By David Lawder
WASHINGTON, April 29 (Reuters) – Kevin Warsh, U.S. President Donald Trump’s pick to lead the Federal Reserve, cleared a key procedural hurdle on Wednesday, opening a path for him to succeed Jerome Powell next month amid the White House’s unprecedented efforts to exert control over the world’s most powerful central bank.
The Senate Banking Committee voted 13-11 along party lines to advance Warsh’s nomination to the full Republican-controlled Senate, which is expected to confirm him in a vote held the week of May 11. Powell’s term as the head of the U.S. central bank ends May 15.
As the vote took place, Powell led his final policy meeting as head of the Fed. The Federal Open Market Committee held interest rates steady in its most divided decision since 1992, with one official seeking a rate cut and three dissenters who wanted to stop communicating a bias towards reducing borrowing costs.
President Donald Trump, who picked Powell for the top Fed job in 2018 but soured on him within months for not cutting interest rates, said he believes that Warsh will deliver the reductions in borrowing costs that he wants. Warsh served as a Fed board member from 2006 to 2011.
But Powell told reporters that he would stay on as a Fed board governor for an undetermined period of time due to unprecedented legal attacks on the Fed and step down when “I feel it’s appropriate for me to leave.”
That means he would serve alongside Warsh after May 15, delaying Trump’s ability to nominate a new board member. But Powell said he would keep a low profile on the board and not seek to be a “shadow chair” or a “high profile dissident.”
Powell’s board seat runs through January 2028.
It’s unclear whether Trump will follow through on his threat to try to fire Powell. Such a move would surely draw a legal challenge, as did the president’s attempt last summer to fire Fed Governor Lisa Cook.
Fed chiefs almost always step down to make room for their successors, and Powell is a lawyer whose adherence to regularity runs deep. But he took the view that the government’s criminal investigation into his handling of building renovation projects was political intimidation and part of the Trump administration’s efforts to influence how the Fed sets interest rates.
U.S. Attorney for the District of Columbia Jeanine Pirro said on Friday she would not hesitate to resume her probe of Powell “should the facts warrant doing so.”
‘BATTLE TESTED’ OR ‘SOCK PUPPET’?
Warsh, a 56-year-old lawyer, financier and former Fed governor, told lawmakers at his confirmation hearing last week that he had not promised Trump that he would cut rates. But he did vow “regime change” to make the central bank more answerable to the administration and Congress on non-monetary policy matters.
The vote on Wednesday went forward after North Carolina Senator Thom Tillis dropped his opposition in response to the Department of Justice’s decision on Friday to end a criminal investigation into Powell that Tillis viewed as a threat to the Fed’s political independence.
“I’ve got confidence that this investigation is over,” Tillis said after casting his vote with the Republican majority, adding that while the Department of Justice does plan to appeal a federal judge’s decision in the case, prosecutors assured him the intent is not to reopen the investigation but only to settle a legal matter regarding the department’s subpoena power.
Republican Senator Tim Scott, who chairs the Senate Banking Committee, called Warsh “battle-tested and ready to serve, and not only serve, but to lead.”
The panel’s 11 Democrats, who say they doubt Warsh’s promise to set policy without regard to Trump’s wishes, voted against advancing the nomination.
“Members of this committee who vote for Mr. Warsh and help facilitate President Trump’s takeover of the central bank will come to regret it,” the committee’s top Democrat, Senator Elizabeth Warren, said before the vote, calling Warsh a “sock puppet” for Trump.
Republican leaders in the Senate intend to push ahead with consideration of Warsh’s nomination on Thursday, a timeline aimed at holding a confirmation vote in the week of May 11, a source familiar with the process said. That timeline would allow Warsh to be sworn in by May 15 when Powell’s leadership term ends.
(Reporting by David Lawder; Writing by Ann Saphir; Editing by Paul Simao)
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