Countdown to May 15! Powell refuses to "hand over power" in advance, Trump threatens "immediate dismissal," Federal Reserve power transition bogged down in legal quagmire.

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The transition of the Federal Reserve chairmanship is facing a severe test.

With incumbent Chair Powell’s term expiring on May 15, there is major uncertainty over whether Trump’s nominee, Kevin Warsh, can be confirmed by the Senate in time. A legal and political struggle over the leadership of the Fed is taking shape.

Trump made it clear this week that if Powell remains after his term ends, he will be fired. Powell, in turn, insists that, according to the law, he will continue to serve as “acting Chair” until his successor is confirmed. The two men’s opposing positions have thrown the leadership of the world’s most important central bank into unprecedented uncertainty.

The immediate trigger for this standoff is that Republican Senator Thom Tillis has vowed to block Warsh's nomination from reaching a full Senate vote until the Department of Justice ends its investigation into Powell. Analysts warn that if the White House tries to force the handover through legal means, it could undermine confidence in the Fed’s independence.

Tillis Blocks Warsh, Path to Chairmanship Fraught with Difficulty

Warsh is set to appear before the Senate Banking Committee next Tuesday, but whether he can complete the confirmation process before May 15 remains in doubt.

The core resistance is from Republican Senator Tillis. He has made it clear he will block Warsh's nomination from reaching a Senate vote unless the Justice Department drops its investigation into Powell—a probe focused on whether Powell made false statements to Congress about the Fed’s roughly $2.5 billion headquarters renovation project.

Senate Banking Committee Chair, Republican Senator Tim Scott, says he is confident the Justice Department will wrap up the investigation “within weeks,” but so far there is no sign the investigation will end soon. Trump himself has stated he wants the probe to continue, even though a federal judge this month ruled that the government’s subpoenas were merely a pretext to pressure Powell to cut rates.

Washington D.C. federal prosecutor Jeanine Pirro has pledged to appeal the ruling. This Tuesday, two government prosecutors and an investigator went to the Fed’s renovation site to request a tour but were refused.

The procedural timeline is also daunting. According to Reuters, the Senate has only once completed a confirmation in less than a month after a hearing, and that was for a regular Fed governor, not the Fed chair—the world’s most important central bank role.

Does Powell Have the Right to Remain?

If Warsh is not confirmed by May 15, the Fed’s leadership will enter a legal gray area.

Powell’s position is clear. He previously stated: “If my successor is not confirmed before my term as chair ends, I will continue as acting chair—that’s what the law provides, and there are precedents for this, including for myself.” The Federal Reserve Act stipulates that Board members “shall continue to serve until their successors are appointed,” giving Powell a clear legal basis to stay.

However, Trump allies cite a different legal logic. Conservative circles have recently circulated a Carter administration–era memo asserting that the president has the authority to appoint an existing governor as acting chair while the nominee awaits confirmation. Some of Trump’s allies argue he is entitled to designate one of his appointees—such as Stephen Miran, Michelle Bowman, or Christopher Waller—as de facto chair.

Most legal scholars remain skeptical about this.

Columbia Law School Professor Lev Menand states that Powell is entitled to stay, and the president appointing someone else “has no legal basis,” adding that the Carter-era analysis is “extremely weak.” Moreover, the 1998 Federal Vacancies Reform Act explicitly prohibits the president from naming acting officials to multi-member commissions.

Threat of Dismissal—An Unprecedented Constitutional Risk

If Trump’s threat to fire Powell is carried out, it will set a historical precedent and almost certainly provoke legal challenges.

This week, Trump said plainly that if Powell does not step down when his term ends, “then I’ll have to fire him.” This echoes his earlier critiques of Powell—calling him a “moron” and a “stubborn mule” for refusing to cut rates.

Such an action would be unprecedented. Trump’s attempt last summer to fire Fed Governor Lisa Cook is already being challenged in court, with the case still before the Supreme Court and Cook still in office.

Derek Tang, analyst at LH Meyer, notes that if the White House opts for the “nuclear option”—forcing the transition through lawsuits and challenges—it could undermine market confidence in the Fed, though he adds that the market does not appear visibly concerned about this risk for now.

Powell’s Future Hinges on the Investigation

Even if Warsh is ultimately confirmed, there is still uncertainty as to whether Powell will leave his Board seat early.

Powell’s term on the Board lasts until January 2028, far beyond his term as chair. In the past, he had indicated he would likely follow precedent by resigning as governor once his successor takes office.

However, unsealed legal documents show Powell believes retiring while the investigation is active would jeopardize the Fed’s ability to set interest rates independently. Last month, he made it clear that until the probe “comes to a thorough, transparent, and conclusive end,” he will not leave the Board.

Analysts point out that the likelihood of Powell remaining as a governor has increased—which may in turn constrain Warsh’s room to reshape the Fed. Tang notes, “People will assess Powell’s role not just from an economic perspective, but a moral one as well.”

The Successor Faces a Thorny Predicament

Even if the power handover proceeds smoothly, the new chair will also face a difficult policy environment.

Evercore ISI Vice Chair Krishna Guha warns, “Applying political pressure on the central bank in times of energy price shocks is not without risks, even if it comes to nothing. On the margin, this increases the risk of inflation expectations rising because the market may worry that the Fed will be unable to take necessary actions to bring inflation back to target in the medium term.”

LH Meyer’s Tang raises a more practical question: “In the coming months, the inflation reality will be extremely tough. Do you really want ‘your person’ in that position, becoming the scapegoat for maintaining high rates?”

White House spokesman Kush Desai said, “The White House remains focused on working with the Senate to confirm Kevin Warsh as the next Fed chair as soon as possible.” But with Tillis’s blockade, the unresolved DOJ investigation, and Trump’s hard-line stance, this goal is becoming increasingly difficult to achieve.

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