Bessent urges Warsh confirmation hearings as Powell probe stalls Fed succession

A political battle over the future of the Federal Reserve intensified Sunday as Treasury Secretary Scott Bessent urged the Senate to begin confirmation hearings for Fed chair nominee Kevin Warsh, even as a Republican senator vowed to block the process until a criminal investigation into current chair Jerome Powell concludes.

Political divide threatens confirmation process

Bessent, who has shepherded the administration’s economic messaging on Capitol Hill, stressed that Warsh’s extensive experience, including prior Senate confirmation as a Fed governor, warrants an early hearing despite the controversy.

“Senator Tillis has come out and said he thinks that Kevin Warsh is a very strong candidate. So I would say, why don’t we get the hearings underway and see where Jeanine Pirro’s investigation goes?” Bessent said, addressing Senator Thom Tillis.

Bessent was referring to Senator Thom Tillis (R-N.C.), a member of the Senate Banking Committee who has repeatedly vowed to block all Federal Reserve nominations until the DOJ probe into Powell is resolved.

Tillis argues that proceeding with a nomination vote while a criminal investigation is ongoing could undermine confidence in the central bank’s independence.

“I’d be one of the first people to introduce Mr. Warsh if we’re behind this and support him, but not before this matter is settled.” – Tillis told CNBC

Republicans hold a narrow majority on the Senate Banking Committee, 13 of 24 seats, meaning that Tillis’s opposition could effectively stall Warsh’s nomination unless Democrats break with their party or the investigation winds down.

How the Powell investigation complicates policy

The DOJ investigation, led by U.S. Attorney Jeanine Pirro, centres on whether Powell misled Congress last year when asked about the scope and cost of the Fed headquarters renovation.

The inquiry has drawn sharp criticism from central bankers, former Fed officials, and members of both parties, who warn it risks politicising monetary policy.

Powell has denied wrongdoing and labelled the probe politically motivated, contending that its real aim is to punish his resistance to aggressive interest rate cuts sought by Trump.

Democrats have also weighed in. Senator Elizabeth Warren (D-Mass.) and her colleagues have called for delaying Warsh’s confirmation until after the investigation ends.

Senate Banking Committee Chair Tim Scott (R-S.C.) has tried to walk a middle line. In contrast, rejecting any suggestion that Powell committed a crime.

What this means for markets and central bank independence

The showdown over the Fed chair nomination comes at a sensitive moment. The Federal Reserve’s monetary policy direction, especially concerning interest rates, affects asset prices across equity, bond, and digital asset markets.

A prolonged confirmation battle could inject uncertainty into market expectations about future Federal Reserve policy.

Warsh, regarded as knowledgeable on monetary matters, has signalled views that could diverge from Powell’s approach, raising questions about how quickly the central bank might pivot if he is confirmed.

However, with the nomination process caught in legislative crossfire, markets may be forced to wait longer for clarity.

As lawmakers return to Washington this week, all eyes will be on whether the Senate Banking Committee opts to begin Warsh’s confirmation hearings.