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A top Senate Republican has said Fed chair Jay Powell has not “committed a crime”, in a strong rebuke of the Trump administration’s probe into the central bank chief from a senior member of the president’s own party.
The remarks from Tim Scott, chair of the powerful Senate banking committee, are a blow to Donald Trump, who is facing criticism in the justice department’s investigation of Powell. The probe revolves around whether Powell misled the committee about a $2.5bn renovation of the Federal Reserve’s headquarters, which is $700mn over budget.
“I found him to be inept at doing his job, but ineptness or being incompetent is not a criminal act,” Scott told Fox Business Network on Wednesday, in his first public comments since the investigation was revealed by Powell last month.
Scott added that while Powell “made a gross error in judgment” and “was not prepared” for lawmakers’ questions on the renovation last summer, he did “not believe that he committed a crime during the hearing”.
The Department of Justice investigation sparked a backlash on Capitol Hill and has threatened to hold up Trump’s efforts to appoint Kevin Warsh as Powell’s successor at the top of the world’s largest central bank.
While most Republican senators have praised Warsh’s nomination, North Carolina Republican Thom Tillis has vowed to block his confirmation until the investigation into Powell is “resolved”.
Powell has denied the allegations and claimed the probe was a “pretext” aimed at forcing Fed officials to succumb to pressure from Trump to slash borrowing costs.
Kevin Cramer, another Republican senator on the banking committee, told the FT in an interview this week he also believed that Powell was not a criminal and that he hoped the probe would be dropped.
“If misleading the United States Senate, misleading Congress, was a criminal offence, we would have to build another federal penitentiary to house them all,” Cramer said.
“Jay blew it that day. But . . . does it rise to that level? I don’t think it does, especially a couple of months from his expiration date.”
The backlash against the probe has threatened to derail the confirmation hearing for Warsh.
On Tuesday, the FT reported that the banking committee’s 11 Democrats wrote a letter to Scott saying they would try to block a confirmation hearing until the DoJ investigation was dropped.
Democrats also want federal prosecutors to end a probe of Fed governor Lisa Cook, who has faced allegations of mortgage fraud, which she denies.
A banking committee hearing is a crucial first step to Warsh receiving full confirmation from the Senate to take over from Powell in mid-May.
Scott said Warsh’s confirmation hearing was going to “move forward”, adding: “Thom Tillis will be voting for Kevin Warsh as the next chair of the Federal Reserve. That’s my prediction.”
Tillis has signalled that he has no personal issues with the nomination of Warsh, a former Fed governor with deep connections on Wall Street and Capitol Hill, and his refusal to proceed with the probe relates entirely to the investigation and Trump’s attacks on rate-setters’ independence to set interest rates.
“My position has not changed: I will oppose the confirmation of any Federal Reserve nominee, including for the position of chair, until the DoJ’s inquiry into Chairman Powell is fully and transparently resolved,” Tillis said in a statement last Friday after Warsh was nominated.
Trump, however, has rejected calls for the justice department to halt the investigation into Powell. “She’s just going to take it to the end,” the president told reporters on Monday when asked if Jeanine Pirro, the US federal prosecutor in Washington, should drop the probe.
