New Fed News Agency: After Powell faced a criminal investigation, the pattern for his successor has become even more "shrouded in mystery."

January 15 — Nick Timiraos, the well-known financial reporter considered the “new Fed communications agent,” wrote that the criminal investigation into current Federal Reserve Chairman Powell is fundamentally changing what had already become a final-phase competition for the position. The article points out that this event has created new obstacles on Capitol Hill and provoked sharp questions about whether any nominee truly possesses “independence”—a tension that previously existed but is now impossible to ignore. Trump has been clear that he values “loyalty” in his pick. However, as Powell noted, the Justice Department’s investigation essentially acts as a coercive pressure to force Fed rate cuts, which means that “loyalty” may actually become a liability for any nominee. The article states, **the strong backlash from Congress may force the eventual nominee to walk a tightrope at the confirmation hearing this spring: not angering the President by questioning his challenges against the Fed, but not appearing too close to Trump either, which could spark legislative or market worries about their independence.** Timiraos points out that one of the leading candidates, Hassett, drew criticism for defending the investigation in interviews, calling it legitimate government oversight—a move that has given Warsh a comparative advantage. Meanwhile, if Trump chooses Waller to replace Powell, Powell is more likely to voluntarily resign his Board position, which is scheduled to end in 2028. **This would give Trump an additional seat to fill, allowing him to appoint two Board members in total this year.** Former Fed Chair and Treasury Secretary Yellen bluntly stated: “Trump has made things difficult. He says he refuses to appoint anyone who doesn’t agree with him or won’t do as he wishes. If that’s your starting point, it undermines the credibility of any nominee.” Analysts note, **the investigation that was meant to pressure the process has instead shackled Trump, forcing him to concede to demands for “independence”, otherwise nominations will be indefinitely stalled by Congress, exposing the market to significant uncertainty.** ## Senate's “Ultimatum”: Independence Is the Red Line Timiraos writes that the most direct consequence of the investigation’s political storm is resistance inside the Republican Senate. North Carolina Senator Thom Tillis and Alaska Senator Lisa Murkowski made it clear this week that they won’t support any nominee while the investigation is ongoing. Tillis, a member of the Senate Banking Committee, expressed his position with a vivid metaphor: > “Under current circumstances, even if my own mother applied for the job I wouldn’t consider it, because we have to resolve this issue first.” He emphasizes this as the cornerstone determining the Fed’s future. As a long-time critic of the Trump administration, Tillis is not bluffing—with support from Democrats, he could completely block the nomination. **So, why has the investigation rendered the nomination process so passive?** Timiraos explains: It’s akin to replacing someone in a position requiring both professional ability and public trust. If the incumbent is investigated for not “obeying orders,” then a successor who seems too “obedient” will be seen as a puppet, losing public confidence. Tillis further implied that candidates regarded as closer to Trump will face tougher scrutiny on independence. **By comparison, Fed Governor Christopher Waller, who has no personal ties to the President, may emerge as a “safe bet” to address concerns.** ## The “Battle of the Two Kevins”: Loyalty vs. Political Baggage The article says that while other candidates have appeared, the core rivalry remains between the “two Kevins”: **former Fed Governor Kevin Warsh and White House National Economic Council Director Kevin Hassett.** Hassett, once a strong contender due to his ties to Trump, now finds that relationship may have become a vulnerability. In an interview with CNBC this week, Hassett expressed hope for Powell, while also defending the investigation as legitimate oversight, saying: “This is part of government functioning, letting inspectors check your behavior for complete propriety.” These remarks immediately drew fire from economists and analysts. Former Obama-era advisor Jason Furman commented frankly: seeing Hassett accept this as “transparent, legitimate independent investigation” is “sad but not surprising.” Defending political attacks in this way is definitely at odds with leading an independent central bank. **By contrast, Warsh, who has publicly dismissed concerns over Fed independence and even hinted that Powell “brought this upon himself,” currently holds no White House position and doesn’t have to defend contentious government actions in the media daily as Hassett does.** Some Trump allies think that as the inquiry into Powell heats up, Hassett’s standing in the Senate may erode, **giving Warsh a relative advantage.** ## An Unpredictable Future and Potential Political Games As for future trends, Timiraos notes that Trump remains unpredictable for his advisors. According to one insider, the current front-runner “depends on the particulars of the day.” Though Trump recently suggested he’d prefer Hassett to stay in his current role because he likes how Hassett defends policy on TV, he’s also very impressed by Warsh’s acumen and persona. This raises a deeper strategic question: If he doesn’t choose a “loyalist” but instead picks a “safe bet,” what’s the benefit for Trump? The article also says there’s a practical consideration. The Trump administration would like Powell to leave the Fed entirely after his term as Chair ends. Powell’s Chair term ends in May, but his Board term runs until 2028. **Analysts think that if Trump picks Waller—a colleague Powell respects—as successor, Powell is more likely to voluntarily relinquish his Board seat. This would give Trump an extra spot to fill, making two vacancies he can address this year.** Yet, if the investigation escalates to a criminal indictment, the situation becomes much less controllable. Larry Kudlow, who served as White House National Economic Council Director during Trump’s first term, warned on Fox News: **Unless the investigation against Powell is dropped, the President won’t be able to confirm his pick for Fed Chair.** The article concludes, **the impact of this incident far exceeds a simple personnel appointment. It is a deep contest over the independence of the Federal Reserve and the limits of presidential power.** Washington DC federal prosecutor Jeanine Pirro claims the investigation is to find out if Powell lied to Congress, while Powell insists it’s a pretext to force rate cuts. The article states that whoever wins the nomination will carry a heavy political burden. For the market, this uncertainty is the greatest risk. As Timiraos writes: > **The investigation, intended as a pressure tactic, may instead have shackled Trump himself, forcing him to yield to demands for “independence” when choosing a successor, or risk having nominations indefinitely stalled by Congress in an election year.** Risk Warning and Disclaimer The market carries risks; investments must be made with caution. This article does not constitute personal investment advice, nor does it take into account the unique investment goals, financial status, or needs of individual users. Users should consider whether any opinions, viewpoints, or conclusions in the article suit their own circumstances. If you invest based on this, risk and responsibility are borne by yourself.