The standoff over the succession at the head of the Federal Reserve is intensifying. While a Republican senator blocks any progress until the investigation targeting Jerome Powell is completed, the Treasury Secretary proposes a bold strategy: why not fight both battles head-on? A political chess game that could redefine the future of the Fed.
In brief
- Scott Bessent calls on the Banking Commission to hold Kevin Warsh hearings without waiting for the conclusion of the Powell investigation.
- Republican Senator Thom Tillis threatens to block any confirmation until the Justice Department sheds full light on the Powell affair.
- The DOJ investigation focuses on expenses related to a multi-year renovation project at the Fed buildings.
- Powell denounces political exploitation, linked to his disagreement with Trump on monetary policy.
Scott Bessent's strategy in the face of Tillis' blockage
Scott Bessent made a public appeal to the Senate Banking Committee on Sunday. On Fox News, the Treasury Secretary urged senators to begin hearings now with Kevin Warsh, Donald Trump's nominee to lead the Fed. A position which openly defies the blockade announced by Thom Tillis.
The North Carolina senator was however clear: there was no question of confirming Warsh before the Justice Department's investigation into Jerome Powell was completed.
“ Senator Tillis has publicly stated that he considers Kevin Warsh to be an extremist candidate “, recalled Bessent. Before adding: “ So I would say, why not launch the hearings and see where Jeanine Pirro's investigation leads? »
This proposal reveals Tillis's dilemma. An influential member of the banking committee, the Republican senator actually supports Warsh's candidacy. He even said that he would be “among the first” to present it. But its priority objective remains the protection of the independence of the Fed in the face of political pressure.
The Republicans have 13 out of 24 seats on the commission. In theory, they could pass Warsh without the Democrats. But Tillis' hostile vote would change the situation. The final decision would then fall to the Democrats, transforming what was supposed to be a formality into a real political ordeal.
The investigation into Powell, a political weapon?
The Justice Department opened its investigation in early January. Federal prosecutor Jeanine Pirro, who heads the District of Columbia office, served the Fed with grand jury subpoenas. The object? Expenditures deemed suspicious as part of a vast renovation project for Federal Reserve buildings.
Powell immediately counterattacked. On January 11, the current president of the Fed denounced a political maneuver. According to him, this investigation aims to punish him for having maintained high interest rates, against Trump's express wishes. A serious accusation which highlights the tensions between the White House and the central bank.
This affair occurs in an already electric context. Since Warsh's official appointment on January 30, the financial markets have been shaking. Bitcoin plunged from $84,500 to below $75,000. Investors fear a sharp monetary shift, even if some economists believe that Warsh could instead lower rates more quickly than expected.
The confirmation process will follow several steps. First, Warsh will have to appear before the Banking Commission for a review hearing. Then, the committee will vote on whether or not to forward its nomination to the full Senate. Finally, all senators will debate before the final vote. A journey strewn with pitfalls, especially if Tillis maintains his blockage.
The current impasse in the Senate illustrates the power battles taking place around the Fed. Between Bessent's offensive strategy, Tillis' obstinacy and Powell's accusations, Warsh's appointment promises to be explosive. The coming weeks will tell whether the Treasury will manage to resolve the situation or whether the DOJ investigation will permanently paralyze the confirmation process.
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