Pirro’s Jerome Powell Fed investigation is hitting roadblocks

Federal prosecutors are still pressuring the Federal Reserve over the Trump administration’s allegations that there was some malfeasance involved in ongoing building renovations and Chair Jerome Powell‘s testimony to Congress about them. But legal experts say U.S. Attorney for the District of Columbia Jeanine Pirro’s investigation appears to be in trouble, and she faces a ticking clock to appeal a judge’s rulings against her. 

Investigators from Pirro’s office visited a Fed construction site Tuesday, according to a note sent by the Fed’s legal team to the prosecutors and seen by CNBC. The investigators appeared “without prior notice” and asked for a tour, Robert Hur, an attorney for the Fed, wrote in the note.

“Any construction project that has cost overruns of almost 80% over the original construction budget deserves some serious review,” Pirro said in a statement to CNBC.

The investigators’ visit comes at a crucial juncture for Pirro’s investigation. James E. Boasberg, chief judge of the U.S. District Court for the District of Columbia, ruled last month that the prosecutors hadn’t met the low bar to seek a subpoena to the Fed. He quashed subpoenas Pirro’s office had issued, and on April 3 declined a request by the prosecutors to appeal the order. 

Pirro has 30 days to appeal Boasberg’s ruling quashing the subpoenas under the appeals court’s rules. That sets up May 4 as a date by which the Senate may attempt to go ahead with an initial vote on the nominee to replace Powell with former Fed Governor Kevin Warsh.

The fate of Warsh’s nomination is tied to the Powell investigation. Sen. Thom Tillis, R.-N.C., said as recently as Tuesday he intends to vote against allowing Warsh to proceed as long as Pirro’s probe remains unresolved. Tillis and Powell describe the investigation as an attempt to bully the Fed into lowering interest rates. 

Congress gave the Fed the power to set interest rates independently of politics, because it tends to be popular to keep rates low, even though that can risk inflation. 

Warsh is set to testify in front of the Senate Banking Committee on April 21, though with Tillis blocking his confirmation, it isn’t clear what would happen next. A hearing is a step the committee takes ahead of voting on a nominee.

The investigators’ visit to the Fed, which was first reported by The Wall Street Journal, may have been an attempt to break that logjam. 

A prosecutor from Pirro’s office told Boasberg in March that the DOJ does “not know” if there had been improper conduct by Powell and declined an offer by the judge to present any suspicions without presence of the defense. Boasberg proceeded to rule that the prosecutors’ subpoenas were illegitimate because the government had “presented no evidence whatsoever of fraud.”

Without some new evidence, Pirro’s investigation of Powell won’t survive judicial scrutiny, said Daniel Richman, a law professor at Columbia University who was chief of the appellate division at the office of the U.S. attorney for the Southern District of New York. 

Boasberg’s order didn’t foreclose the government from investigating, but it did make clear the court wants to see hard evidence. 

Boasberg “left room for the government to proceed on a proper showing,” Richman said. “Indeed the government’s refusal to make that showing is one reason why an appeal of the order is hard.” Richman said he believes an appeals court would conclude Boasberg was correct in concluding prosecutors hadn’t met the minimal standard for issuing a grand jury subpoena.

Pirro has said she believes she has scope to proceed. She “can certainly keep investigating,” a person familiar with Pirro’s thinking said on condition of anonymity to describe private discussions about an ongoing investigation. 

“Appealing the ruling just pertains to issuing subpoenas,” the person said.

That leaves open the possibility that the deadline for appeal could go by without a clear ending to the investigation. Both Tillis and Powell have said that quietly dropping it won’t be enough for them; they want to see an affirmative end. Without it, Tillis could keep Warsh in limbo until the senator retires from Congress in January.

Pirro has said she believes the Fed’s cost overruns in renovating its headquarters are sufficient reason to keep looking into the central bank.

Meanwhile, President Donald Trump continues to assert Powell did something wrong. Trump said Wednesday he would fire Powell “if he’s not leaving on time.” Powell’s term as chair ends May 15. He can stay on as a board member through January 2028.

Trump is also looking for a new attorney general after firing Pam Bondi from that job earlier this month. Politico has reported that Pirro is among the potential candidates to replace Bondi.

Pirro said at a news conference last week she is happy with her current job.

— CNBC’s Steve Liesman contributed to this report.