President Donald Trump intensifies his clash with Jerome Powell while nominee Kevin Warsh faces Senate gridlock
Tasos Katopodis / Getty Images
A version of this article originally appeared in Quartz’s Washington newsletter. Sign up here to get the latest business and economic news and insights from Washington straight to your inbox.
Federal Reserve Chair Jerome Powell has roughly three weeks left in his term helming the central bank. President Donald Trump doesn’t seem willing to let him go without a fight.
The next chapter of the long-running standoff could chip away at the and destabilize financial markets as the Iran war drags down global economic activity. The International Monetary Fund its international growth forecast by 0.2% to 3.1% last week, a fresh sign of the war’s economic toll.
Join 500,000+ readers who start their day with Quartz.
By subscribing, you agree to our Terms of Service and Privacy Policy.
Now the Federal Reserve re-enters the stage. Trump has stated he’s not dropping a criminal probe into Powell related to the cost of renovating the Fed’s aging headquarters. Beyond that, the president has said that if Powell stays at his post past the final day of his term on May 15, he will fire him.
The moves greatly complicate the path ahead for Kevin Warsh, the president’s nominee to replace Powell as Fed chair. Warsh, though, is likely to get stranded in the Senate for the foreseeable future. Republican Sen. Thom Tillis has vowed to maintain a blockade on Fed nominees until the Department of Justice closes its Powell investigation.
Without drawing Tillis’s tie-breaking vote in the Senate Banking Committee, Warsh will be in limbo. Though he enjoys broad support among Republicans, Warsh faces concern from Democrats that he will prioritize the well-off over average Americans.
Warsh cleared one hurdle on Tuesday as he sat down with senators for a two-hour confirmation hearing that delved into his finances and interest rate views.
Earlier this month, Warsh disclosed to the Office of Government Ethics that he maintains between $131 million and $209 million in financial assets. It’s an enormous sum that far surpasses any previous Fed chair. It includes stakes in Polymarket, SpaceX, and $10 million in income from his role as advisor to investor Stanley Druckenmeyer.
“I've filled out those nominee question questionnaires many times,” Rohit Chopra, a former Federal Trade Commission member, said in a Monday press call organized by the left-leaning Groundwork Collaborative think tank. “Never before have we seen the reluctance to disclose what is truly in all of those investments.”
Warsh has stated that confidentiality agreements limit how much he can specifically disclose about his investments. He has also said he will divest holdings in two separate index funds to comply with federal ethics directives if he is confirmed.
Democratic senators, though, piled on with questions about his ties to Silicon Valley and Wall Street at Tuesday’s confirmation hearing. Warsh maintained that he’d stick to the agreement with OGE to divest his assets once confirmed.
Democrats also pressed him to share his views on interest rates and the Fed’s autonomy from the executive branch. Sen. Elizabeth Warren of Massachusetts assailed Warsh as Trump’s “chosen sock puppet” who will do his bidding. Warsh, though, insisted that he’d operate independently from the White House.
"The president never asked me to predetermine, commit, fix, decide on any interest rate decision, in any of our discussions," Warsh said. "Nor would I ever agree to do it if he had."
He also suggested that he won’t attempt to strong-arm the 12 voting members of the Federal Open Market Committee that steer interest rates into falling in line. "I tend to favor messier meetings than some, where people don't show up with rehearsed scripts, but we can have a good family fight," Warsh said.
For now, Powell has indicated he won’t step aside if Warsh isn’t confirmed by the Senate in time. He’d be able to continue serving as chair pro tempore.
“That is what the law calls for,” Powell said at a news conference in March. “That’s what we’ve done on several occasions ... and it’s what we’re going to do in this situation.”
If Trump fired Powell, it would almost certainly trigger a legal challenge that lands at the Supreme Court. The high court is already determining the legality of the president attempting to oust Fed governor Lisa Cook last year. Until that case is settled, Cook has been allowed to keep serving on the Fed’s Board of Governors.
Fed observers, though, believe Trump won’t ultimately cross the rubicon by firing Powell and attempting to hijack the Fed.
“He can huff and puff to try to blow his house down. But the Fed built a mansion,” Aaron Klein, a monetary policy expert at the Brookings Institute, told Quartz. “No matter how hard Trump puffs and puffs, he's not gonna be able to blow the Fed down.”
