Trump’s attacks on Fed Chair Jerome Powell are backfiring
The White House could install a new Federal Reserve chairman within months if the Justice Department’s criminal investigation into Fed Chairman Jerome Powell is dropped. This doesn’t happen.
Instead, both sides are stubbornly stubborn and ensuring that a stalemate of vital importance for the future of monetary policy continues with no end in sight. Powell’s term could end on May 15 and he would remain “president pro tempore” – the opposite of what Trump intended to achieve.
The latest salvo came Thursday when Trump suggested Powell was involved in “criminality” because of ongoing renovations at the Fed’s aging headquarters in Washington. The president had long attacked Powell since last year because the Fed was not cutting interest rates more quickly to accelerate economic growth.
“He’s a stubborn and incompetent person…and he may be a dishonest guy,” Trump told reporters in the Oval Office.
But there are signs that Trump’s long-running campaign to pressure the Fed into compliance is backfiring and throwing the confirmation of his nominee for Fed chairman, Kevin Warsh, into limbo.
A day earlier, Powell declared his intention to remain Fed chairman while the federal investigation into him continued. “I have no intention of leaving the board until the investigation is well and truly completed, transparently and definitively,” he said Wednesday at a press conference following the Fed’s decision to keep interest rates stable. The central bank did so for the second consecutive meeting.
Powell could choose to remain a member of the seven-member Fed Board of Governors until 2028, even after his term as chairman ends. If he chooses this path, it would deprive Trump of the opportunity to appoint another member closer to him on interest rate cuts. Powell has not said whether he plans to stay at the Fed once he leaves as chairman.
The investigation itself faced legal obstacles. A federal judge threw out grand jury subpoenas against Powell last week, saying the case was motivated by a desire to “harass and pressure Powell to either give in to the president or resign and make way for a Fed chairman who will.”
The origins of the standoff date back to the DOJ’s January initiation of a criminal investigation against Powell over his Senate testimony on Fed improvements costing $2.5 billion, an amount far higher than initial spending projections. Powell called the investigation “intimidation” at the time and indicated he would not back down.
Powell and Trump are not the only ones gaining a firm foothold.
North Carolina Republican Sen. Thom Tillis said he would not be dislodged from his blockade against all Fed nominees until the Powell investigation is complete.
Tillis holds a tie-breaking vote on the Senate Banking Committee, the committee responsible for handling major nominees to the Fed. He is not necessarily alone in his decision to defend Powell.
Several Republican members of the Senate Banking Committee say they don’t believe Powell committed a crime, including Sen. Tim Scott of South Carolina, who chairs the committee. The Fed impasse, however, injects uncertainty about Warsh’s timetable for assuming the Fed chairmanship.
No date has been set for his confirmation hearing.
