Trump would decide whether to investigate Fed pick Warsh over refusal to cut rates: Bessent

• Bessent would not commit that Warsh would avoid investigation or lawsuit if interest rate decisions displease Trump, breaking with traditional White House deference to Fed independence
• Current Fed Chair Jerome Powell is already under DOJ investigation related to renovation cost overruns, widely viewed as retaliation for refusing to lower rates to Trump's preference
• Democrats and some Republicans have called for halting Warsh's nomination until investigations into Powell and Fed Governor Lisa Cook are ended, with critics characterizing the probes as attempts to strong-arm the independent central bank

Summary: Trump Fed Pick Warsh Could Face Investigation Over Rate Decisions

Treasury Secretary Scott Bessent declined to rule out a Department of Justice investigation into Federal Reserve Chair nominee Kevin Warsh if he refuses to cut interest rates as President Trump desires. During Senate Banking Committee testimony on Thursday, Sen. Elizabeth Warren (D-MA) pressed Bessent on Trump's weekend comment about potentially suing Warsh over rate decisions. Bessent responded that such decisions are "up to the president."

Key Developments:

The exchange highlights escalating concerns about Federal Reserve independence. Current Fed Chair Jerome Powell is already subject to an unprecedented DOJ investigation related to cost overruns on Fed headquarters renovations, which critics characterize as political intimidation. Powell's term ends in May, and Trump has nominated Warsh as his replacement.

Federal Reserve Governor Lisa Cook also faces investigation for alleged ethics violations. Several Democratic committee members are demanding these probes end before considering Warsh's nomination.

Political Context:

Committee Chair Sen. Tim Scott (R-SC) claims Powell lied in Senate testimony, while Sen. Thom Tillis (R-NC) has vowed to block the nomination unless the Powell investigation is dropped. Warren accused Trump of attempting to "take over the Fed," citing threats to fire Powell and investigations against Fed officials who don't comply with presidential preferences.

Market Implications:

This controversy threatens the traditional separation between White House and Fed monetary policy. Compromised central bank independence could undermine market confidence in Fed decision-making objectivity, potentially affecting interest rate expectations and broader financial market stability. The situation represents an unprecedented challenge to institutional norms governing U.S. monetary policy.