Top Wall Street executives are increasingly confident that the impasse over Kevin Warsh’s nomination as Fed chair will be resolved before central bank boss Jerome Powell’s term ends next month, On The Money has learned.
The optimism comes after Sen. Thom Tillis (R-NC) on Tuesday offered President Trump a so-called “off ramp” that would end a Department of Justice investigation into whether Powell misled Congress over the $2.5 billion price tag of the Fed’s new headquarters dubbed the “Taj Mahal On The Mall.”
Tillis, a ranking member of the powerful Senate Banking Committee, has called the investigation “bogus” and has vowed not to vote to advance Warsh’s nomination to the full Senate if it continues.
The truce proposed by Tillis, which also has the backing of Senate Banking Chair Tim Scott (R-SC), would call for the Senate Banking Committee to lead the investigation of Powell’s testimony on the renovations and, if it finds there was wrongdoing, make a referral to the DOJ.
Wall Street executives interviewed by On The Money Wednesday said they’re betting that a deal is finally on the horizon.
“There will be some off ramp,” said a government affairs executive at a major bank.
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Another person with ties to the Trump White House said Trump could be open to a deal if Powell — whom he loathes and has attacked for not cutting interest rates fast enough — leaves the central bank completely after his term as chair ends. Powell has the right to stay on as a Fed governor until January 2028.
“If Trump makes a deal, Powell has got to be out of our hair completely,” this person said.
Tillis on Tuesday also seemed to distance Trump from the DOJ probe, stating it began “back into the bowels of DOJ … At the end of the day there’s only one thing that solves this problem, and it’s getting rid of the bogus investigation that started without the president’s knowledge and has created this situation.”
Tillis declined to comment on whether he discussed the matter with Trump.
A spokesman for Tillis would only say that “Senator Tillis will support Kevin Warsh once the DOJ drops the bogus investigation into Chairman Powell, and he would be more than willing to support an oversight investigation led by the Senate Banking Committees as he mentioned in his testimony today.”
White House spokesman Kush Desai had no comment on the plan, but tells On The Money, “The White House remains focused on working with the Senate to swiftly confirm Kevin Warsh as the next Chairman of the Federal Reserve.”
A rep for the Fed had no immediate comment.
In an interview with CNBC on Tuesday, Trump still appeared to dig in: “We have to find out why a small building costs close to $4 billion. It’s not finished, by the way. They have a long way to go.”
Tillis floated the potential compromise amid White House pressure for him to vote Warsh’s nomination out of committee so the full Senate, presumably on a party-line vote, could confirm Warsh. Powell’s term ends May 15.
Wall Street executives have been calling on the White House to drop the DOJ probe, fearing the potential of whipsawing markets given the conflict with Iran and its impact on inflation, sources told On The Money.
Tillis has stated that he believes Warsh, a former Fed governor, Wall Street banker and currently an academic at Stamford University, is eminently qualified for the role as the central bank chair. But barring what he called a “good off-ramp” Tillis said he will hold firm and continue not vote Warsh’s nomination out of committee.
He has stated that the DOJ investigation sets a dangerous precedent of the executive branch interfering with the governance of the central bank, created by Congress as an agency independent from politics as it manages the nation’s money supply.
Trump has long sparred with Powell over interest rate policy, calling him a “disaster,” “either incompetent or crooked,” a “stubborn moron,” a “numbskull,” and a “stupid person” for failing to cut interest rates cut faster.
If Tillis remains a no-vote, Powell could stay at the Fed as chairman indefinitely, serving in a “pro tem” capacity.
