Pirro’s Jerome Powell Fed investigation is hitting roadblocks

Federal prosecutors are still pressing the Federal Reserve over allegations of some abuses in the Trump administration’s ongoing building disclosures and Chairman 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 problematic and it’s time to appeal the judge’s rulings against her.

Investigators from Pirro’s office visited a Fed construction site on Tuesday, according to a memo the Fed’s legal team sent to prosecutors and seen by CNBC. Investigators showed up “without notice” and asked for a tour, Fed lawyer Robert Hur wrote in the memo.

“Any construction project with cost overruns exceeding almost 80% of the initial construction budget deserves serious scrutiny,” Pirro told CNBC.

The inspectors’ visit coincides with a crucial turning point in Pirro’s investigation. James E. Boasberg, chief judge of the U.S. District Court for the District of Columbia, ruled last month that prosecutors did not meet the threshold for seeking subpoenas to the Fed. He quashed subpoenas issued by Pirro’s office and on April 3 denied prosecutors’ request to appeal the decision.

Pirro has 30 days to appeal Boasberg’s decision quashing the subpoenas, per the appellate court’s rules. That sets May 4 as the date when the Senate could take a first vote on a nominee to replace Powell with former Fed Governor Kevin Warsh.

The fate of Warsh’s nomination hinges on the Powell investigation. Sen. Thom Tillis, R.-N.C., said Tuesday that he plans to vote not to allow Warsh to proceed unless Pirro’s investigation is resolved. Tillis and Powell describe the investigation as an attempt to force the Fed to lower interest rates.

Congress has given the Fed the authority to set interest rates independently of policy because it is popular to keep rates low even if it risks inflation.

Warsh is scheduled to testify before the Senate Banking Committee on April 21, but it’s unclear what will happen next because Tillis blocked his confirmation. A hearing is a step the committee takes before voting on a candidate.

The inspectors’ visit to the Fed, first reported by the Wall Street Journal, may be an attempt to break the impasse.

A prosecutor from Pirro’s office told Boasberg in March that the Justice Department “does not know” whether there was any improper conduct by Powell and rejected the judge’s offer to introduce any suspicion without a defense. Boasberg ruled that prosecutors’ subpoenas were not legitimate because the government “provided no evidence of fraud.”

Daniel Richman, chief of the appellate division of the U.S. attorney’s office for the Southern District of New York and a law professor at Columbia University, said Pirro’s investigation of Powell would not survive judicial review without new evidence.

Boasberg’s order did not prevent the government from investigating, but it made clear that the court wanted to see concrete evidence.

Richman said Boasberg “leaves the government room to make a proper showing.” “In fact, the government’s refusal to show this is one reason why the decision is difficult to appeal.” Richman said he believes the appeals court will conclude that Boasberg was correct in concluding that prosecutors did not meet the minimum standard for issuing a grand jury subpoena.

Pirro said he believes he can continue moving forward. “He can certainly continue the investigation,” a person familiar with Pirro’s thinking said on condition of anonymity describing private discussions about an ongoing investigation.

“Appealing the decision is just a matter of issuing a subpoena,” the person said.

This leaves open the possibility that the appeal period may expire before the investigation is clearly concluded. Both Tillis and Powell said quietly giving up wouldn’t be enough for them; They want to see a positive ending. Without that, Tillis could keep Warsh in limbo until the senator retires from Congress in January.

Pirro said he believes cost overruns in renovating the Fed’s headquarters are reason enough to continue investigating the central bank.

Meanwhile, President Donald Trump continues to claim Powell did something wrong. Trump said Wednesday that he would fire Powell “if he doesn’t leave on time.” Powell’s term as chairman ends May 15. He can remain a board member until January 2028.

Trump is also seeking a new attorney general after firing Pam Bondi from the job earlier this month. Politico reported Pirro among potential candidates He will replace Bondi.

Pirro said at a press conference last week that he was happy with his current job.

—Steve Liesman contributed to this report.