000 range this year, as the Federal Reserve has maintained interest rates between 3.5% and 3.75%, with market participants closely monitoring the central bank’s signals. Historically, lower interest rates tend to diminish yields on traditional assets, thereby steering capital toward higher-risk assets such as Bitcoin. When the DOJ initiated its probe in January, Bitcoin saw a surge toward $92,000 as institutional investors interpreted the scrutiny of the Fed as a potential threat to the credibility of the dollar and an impetus for rate cuts.
Warsh is perceived as being more hawkish on inflation than Powell, having previously described the Fed’s post-pandemic rate policy as “the biggest policy error in 40 or 50 years.” Should he assume leadership on May 15 and continue with a restrictive approach, Bitcoin investors expecting an expansion of liquidity driven by rate cuts may find their expectations prolonged.
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