Senator Blocks Fed Nominee Over Powell Investigation

Senator Holds Up Fed Nomination Amid Powell Probe

Senator Tom Tillis is blocking any new nominations to the Federal Reserve until an investigation into Fed Chair Jerome Powell is resolved. Tillis stated he is not changing his position, despite pressure from the White House.

The investigation, which began over a year ago, concerns testimony Powell gave about renovations at the Fed. Most members of the Senate Banking Committee believe this probe is without merit.

Tillis Cites Principle in Blocking Nomination

Senator Tillis spoke with Ali Vitali, senior Capitol Hill reporter for MSNBC, about his decision. He confirmed that the White House is aware of his hold on nominations, including that of Kevin Warsh.

Tillis emphasized that he is not budging on his stance. He explained that his concern is that any official testifying before Congress could have their words twisted into federal charges for political reasons.

Tillis believes this is a matter of principle, affecting both the Federal Reserve and Congress. He stated he doesn’t need to speak with Kevin Warsh, whom he likes, to maintain his position. Tillis’ argument centers on protecting the integrity of oversight hearings and preventing politically motivated investigations.

White House Offers No Concessions

President Trump has repeatedly stated his support for Powell and has not offered any concessions to Tillis. Vitali noted that the President was given opportunities to back down from the situation, which he created with his administration’s Department of Justice. The focus of the Fed nomination should be on economic policy, such as interest rates and inflation, but it has become heavily politicized.

The President wants a Fed chair who will lower interest rates, a stance that contradicts sound economic policy. This desire puts pressure on nominees to align with political interests rather than data-driven decisions. The ongoing investigation into Powell, despite court rulings against subpoenas, continues to cast a shadow over the nomination process.

Details of the DOJ Investigation

The Department of Justice investigation into Fed Chair Jerome Powell is ongoing, even though a federal judge has twice blocked subpoenas. These rulings stated that the subpoenas were based on a pretext and lacked evidence. Despite this, the DOJ has indicated no intention to drop the investigation, shifting its focus to incompetence rather than criminal wrongdoing.

President Trump has cited concerns over the cost of Fed renovations, claiming a project costing around $2.5 billion should have cost significantly less. The Fed has attributed cost overruns to increased labor and material expenses, as well as unexpected issues like asbestos and soil contamination. These explanations have not satisfied the President.

Kevin Warsh: A Conservative Choice with a Shifting Stance

Kevin Warsh is considered a conservative choice with expertise in financial markets and a belief in limited government intervention. However, his stance on interest rates has evolved. While previously hawkish, Warsh wrote in an op-ed that the Fed should re-examine its assumptions about inflation caused by economic growth and high wages.

He suggested that a larger federal government balance sheet could be used to lower interest rates and support businesses and households. This shift raises questions about whether Warsh would prioritize the Fed’s independence or follow the President’s directives on interest rate policy. He is expected to address these concerns during his confirmation hearing.

Concerns Over Fed Independence and Future Policy

Economists like Justin Wolfers and Ron Insana express concern that President Trump is seeking a Fed nominee who will act as a “yes man” for his low-interest rate policies. This approach, they argue, prioritizes political interests over the economic well-being of the American people. The independence of the Federal Reserve is crucial for stable economic management.

Ron Insana noted that Warsh’s current views on interest rates contradict his past opposition to aggressive Fed intervention during the 2008 financial crisis. Insana also pointed out that the Fed’s independence is determined by its members collectively, not just the chair. The risk lies in potential backroom deals or promises made to secure the nomination, which could lead to market instability and a loss of confidence in the Fed’s ability to control inflation.

Warsh’s Stance on Fed’s Role

Kevin Warsh has publicly stated his belief that the Fed must “stay in its lane.” He argues that the central bank’s independence is most at risk when it ventures into fiscal and social policies outside its authority and expertise. This statement suggests a desire to focus strictly on monetary policy.

However, Insana questioned whether the Fed has truly “veered from its lane” in recent years. He believes that the Fed has acted appropriately to support the economy during extraordinary times, such as the financial crisis and the pandemic. While economists may differ on the Fed’s actions, Insana believes the institution has largely acted in the best interest of the economy, given the circumstances.

What’s Next for the Fed Nomination

The Senate Banking Committee hearing will continue with opening statements and questioning of Kevin Warsh. Senator Tillis’ hold means that even if Warsh is approved by the committee, his full Senate confirmation could be delayed.

The resolution of the DOJ probe into Jerome Powell remains the key factor influencing Tillis’ decision. All eyes will be on the White House and the DOJ to see if any further actions are taken regarding the investigation.

Source: Sen. Tillis tells MS NOW he's not budging on opposing Fed pick until Powell probe is resolved (YouTube)