Will Kevin Warsh, a Fed chair contender, clear the Senate confirmation hurdle? [Fed Watch]

Kevin Warsh, a former Federal Reserve governor tapped as the next chair of the US central bank, is unlikely to have a smooth path to succeeding current Chair Jerome Powell. Backlash has emerged even within the Republican Party over what some see as an overreach in the Justice Department’s investigation into Powell, raising the risk that the Senate Banking Committee may not advance the confirmation process as expected.

To be confirmed as Fed chair, a nominee must secure a majority vote in both the Senate Banking Committee and the full Senate. Clearing the Banking Committee will be difficult. The committee has 24 members—13 Republicans and 11 Democrats. Passage would be straightforward if all Republicans backed Warsh, but the problem is that Sen. Thom Tillis (R., North Carolina) has hardened his stance that he will oppose the nomination until the Justice Department investigation into Powell is resolved “with complete transparency.”

On the 30th of last month, Tillis wrote that while Warsh is a “qualified candidate with a deep understanding of monetary policy,” “the Department of Justice continues a criminal investigation into Chair Jerome Powell based on committee testimony that a reasonable person could not interpret as reflecting criminal intent,” adding that “protecting the Federal Reserve’s independence from political interference or legal threats is non-negotiable.” He has reiterated the position in media interviews.

If all Democrats and Tillis oppose the nominee, the confirmation cannot reach the minimum 13 votes (a majority) needed to pass. In theory, Tillis alone could block confirmation of the next chair until his Senate term expires early next year. Even if the nominee somehow clears committee, additional defections—such as from Sen. Lisa Murkowski (R., Alaska)—would make passage in the full Senate far from assured.

If the next chair is not confirmed even after Powell’s term ends (in May), Vice Chair Philip Jefferson would serve as acting chair of the Board under Section 10(2) of the Federal Reserve Act. However, there is no explicit rule on who would chair the Federal Open Market Committee (FOMC) meetings, a role typically held concurrently by the Board chair. Scenarios being discussed include Powell continuing to preside, Jefferson serving in an acting capacity, or John Williams—the FOMC vice chair and president of the Federal Reserve Bank of New York, who is considered higher in seniority—acting as chair. President Donald Trump, however, said he is “not worried” about Warsh’s confirmation.

Born in 1970 (age 56), Warsh earned a bachelor’s degree from Stanford University (economics and political science) and a J.D. from Harvard Law School. After working at Morgan Stanley, he became the youngest Fed governor, serving from 2006 to 2011. Since 2011, he has been affiliated with Stanford and the Hoover Institution as a visiting scholar. He is the son-in-law of Ronald Lauder of the Estée Lauder family. Lauder, a key Trump backer, is known as the person who proposed the idea of “buying Greenland.” Since 2019, Warsh has served as an outside director of Coupang and holds a significant stake in the company. To serve as Fed chair, however, he would have to step down from the outside directorship. He also cannot own individual stocks.

The Wall Street Journal (WSJ) reported that Warsh wanted the Treasury secretary post after Trump’s election, but Trump told him, “You’re my Fed chair.” The paper added that Warsh himself repeatedly told people around him that the job was his—suggesting that Trump had pegged him as the next chair from the outset.

Washington=Lee Sang-eun, correspondent selee@hankyung.com