Warsh’s Approval Remains Uncertain

During the confirmation hearing for Kevin Warsh, Senator Thom Tillis (R-North Carolina) made it clear that the nomination cannot proceed while the Justice Department’s investigation into the Federal Reserve’s renovation cost overruns is ongoing. The following day, U.S. Attorney Jeanine Pirro, at a press conference focused on an international car theft bust, noted that the investigation would carry on.

“I’m in the legal lane, and some people are in the political lane. I don’t cross those two lanes,” Pirro stated, emphasizing her commitment to the investigation.

This situation raises the likelihood that a new Fed chair may not be confirmed. Jerome Powell’s term as Federal Reserve Chairman ends on May 15. Just for reference, that’s only 23 days away, or 16 business days, as of Wednesday, April 22.

Powell’s Persecution Complex

Interestingly, during the hearing, Senator Tillis appeared to directly contradict Powell’s viewpoint. He suggested that Pirro’s investigation serves as a mechanism to pressure the Fed into cutting interest rates. Although Mr. Powell didn’t back this claim with evidence, it was accepted without question by both establishment Republicans and Democrats, as well as mainstream media.

It’s worth noting that Mr. Powell’s argument lacks coherence. With his term ending in May, there would be no need to invoke an investigation to shift policy. The Fed had already cut interest rates in its last three meetings last year, leaving Powell with just three meetings remaining this year. If the administration viewed him as a barrier to monetary easing, it would have made more sense to wait a few months. Anyone familiar with Mr. Powell knows he’s unlikely to change his monetary policy stance out of fear of a criminal investigation, especially one tied to the Trump administration.

What Trump Prefers is “Job of Referee”—policy debates usually manifest as public criticism rather than investigations by the Justice Department. It’s not Mr. Trump’s style to hide behind the grand jury led by Jeanine Pirro.

Yet, typically, a total lack of discretion doesn’t stop government officials from accepting the prevailing narrative. In this case, it seems widely accepted: Mr. Powell’s incredible story is believable. Senators and journalists in Washington, D.C., think it’s implausible to believe that Mr. Powell could orchestrate interest rate changes without external pressure, but they also find ways to maintain that Mr. Trump initiated an investigation to intimidate Mr. Powell.

It’s a clear example of Trump Confusion Syndrome: the belief that Trump can orchestrate a secret plot while simultaneously predicting its failure. To buy into that, you’d almost have to see him as a comic book supervillain, and many of his critics do just that.

Tillis vs. Powell

However, Tillis remarked on Tuesday that he believes Pirro was acting independently. He stated that he does not think President Trump or “the major Justice Department” had prior knowledge of the investigation. If that’s accurate, it would seem unlikely that President Trump is attempting to undermine the Fed’s independence or manipulate interest rates. If Pirro’s investigation isn’t a part of a larger Trump conspiracy against Mr. Powell, then there’s little reason for Tillis to oppose Warsh’s confirmation.

At this juncture, Tillis’ call to pause the investigation seems to politicize the U.S. Attorney’s Office. He is implying that Pirro should consider Warsh’s nomination when deciding how to proceed with the investigation, or suggesting that Trump might instruct her to withdraw the nomination to facilitate Warsh’s advancement. Such suggestions go against the principles of the rule of law and undermine the idea that justice should be pursued with political impartiality.

If Mr. Tillis genuinely believes his statements from the hearing—that Mr. Trump is not behind the investigation—then he should reconsider his opposition to Mr. Warsh’s confirmation.