DOJ Drops Powell Probe, Clearing Path for Warsh Nomination

Key Takeaways:

• The DOJ has dropped its criminal investigation into Jerome Powell, clearing the way for Kevin Warsh’s confirmation as Fed chair before Powell’s term ends on 15 May.
• Senator Thom Tillis had blocked Warsh’s nomination over the probe, citing threats to Fed independence. He announced Sunday he is now prepared to support the confirmation.
• Markets remain unsettled, with Iran peace talks stalled and Goldman Sachs raising its Q4 oil forecast on record inventory drawdowns.

Following last week’s news on Tillis blocking Warsh’s nomination, the DOJ has pulled its investigation of Jerome Powell. U.S. Attorney Jeanine Pirro announced Friday that her office was closing the probe and referring scrutiny of the Fed’s multibillion-dollar headquarters renovation to the Federal Reserve’s inspector general. This clears the way for the potential Warsh nomination as Powell prepares to finish on 15 May.

Tillis, a North Carolina Republican, was blocking Warsh’s confirmation in retaliation for the DOJ investigating Powell. His reasoning was to keep Fed independence intact. While claiming he did not believe Trump had personally ordered the investigation, he suggested someone at the DOJ had acted to please the president.

Tillis announced Sunday on NBC’s Meet the Press that he is prepared to move forward with Warsh’s confirmation. “I am prepared to move on with the confirmation of Mr. Warsh, I think he’s going to be a great Fed chair,” he said, adding that he had received -assurances from the DOJ that the probe was “completely and fully ended.” His position on the Senate Banking Committee had allowed him to defect and keep the panel deadlocked at 13 to 11. The committee is now expected to vote on Warsh’s nomination Wednesday.

While this development clears one source of uncertainty for the Fed, the broader investing environment remains unsettled. Trump cancelled a planned Pakistan trip for Kushner and Witkoff, saying there was no point flying 18 hours to talks where the Iranian side refused to commit to a meeting. Goldman Sachs has also raised its Q4 oil forecast, warning that Middle East production losses are driving the fastest inventory drawdown on record, with an estimated 14.5 million barrels per day of output lost. The Fed may have slipped out from under direct political pressure, but the Iran conflict now looms as a significant external constraint on any rate decisions under new leadership.

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