The Federal Reserve Can’t Wait For A New Leader

The Federal Reserve needs a new chairman. Jerome Powell’s term expires May 15. Kevin Warsh—Stanford, Harvard Law, former Fed governor and crisis-tested—is nominated and ready. The Senate should confirm him immediately. Instead, we have a spectacle.

Senator Thom Tillis (R–NC) has pledged to block Warsh’s nomination from advancing until the Department of Justice (DOJ) drops its criminal probe of Powell. The DOJ move here—which a federal judge has already tossed out, finding that the government had produced “essentially zero evidence to suspect Chair Powell of a crime”—is not an investigation. It’s a political grievance dressed up in a subpoena.

U.S. Attorney for the Distrcit of Columbia Jeanine Pirro has vowed to appeal anyway. It’s true that a number of highly reputable legal scholars think the judge’s opinion was a fourth-rate effort that would embarrass a first-year law student. But this is beside the point. The renovation of the Federal Reserve palace is another nauseating example of government incompetence and indifference to costs. Sadly, that’s the norm in Washington. If it were a crime, most of the capital would be serving time. But stubbornness in pursuing a criminal probe of Powell is costing us something real.

Disagree with Powell’s decisions all you want. His is indeed a record of failure. But weaponizing the Justice Department against a sitting Fed Chair over a misbegotten building renovation is the kind of thing we lecture other countries about regarding the rule of law. The judge saw through it; Congress should too.

Warsh is no pushover. He has long argued that “mission creep” has pushed the Fed away from its core mandate of maximum employment and price stability. He wants our central bank leaner, more disciplined and less political. He recognizes the Fed’s core belief that prosperity causes inflation is profoundly wrong and has cost us dearly in lost economic growth. He knows that the key to achieving the Fed’s mandates is a stable dollar. His insights will lead to reforms the institution badly needs. He has also advocated for a new Treasury-Federal Reserve accord that would recalibrate the relationship between monetary and fiscal policy, without destroying the central bank’s independence. This could help make the dollar trustworthy.

The irony is thick. The administration wants a Fed that stays in its lane. Criminalizing disagreement with the administration is the surest way to destroy Fed independence. Drop the investigation, let it die on appeal, and get Warsh into the hearing room.

Powell’s term ends May 15. There is no margin here: A leaderless Fed heading into a turbulent economy is a self-inflicted wound. Tillis is right that the probe into Powell is an intimidation tactic. The answer to that is not to hold a good nominee hostage, it’s to demand that the tactic stop.

The administration should stand down. The Senate should move. The economy is not waiting on anyone’s pride.