Fed chair drama: Tillis pours cold water on off-ramp for Powell criminal probe

• Tillis, a Banking Committee member, refuses to allow a markup vote on Warsh's nomination until the DOJ investigation is resolved, stating 'we do oversight, we don't prosecute'
• The rejected proposal would have transferred the Powell probe from DOJ to the Senate Banking Committee as a compromise to end criminal prosecution threats
• Tillis believes the White House was unaware of the DOJ investigation and sees no confirmation path for Warsh without resolution, expecting most Democrats to oppose the nomination

Summary

Key Development: Sen. Thom Tillis (R-N.C.) rejected a proposed compromise that would transfer the Department of Justice's criminal investigation of Federal Reserve Chair Jerome Powell to the Senate Banking Committee, keeping his blockade on Kevin Warsh's Fed chair nomination intact.

Main Players:

• Jerome Powell: Current Fed Chair under DOJ criminal investigation
• Kevin Warsh: President Trump's nominee to replace Powell
• Sen. Thom Tillis: Senate Banking Committee member blocking Warsh's confirmation

Critical Issues:

The DOJ probe into Powell prompted Tillis to halt progress on Warsh's nomination. Republican lawmakers proposed shifting the investigation from DOJ to the Senate Banking Committee as a compromise to satisfy both Trump (who supports the probe) and senators concerned about Fed independence.

Tillis's Position:

The senator firmly rejected this approach, stating "We do oversight, we don't prosecute" and emphasizing the need for Fed independence. He demanded the administration either "move forward with a compelling investigation" or "resolve the current investigation and move on."

Market Implications:

This impasse creates significant uncertainty around Fed leadership succession. Tillis indicated he won't allow a successful markup on Warsh's nomination unless the DOJ investigation is resolved, and expects most Democrats will oppose the nomination regardless. This suggests prolonged uncertainty over Fed chair transition, potentially affecting monetary policy expectations and market confidence in the central bank's independence—a crucial factor for financial stability.

Next Steps:

The situation remains unresolved with no clear path forward for Warsh's confirmation while the Powell investigation continues.