President Donald Trump made a solid and noncontroversial pick to lead the Federal Reserve, argued the Wall Street Journal editorial board on Tuesday — but he's throwing that candidate to the wolves with his crusade against central bank independence.
Trump nominated Kevin Warsh, a former Fed governor and economist at the conservative Hoover Institution, in a move that assuaged some market observers as he is a credible policymaker with a long resume. However, he and Attorney General Pam Bondi have continued to oversee a Justice Department investigation into the Fed's spending on headquarters renovation, widely considered to be a move to bully current chair Jerome Powell, and it's causing needless friction in the process.
"We haven’t seen the subpoena, but sources who have seen it say it amounts to a broad fishing expedition to find something, anything, to charge against the Chairman," wrote the board. "His testimony on the renovations shows no criminal intent we can see. That suggests the investigation by the U.S. Attorney for the District of Columbia, Jeanine Pirro, is intended to punish Mr. Powell for not cutting interest rates as aggressively as Mr. Trump prefers. This political lawfare now may backfire as Mr. Trump tries to get his own nominees on the Fed board."
The biggest problem, the board noted, is that Sen. Thom Tillis (R-NC) has vowed to put a hold on Fed nominees until this investigation is withdrawn — even for Warsh, despite Tillis' general approval of the pick.
"Without Mr. Tillis’s support, a stalemate is likely," the board wrote. "Senate Majority Leader John Thune on Thursday said that the Senate probably couldn’t confirm a Fed pick without Mr. Tillis’s support. Mr. Tillis isn’t running for re-election this year after Mr. Trump trashed him on social media, so the Senator has little incentive to give Mr. Trump a break."
Moreover, the board argued, should Powell exit, Trump "would have a second opening to fill on the seven-person Fed board and a chance to give Mr. Warsh a wing man for his reform agenda," like perhaps former World Bank president David Malpass — a slot Trump will need if he doesn't want former President Joe Biden's Fed appointees to constantly overrule him on regulatory issues.
"All of this argues for Attorney General Pam Bondi to order Ms. Pirro to close the Powell case file and focus on real crimes," the board concluded. "The duo aren’t doing the President, or the country, any favors by continuing with this harassing and counterproductive investigation."