Unlock the White House Watch newsletter for free
Your guide to what Trump’s second term means for Washington, business and the world
Donald Trump’s Federal Reserve chair nominee Kevin Warsh faces a battle in the Senate after lawmakers threatened to hold up his confirmation until the Department of Justice halts its probes into Jay Powell and Lisa Cook.
In a letter addressed to Senate banking committee chair Tim Scott, the 11 Democrats on the influential committee demanded that he delay any nomination proceedings for Warsh “until the pretextual criminal investigations against Chair Powell and other Fed board members have been closed”.
Trump nominated Warsh to be the next chair of the Fed last Friday. The Senate banking committee will review the nomination before it is voted on by the 100-member Senate.
While Republicans control the banking committee 13-11, Thom Tillis, the Republican senator from North Carolina, has threatened to block Warsh’s nomination over the DoJ’s criminal probe of Powell.
Tillis on Friday described Warsh as a “qualified nominee with a deep understanding of monetary policy”, but said he would oppose the confirmation of any Fed nominee, including Warsh, until the justice department’s Powell investigation was “fully and transparently resolved”.
Tillis, who did not sign the Democrats’ letter, is so far the only Republican member of the committee to say he would oppose Warsh’s nomination. But assuming a confirmation vote splits along party lines, his vote would divide the committee 12-12 and potentially block Warsh’s nomination from proceeding to a full Senate vote.
That could stymie the confirmation process at a time when the Trump administration’s attacks on the US central bank risk undermining confidence in the world’s biggest economy.
A spokesperson for Scott declined to comment.
Trump has rejected calls for the justice department to halt the investigation into Powell, which relates to the Fed’s handling of the $2.5bn renovation of its headquarters in Washington, which is $700mn over budget.
“She’s just going to take it to the end,” the US president told reporters on Monday when asked if Jeanine Pirro, the US federal prosecutor in Washington, should drop the probe. “It’s either gross incompetence or it’s theft of some kind or kickbacks. I don’t know what it is, but Jeanine Pirro is incredible, and she’ll figure it out.”
Powell has denied the allegations and claimed the investigation was a “pretext” aimed at forcing Fed officials to cut borrowing costs below the 3.5-3.75 per cent range rate-setters believe is the right level for the US economy.
Trump wants interest rates to fall as low as 1 per cent — a level, he says, that would save Americans hundreds of billions of dollars a year by lowering the government’s refinancing costs and boosting the economy.
The DoJ is also investigating Cook over allegations of mortgage fraud. Trump tried to fire the Fed governor over the summer. But Cook, who has denied the allegations, remains at the central bank and appeared before the Supreme Court last month to contest the president’s attempts to sack her.
“The administration’s apparent effort to seize control of the Fed through criminal prosecutions is dangerous and unprecedented,” said the letter, seen by the FT. “It would be absurd on its face to allow President Trump to handpick the next chair of the Federal Reserve as his Department of Justice actively pursues criminal investigations of not one, but two sitting members of the Fed board.
“This committee should not participate in this farcical effort that threatens to undermine our democracy and confidence in our financial markets.”
The DoJ did not immediately respond to a request for comment.
The difficulties in moving forward with the confirmation of Warsh, a former Fed governor who is seen as a mainstream candidate with good relations on Capitol Hill and Wall Street, highlight how the White House’s attacks on the Fed and Powell risk backfiring.
Powell, who has faced a series of barbs from Trump over his refusal to cut rates as low as the president wants, would remain as the Fed chair beyond the end of his second term in May should the Senate fail to approve Warsh in time.
Stephen Miran, a Fed governor and Trump ally, later on Tuesday stepped down from his role on the White House’s Council of Economic Advisors.
During his Fed confirmation hearing Miran had told the Senate that he would take a leave of absence from his White House role when his central bank term expired at the end of January. However, he will remain at the Fed until a replacement is confirmed.
Additional reporting by Stefania Palma in Washington
