StoneX Strategy: Fed Leadership: Another Showdown is Looming on Constitution Avenue

From the desk of our senior advisor, Jon Hilsenrath.

We are potentially moving toward a period of leadership disarray at the Federal Reserve. This is a theme we’ve been covering for several weeks, and the plot has thickened in recent days, generating news headlines. 

A quick review of pertinent facts: 

Jerome Powell’s term as Fed Chairman ends May 15; 

• His chosen successor, Kevin Warsh, will appear before the Senate Banking Committee for a confirmation hearing Tuesday, April 21; 
• Warsh’s confirmation is likely to be delayed beyond May 15, because Senator Thom Tillis, a banking committee Republican, has said he will not allow Warsh to clear a committee vote until a Justice Department probe of Powell is resolved; 
• Jeannine Pirro, the U.S. attorney handling the probe, has indicated she plans to proceed with an appeal after the case was thrown out by a federal judge, and her boss – President Trump – has publicly encouraged her to proceed; 
• Powell has said that in the absence of a confirmed successor, he will continue as Fed chairman beyond May 15 as chairman “pro tempore;” 
• President Trump has said he will fire Powell if the Fed chairman stays beyond his allotted term

Trump’s threat to fire Powell can be interpreted in different ways. Fire him as a governor, as the president tried to do with Lisa Cook? On what grounds? Fire Powell as chairman? He has not said explicitly. If President Trump wants to get rid of Powell as the Fed’s leader – short of dropping Pirro’s case and allowing Warsh’s confirmation to proceed unimpeded in the Senate – the course with the best chance in court would be for the president to block Powell’s attempt to remain as Fed Chairman pro tempore pending Warsh’s Senate confirmation...

 

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