"On hold until the Powell probe stops"… Warsh confirmation seen facing headwinds

Eleven Democratic senators on the U.S. Senate Banking Committee sent a letter to Committee Chairman Tim Scott (R) calling for the confirmation process for nominee Kevin Warsh to be put on hold until the Justice Department stops its investigations into current Federal Reserve Chair Jerome Powell and Governor Lisa Cook, the Financial Times (FT) reported on the 3rd (local time).

In the letter, the Democrats said, "Any confirmation proceedings for Mr. Warsh should be delayed until the bogus criminal investigations into Chair Powell and other Fed governors are concluded," adding that "the administration’s attempt to seize control of the Fed through criminal investigations is dangerous and unprecedented."

They argued that "it is unreasonable to allow the president to handpick the next chair while Donald Trump’s Justice Department is investigating not one but two sitting Fed governors."

They added, "The Banking Committee must not be complicit in this absurd effort that threatens confidence in our financial markets and undermines democracy."

The Democrats’ demand is widely seen as an attempt to block Warsh’s confirmation by linking it to the DOJ’s probe—such as issuing a subpoena to Chair Powell—over the Fed headquarters renovation project, which they view as "political retaliation."

The probe has taken issue with the process by which $2.5 billion was spent on the Fed headquarters renovation, exceeding the original budget by $700 million. The opposition, however, interprets it as an effort by President Trump to pressure Powell into an early exit for not accommodating calls for rate cuts.

Democrats also view the DOJ’s investigation into allegations of mortgage fraud involving Governor Cook in a similar context.

But in a Q&A with reporters on the 2nd, President Trump reiterated the need for an investigation, saying of the Fed headquarters renovation costs, "Something went wrong," describing it as "gross incompetence or theft of some kind involving kickbacks."

Even if Chairman Scott, a Republican, does not accept Democrats’ request to delay the confirmation process, passage of Warsh’s nomination is expected to be difficult.

The Senate Banking Committee is composed of 13 Republicans and 11 Democrats, and Republican Sen. Thom Tillis is opposing the confirmation.

While calling Warsh "a qualified candidate with a deep understanding of monetary policy," Tillis has said he cannot support the nomination until the DOJ’s investigation into Chair Powell is resolved. Assuming the remaining members vote along party lines, the tally would be tied 12-12, making it difficult to advance the nomination to the full Senate.

Ko Jeong-sam, Hankyung.com reporter jsk@hankyung.com