It’s getting very mucky.
As the White House tightens the timeline for announcing its pick for the next chair of the Federal Reserve, it is also ratcheting up public criticism of the current head of the central bank.
Treasury Secretary Scott Bessent, who is leading the Trump administration’s search to replace Jerome Powell, blasted him with a barrage of sharp verbal hits attacking Powell’s credibility in his role.
“If that happened at a Wall Street firm, the CEO would be out,” Bessent said.
Federal Reserve Chair Jerome Powell.
Bessent takes on Powell’s performance as Fed chair
Bessent’s comments on Jan. 20 pivoted from the mainly moderate stance he has taken in the past year, while President Donald Trump poured constant personal and professional attacks on Powell for not lowering interest rates enough to meet the president’s demands.
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Bessent appears to be setting the stage for ginning up investor and political support for the Fed chair nominee while also making life uncomfortable for Powell, whose term as chair expires in May but whose term at the Fed runs into 2028.
This comes amid mounting concerns that the new Fed chief will be viewed as a political Trump lackey who will do the president’s bidding at the expense of central bank independence.
“It won’t be easy to find a pick that both President Trump and bond markets like, unless he fundamentally reconsiders what he’s looking for,” Tobin Marcus, head of U.S. policy and politics at Wolfe Research, told Bloomberg.
Blowback from DOJ probe shakes up nominee process
Adding to the complexity of finding the right candidate who will appease global markets and win a Senate confirmation are:
- The Department of Justice’s criminal probe of Powell over renovation costs.
- Fed Governor Lisa Cook’s hearing before the Supreme Court on Jan. 21 to retain her seat despite unsubstantiated allegations of mortgage fraud.
Both those issues are widely seen as evidence that the Trump administration intends to put its political allies on the seven-member Fed Board of Governors and increase its influence on monetary policy — a move met with deep opposition from economists and financial experts.
Related: Powell pushes back as DOJ probe raises fears for Fed independence
Powell called the probe “a pretext” as part of the president’s effort to force the Fed to lower interest rates.
GOP Sen. Thom Tillis of North Carolina sits on the Senate Banking Committee. He has said he will not vote to advance any of the central bank nominees to the full Senate until the subpoena issue is solved.
Bessent blasts Powell’s tenure as Fed chair
Here’s Bessent’s takedown of Powell delivered at the World Economic Forum in Davos, Switzerland, during a CNBC interview:
- Powell was accountable for the resignation of “between four to six” senior Fed officials over their compliance with personal-financial rules and disclosure.
- Powell was responsible for asset purchases during and after the Covid-19 pandemic that have led the Fed to run large losses.
- Powell refused to meet with federal prosecutors over the holidays before they issued the subpoenas.
- It would be inappropriate for Powell to attend the oral arguments in Cook’s Supreme Court hearing, arguing that Powell’s presence would “put his thumb on the scale.”
The Fed and Powell are both defendants in Cook’s suit to prevent Trump from firing her for fraud.
The Wall Street Journal reported last week that Bessent, privately, was worried that the DOJ criminal investigation could imperil the president’s nominee in the Senate and rattle markets.
Fed chair pick could be named ‘next week’
The timing of Trump’s announcement on his selection for Fed chair remains unclear but:
- The president said Jan. 19 that he knows who he wants and would “announce it sometime.”
- Bessent said Jan. 20 that the decision would come “maybe as early as next week.’’
The shortlist to replace Powell:
- National Economic Council Kevin Hassett
- Former Fed Governor Kevin Warsh
- Fed Governor Christopher Waller
- BlackRock executive Rick Rieder
The Kalshi prediction market places Warsh the frontrunner at 56% Rieder at 20% and Hassett at 11%.
Hassett was speculated to be the frontrunner, but his candidacy raised concerns that the markets would view him as too close to the president.
Related: White House signals huge shift in race to name next Fed chair