Judge quashes Fed subpoenas, saying DOJ has ‘produced essentially zero evidence’ against Powell, who hints at future as board governor

A federal judge on Friday quashed Justice Department subpoenas issued to the Federal Reserve in January, a severe blow to an investigation that has already attracted strong criticism on Capitol Hill.

The investigation into testimony last June by Chair Jerome Powell about a $2.5 billion building renovation has also delayed Senate consideration of Kevin Warsh, President Donald Trump’s pick to replace Powell when his term ends May 15.

Judge James Boasberg said that the government has “produced essentially zero evidence to suspect Chair Powell of a crime” and called its justifications for the subpoenas so “thin and unsubstantiated” that they were simply a pretext to force Powell to cut interest rates, as Trump has repeatedly demanded.

“There is abundant evidence that the subpoenas’ dominant (if not sole) purpose is to harass and pressure Powell either to yield to the President or to resign and make way for a Fed Chair who will,” he wrote.

The unprecedented investigation into Powell and the Fed is the latest in a series of moves by the Trump administration pressure the central bank, which has for decades been considered as independent from day-to-day politics. Trump has also sought to fire Lisa Cook, a member of the Fed’s governing board, after a member of his administration accused her of mortgage fraud, though no charges were ever filed. The Supreme Court has blocked Cook’s firing for now.

Boasberg’s ruling blocks U.S. Attorney Jeanine Pirro, who issued the subpoenas, from obtaining records from the Fed related to the building renovation. Pirro blasted the ruling at a news conference and said she would appeal it.

Pirro said an “activist judge” has quashed the subpoenas, and has “neutered the grand jury’s ability to investigate crime“ and leaves Powell “bathed in immunity.”

“This is wrong and it is without legal authority,” she said.

The Justice Department’s investigation centers on testimony last June by Powell before the Senate Banking Committee, when he was asked about cost overruns on the Fed’s extensive building renovations. The most recent estimates from the Fed suggest the current estimated cost of $2.5 billion is about $600 million higher than a 2022 estimate of $1.9 billion.

Powell at the time disputed that the renovation included “rooftop gardens … VIP elevators” and other amenities. But administration officials charged that earlier construction plans included some of those features, suggesting Powell was either lying or hadn’t filed updated building plans.

Pirro, in her news conference, said she wanted to investigate “an atrocious cost overrun of $1 billion.” In a filing unsealed Friday, the government said it was investigating “possible fraud and false statements” by the Fed and Powell.

Pirro’s plan to appeal and continue the investigation could further delay the Senate’s consideration of Warsh’s nomination. Powell can remain as Chair past May 15 if no replacement has been approved.

Powell revealed the investigation in an unprecedented video Jan. 11, which prompted Senator Thom Tillis, a North Carolina Republican and member of the Banking committee, to block consideration of Warsh until the investigation is dropped.

Tillis said the ruling confirmed “just how weak and frivolous the criminal investigation of Chairman Powell is.” Tillis has vowed to blockade all Federal Reserve nominees until the criminal probe into Powell is dropped.

“We all know how this is going to end and the D.C. U.S. Attorney’s Office should save itself further embarrassment and move on,” Tillis said Friday. “Appealing the ruling will only delay the confirmation of Kevin Warsh as the next Fed Chair.”

Tillis has also said that seven Republican members of the banking committee have said no crime was committed by Powell at the June hearing.

On Tuesday, Tillis met with Warsh and said he “possesses impeccable credentials and a clear vision for maintaining the Fed’s independence while achieving its dual mandate,” which is to seek low inflation and maximum employment. But he reiterated he couldn’t support Warsh until the investigation is completed.

With Republicans holding only a 13-11 majority on the committee, Tillis can block Warsh’s nomination from being forwarded to the Senate if all Democrats vote against it.

In his ruling, Boasberg said he offered to let the government submit further evidence against Powell directly to him, so that they wouldn’t have to tip their hand to the Fed or Powell. But the government declined to submit evidence under those conditions.

“The Court is thus left with no credible reason to think that the Government is investigating suspicious facts as opposed to targeting a disfavored official,” the judge wrote in his ruling.

In one of the filings unsealed Friday, there was a tantalizing reference to a key question that has surrounded Powell for months, which is whether he will step down from the governing board when his term as Chair ends. It was included in a government filing in response to the Fed’s move to throw out the subpoenas.

Powell is serving a separate term as a Fed governor until January 2028. Most chairs resign from the board when their time as chair ends, but Powell has refused to answer if he will do so. Remaining on the board would enable Powell to deny Trump the opportunity to appoint a new governor.

In recounting a meeting between a lawyer for the Fed and Pirro, the filing says that the Fed’s attorney indicated that: “The Chair feels like he would not leave the board when his term as Chair expires, if he was still under investigation.”

The filing went on to say that Powell wouldn’t commit to leave the board if he was not under investigation, but added that, “it would be a different look to the Chair if he was not facing criminal investigation and the Chair would be free to make a decision that would focus on his family.”

Boasberg, who was nominated to the bench by Democratic President Barack Obama, has been at odds with the White House on other legal fronts since Trump returned to office last January. The Justice Department sought Boasberg’s removal from a high-profile case in Washington after he barred the Trump administration from carrying out a wave of deportation flights under wartime authorities from an 18th-century law.

This story was originally featured on Fortune.com