The Justice Department concluded its criminal investigation into Federal Reserve Chair Jerome Powell on Friday, clearing a significant hurdle that had stalled Senate proceedings regarding Kevin Warsh’s nomination as the next central bank leader.
This probe was focused on purported cost overruns linked to a $2.5 billion renovation of the Fed’s Washington headquarters. Republican Senator Thom Tillis from North Carolina had pledged to hinder any vote on Warsh’s confirmation until the investigation concluded, referring to it as ‘bonus.’
An unnamed Republican senator remarked that ‘Tillis won,’ as per Politico, which indicated that a Banking Committee vote on Warsh might occur next week.
U.S. Attorney Jeanine Pirro cautioned in an X post she would ‘not hesitate to restart a criminal investigation should the facts warrant doing so.’ White House spokesperson Kush Desai also commented via X post, expressing confidence that the Senate will ‘swiftly confirm Kevin Warsh as the next Federal Reserve Chairman to finally restore competence and confidence in Fed decision-making.’
The DOJ’s announcement notably influenced prediction market bets. Traders on Kalshi shifted the likelihood of Warsh’s confirmation to 84% before Powell’s May 15 exit, a rise from approximately 30% prior to Friday’s revelation. Polymarket users have set odds for his confirmation by May 15 at 77%, as reported.
Warsh has declared numerous crypto startup investments in his financial disclosures, including shares in dYdX, Polymarket, Polychain Capital, Dapper Labs, Solana, and Optimism. During his hearing, he informed senators that ‘digital assets are already part of the fabric of our financial services industry in the United States,’ while opposing a Federal Reserve-issued central bank digital currency (CBDC) as ‘bad policy.’
At 56, Warsh previously served on the Fed’s board from 2006 to 2011 and acted as special assistant for economic policy under President Bush. His nomination has met stiff resistance from Senator Elizabeth Warren (D-MA), who labeled him a ‘sock puppet’ for Trump during Banking Committee debates.
Warren expressed concerns that ‘having a sock puppet in charge of the Fed would also give the president access to the Fed’s powerful authorities to enrich himself, his family, and his Wall Street buddies.’ She cited worries about ‘granting special accounts to his family’s crypto company or bailouts to his friends on Wall Street if they get into trouble.’
Warsh has criticized the Fed’s pandemic-era monetary expansion as ‘the biggest policy error in 40 or 50 years.’ Powell, defending the Fed’s independence in previous testimonies, remarked that presidential criticism of rate decisions was ‘a consequence of the Federal Reserve setting interest rates based on our best assessment of what will serve the public, rather than following the preferences of the President.’