Powell investigation upends final stretch of Fed chair contest

Backlash to Justice Department probe highlights how Trump’s and senators’ goals are in conflict

- Nick Timiraos, Siobhan Hughes & Josh Dawsey

U.S. Federal Reserve chair Jerome Powell.

(REUTERS)

The criminal investigation into Federal Reserve Chair Jerome Powell threatens to upend the contest over whom President Trump will choose to succeed him as it enters its final stretch.

The episode is creating new obstacles on Capitol Hill and raising hard questions about whether any nominee can be seen as independent—tension that was always present but is now much harder to ignore. Trump has made clear he prizes loyalty in his pick, but the Justice Department probe —which Powell said was part of a pressure campaign to get the Fed to lower interest rates—threatens to make that quality a liability.

The backlash on Capitol Hill could force that pick to walk a tightrope in any confirmation process this spring. The nominee would have to avoid upsetting Trump with statements that question his efforts to challenge the Fed without provoking concerns from lawmakers or market participants that they are too close to be credible.

“Trump is making it very difficult by saying he refuses to appoint anyone who doesn’t agree with him and is not going to do what he wants,” said Janet Yellen, the former Fed chair and Treasury secretary. “So you start with that, which undermines a person’s credibility.”

In a sign of some lawmakers’ unease, two Republican senators— Thom Tillis of North Carolina and Lisa Murkowski of Alaska—said this week they won't vote for any nominee until the probe is resolved.

“I wouldn’t consider my mother for the post under the current conditions, because we've got to resolve this matter,” Tillis said earlier this week. “It’s foundational to making decisions about the board going forward.”