Fed: The investigation targeting Powell blocks Warsh's confirmation

The standoff over the succession at the head of the Federal Reserve intensifies. While a Republican senator blocks any progress as long as the investigation targeting Jerome Powell is not completed, the Treasury Secretary proposes a bold strategy: why not fight both battles at once? A political chess game that could redefine the Fed’s future.

Scott Bessent’s strategy facing Tillis’s blockage

Scott Bessent made a public appeal to the Senate banking committee on Sunday. On Fox News, the Treasury Secretary urged senators to start hearings for Kevin Warsh, Donald Trump’s candidate to lead the Fed. A position that openly challenges the blockade announced by Thom Tillis.

The senator from North Carolina was clear, however: no confirmation of Warsh before the Department of Justice investigation into Jerome Powell is completed. 

“Senator Tillis publicly stated he considers Kevin Warsh an extremist candidate“, Bessent recalled. Then he added: “So I would say, why not launch the hearings and see where Jeanine Pirro’s investigation leads?“

This proposal reveals Tillis’s dilemma. An influential member of the banking committee, the Republican senator actually supports Warsh’s candidacy. He even stated he would be “among the first” to introduce him. But his top priority remains protecting the Fed’s independence from political pressures.

Republicans hold 13 of the 24 seats on the committee. In theory, they could pass Warsh without the Democrats. But Tillis’s hostile vote would change the situation. The final decision would then fall to the Democrats, turning what should be a formality into a real political trial.

The investigation on Powell, a political weapon?

The Department of Justice opened its investigation in early January. Federal prosecutor Jeanine Pirro, who leads the District of Columbia office, has issued subpoenas to the Fed to appear before a grand jury. The subject? Suspicious expenses in the context of a large renovation project of the Federal Reserve buildings.

Powell immediately fought back. On January 11, the current Fed chairman denounced a political maneuver. According to him, this investigation aims to punish him for maintaining high interest rates, against Trump’s explicit will. A serious accusation that highlights the tensions between the White House and the central bank.

This case arises in an already tense context. Since the official nomination of Warsh on January 30, financial markets have trembled. Bitcoin plunged from 84,500 to less than 75,000 dollars. Investors fear a sharp monetary turn, even though some economists think Warsh could instead lower rates faster than expected.

The confirmation process will follow several steps. First, Warsh must appear before the banking committee for a review hearing. Then, the committee will vote to forward or not his candidacy to the full Senate. Finally, all senators will debate before the final vote. A path full of pitfalls, especially if Tillis maintains his blockage.

The current deadlock in the Senate illustrates the power struggles around the Fed. Between Bessent’s offensive strategy, Tillis’s obstinacy, and Powell’s accusations, Warsh’s nomination looks explosive. The coming weeks will tell if the Treasury can unlock the situation or if the DOJ investigation will paralyze the confirmation process for a long time.