The senior personnel landscape of the Federal Reserve just took a pivotal turn. Last Sunday, Republican Senator Thom Tillis from North Carolina officially backed Kevin Warsh for the Chair position at the FED.
This decision has ended months of deadlock in the Senate, removing the last major obstacle for Donald Trump's nominee to officially succeed the current Chair, Jerome Powell.
Here is an overview of this important political-financial event:
🔷 DOJ's Knot Untangled
Senator Tillis's prolonged opposition does not stem from Kevin Warsh's abilities, but from a criminal investigation by the DOJ targeting Jerome Powell.
Tillis views the DOJ's investigation into Powell's testimony before Congress as a political leverage, an attack on the independence of the central bank aimed at forcing Powell to resign early. This senator previously stated he would block all nominations until the matter is clarified.
However, the turning point came last Friday when U.S. Attorney Jeanine Pirro announced:
Closing the criminal investigation: Her office officially suspended the investigation into Powell.
Internal transfer: The case has been handed over to the FED Inspector General, Michael Horowitz, for further internal handling.
🔶 The Assurance That Helped Tillis "Change His Mind"
In an interview on Meet the Press, Mr. Tillis explained that the reason for the concession was that he received solid commitments from the DOJ.
The criminal investigation has "completely wrapped up."
The case can only be reopened if there is an official criminal complaint from the FED Inspector General (whom Tillis regards as the most reputable in Washington).
Any appeals from the DOJ regarding the previous subpoena ruling are purely administrative procedures, not grounds for reopening the investigation.
"With these assurances, I am eager to support the confirmation of Mr. Kevin Warsh. It's time for the Federal Reserve to eliminate this interference and focus all its energy on its mission," Tillis asserted.
🔷 Upcoming Confirmation Timeline
Tillis's support is crucial because the Republicans currently hold a slim majority of 13-11 on the Senate Banking Committee. If Tillis continues to veto, Warsh's nomination will get stuck in the committee. With the barriers removed, the expected timeline will unfold as follows:
This Wednesday: The Senate Banking Committee will vote on Mr. Warsh's nomination.
Week of 11/5: Full Senate vote (after the first week of May break).
May 15: Deadline when Mr. Powell's term as FED Chair officially ends.
🔶 What Future Awaits Jerome Powell and the Direction of Kevin Warsh?
Although Kevin Warsh is almost certain to take over the Chair position, Jerome Powell's future at the FED remains a big question mark.
Powell stays on the Board: Although his Chair term ends on May 15, Powell's Governor Board term extends until 2028. The DOJ's suspension of the investigation doesn't mean he will leave the Board.
Pressure from the administration: Mr. Trump stated that the investigation is "not completely canceled" due to the Inspector General's ongoing involvement, emphasizing his duty to uncover the cause of the project's cost overruns. This pressure may continue to surround Powell even if he is no longer Chair.
As for his successor, Kevin Warsh (56 years old) is not a stranger. He served as a FED Governor from 2006 to 2011. Since leaving, he has emerged as a frequent critic of the agency's policies. During last week's hearing, Warsh strongly called for a "deep institutional change" in the Federal Reserve's policy-making process.
