Unlock the free White House Watch newsletter
Your guide to what Trump’s second term means for Washington, business and the world
Donald Trump’s Federal Reserve chairman nominee Kevin Wersh faces a fight in the Senate after lawmakers threatened to block his confirmation unless the Justice Department drops its investigations of Jay Powell and Lisa Cook.
In a letter addressed to Senate Banking Committee Chairman Tim Scott, 11 Democrats on the influential committee demanded that he delay any nomination proceedings for Warsh “until the preemptive criminal investigation against Chairman Powell and other Fed Board members is closed”.
Trump nominated Wersch as the next Fed chair last Friday. The Senate Banking Committee will review the nomination before it is voted on by the 100-member Senate.
While Republicans control the Banking Committee 13–11, Republican Senator Thom Tillis of North Carolina has threatened to block Wersch’s nomination over the criminal investigation of Powell by the Justice Department.
Tillis on Friday described Warsh as a “qualified nominee with a deep understanding of monetary policy,” but said he would oppose confirmation of any Fed nominee, including Warsh, until the DoJ’s Powell investigation is “fully and transparently resolved.”
Tillis, who did not sign the Democrats’ letter, is so far the only Republican member of the committee to oppose Warsh’s nomination. But assuming the confirmation vote splits along party lines, his vote would split the committee 12-12 and potentially prevent Warsh’s nomination from advancing to a full Senate vote.
This could disrupt the confirmation process at a time when the Trump administration’s attacks on the US central bank threaten to undermine confidence in the world’s largest economy.
A spokesman for Scott declined to comment.
Trump has rejected calls for the Justice Department to halt its investigation of Powell, which is related to the Fed’s $2.5 billion renovation of its headquarters in Washington, which is $700 million over budget.
When Trump was asked whether Jeanine Pirro, the US federal prosecutor in Washington, should drop the investigation, he told reporters on Monday, “She will take it to the end.” Trump said, “It’s either gross incompetence or it’s some kind of theft or bribery. I don’t know what it is, but Jeanine Pirro is incredible, and she’ll figure it out.”
Powell has denied the allegations and claimed the investigation was a “pretext” intended to force Fed officials to cut borrowing costs to a range rate-setters say is 3.5–3.75 percent, which is the right level for the U.S. economy.
Trump wants rates to drop to less than 1 percent — a level he says would save Americans hundreds of billions of dollars a year and boost the economy by reducing government refunding costs.
The DoJ is also investigating Cook on mortgage fraud allegations. Trump tried to fire the Fed governor over the summer. But Cook, who has denied the allegations, remains at the central bank and appeared at the Supreme Court last month to oppose the president’s efforts to fire her.
“The administration’s apparent attempt to seize control of the Fed through criminal prosecutions is dangerous and unprecedented,” the letter, seen by the FT, said. “It would be absurd on the face of it to allow President Trump to choose the next Chairman of the Federal Reserve as his Justice Department is actively investigating not one, but two sitting members of the Fed Board.
“This committee should not participate in this ridiculous effort that threatens to undermine our democracy and confidence in our financial markets.”
The DoJ did not immediately respond to a request for comment.
The difficulties in moving forward with the confirmation of Wersch, a former Fed governor seen as a mainstream candidate with good ties on Capitol Hill and Wall Street, highlight that the White House’s attacks on the Fed and Powell now risk backfiring.
Powell, who has faced a lot of criticism from the President over his refusal to cut rates as Trump wants, will remain as Fed chair until the end of his second term in May if the Senate fails to approve Warsh in time.
Additional reporting by Stefania Palma in Washington
