Kevin Warsh, Donald Trump's nominee to lead the Federal Reserve, cleared a key procedural hurdle on Wednesday, paving the way for him to succeed Jerome Powell in the coming weeks. This development comes as the White House intensifies its unprecedented efforts to exert control over the world's most powerful central bank.
Senate Committee Vote
The Senate Banking Committee approved Warsh's nomination in a 13-11 vote, strictly along party lines, with all Republicans supporting the nomination. The vote sets up a confirmation vote in the full Senate in the coming days. Republican Senator Thom Tillis of North Carolina dropped his opposition after the Department of Justice ended a criminal investigation into Powell, which Tillis had viewed as a threat to the Fed's political independence.
All 11 Democrats on the panel voted against Warsh, expressing doubts about his promise to set policy independently of the president's wishes. Senator Elizabeth Warren, the ranking Democrat on the committee, reiterated her concern that Warsh would be a "sock puppet" for Trump. "Members of this committee who vote for Mr. Warsh and help facilitate President Trump's takeover of the central bank will come to regret it," Warren said. "Unfortunately, it will be American families that pay the price."
Powell's Final Meeting
The vote coincides with what is likely to be Powell's last policy-setting meeting as Fed chair. The Federal Open Market Committee is widely expected to keep the benchmark interest rate unchanged in the current 3.50%-3.75% range, given persistent inflation and upward price pressures from disruptions to global oil supplies due to the Iran war.
There is little doubt that the Senate will confirm Warsh, a 56-year-old lawyer, financier, and former Fed governor who has promised "regime change" for the central bank. Trump has repeatedly stated that Warsh will deliver the rate cuts the president desires. The timing of the confirmation vote remains uncertain, but if it follows the recent template for Trump administration Fed nominees, Warsh could be sworn in by May 15, when Powell's leadership term ends.
Uncertainty Over Powell's Role
It is unclear whether Warsh's ascension would mean Powell's exit from the Fed or whether Powell would remain as a board member. If Powell stays, Trump may follow through on his threat to fire him, which would likely draw a legal challenge, similar to the president's attempt last summer to fire Fed Governor Lisa Cook. Powell's board seat runs through January 2028.
Fed chiefs almost always step down to make way for successors, and Powell is known for his adherence to regularity. However, he has viewed the government's criminal investigation as political intimidation and part of the Trump administration's efforts to influence interest rate policy. Powell said last month that he would not leave the Fed until the criminal probe concluded with "finality." He may stay on if he believes it is best for the central bank and the country.
US Attorney for the District of Columbia, Jeanine Pirro, stated on Friday that she would not hesitate to resume the investigation "should the facts warrant doing so." Senator Warren and fellow Democrat Dick Durbin called that statement a threat of "future baseless investigations" into Powell or any other Fed governor.
