By Michael S. Derby
March 18 (Reuters) – Federal Reserve Chair Jerome Powell on Wednesday pledged not to leave the central bank until a criminal investigation of him by the Justice Department is resolved, a prospect likely to stymie President Donald Trump’s hopes of soon installing a central banker sympathetic to his demands for lower interest rates.
Powell also said he plans to remain at the helm of the Fed even after his leadership term ends until his nominated successor – Kevin Warsh – is confirmed by the Senate, a process already effectively placed in limbo by a top Republican senator’s vow to block the nomination as long as federal prosecutor Jeanine Pirro’s probe of Powell continues.
Powell’s defiant stance could throw up a wedge between Pirro, the former Fox News host Trump installed as the U.S. attorney for the District of Columbia, who has vowed to press on with the probe, and the president, who wants to bend the Fed to his will but is encountering obstacles to doing so, not least of which is Pirro’s investigation.
“I have no intention of leaving the Board until the investigation is well and truly over with transparency and finality,” Powell told reporters on Wednesday, referring to his seat on the Fed’s Board of Governors.
Moreover, Powell held out the possibility of remaining at the Fed even after the Pirro probe ends. “I have not made that decision yet. I will make that decision based on what I think is best for the institution and for the people we serve,” Powell said.
While Powell’s term as chair is set to expire in mid-May, his seat on the board does not expire until January 31, 2028, though Fed chairs rarely remain after completing their leadership stints. The last to do so – Marriner Eccles – did so at the request of President Harry Truman in 1948.
The White House did not immediately respond to a request for comment on the matter.
STAYING AS CHAIR IF WARSH IS DELAYED
Powell said continuing as Fed chair during any leadership vacuum caused by a delay in the Warsh confirmation is what “the law calls for.”
“If my successor is not confirmed by the end of my term as chair, I would serve as chair pro tem” until that’s resolved, Powell said in a press conference following the end of the Fed’s latest two-day policy meeting.
“That’s what we’ve done on several occasions, including involving me, and that’s what we’re going to do in this situation,” Powell said, referring to the several months delay in the Senate confirming his reappointment as Fed chair in 2022.
Senator Thom Tillis, a Republican member of the Senate Banking Committee, has said he will not allow the Warsh confirmation to proceed until the probe is over. A U.S. judge last week quashed subpoenas Pirro had served on Powell and the Fed, which might have opened a path for the nomination to proceed, but Pirro said she would appeal the ruling, likely delaying it.
SUCCESSION FRICTION
Powell’s comments come amid a combative relationship between Trump and the Fed. Since returning to office just over a year ago the president has repeatedly attacked the Fed over not cutting interest rates as aggressively as he’d like, and has threatened on a number of occasions to fire Powell.
Trump has also attempted to fire Fed Governor Lisa Cook, in a development that has made its way to the Supreme Court.
Powell pushed back forcefully against the legal investigation targeting him over issues involving cost overruns involved with a renovation of the Fed’s Washington headquarters, saying the investigation was effectively punishing the Fed for not following Trump’s monetary policy demands.
A judge agreed. “The government has offered no evidence whatsoever that Powell committed any crime other than displeasing the president,” Chief U.S. District Judge James Boasberg wrote. “The government might as well investigate him for mail fraud because someone once saw him send a letter.”
Fed succession issues are complex given that the chair is also a governor and each role has a separate term. Adding to the complexity of the situation, Federal Open Market Committee members elect the FOMC chair, even as that role has always been held by the chair of the Board of Governors.
The legal assault on the Fed is widely viewed as a stress on the central bank’s independence. Congress granted the Fed power to set interest rate policy independently. Fed officials, as well as a wide range of private-sector economists, believe that setting monetary policy free of political interference leads to better economic outcomes.
Central bankers that take orders directly from elected leaders tend to see worse outcomes on inflation, a point noted by New York Fed President John Williams in early January.
(Reporting by Michael S. Derby; Editing by Chris Reese, Paul Simao and Andrea Ricci )
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