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Federal Reserve Power Transition Crisis: Powell's Nomination Hit by Obstacles, Smooth Transition in Doubt

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The Fed Power Transition Crisis Erupts.

Original Title: "In Anticipation of Next Week's Hearing, Democratic Lawmakers Slam Wash Ahead of Time: Billions in Assets 'Not Disclosed,' Willingly Becomes Trump's 'Puppet'"
Original Authors: He Hao, Ye Zhen, Wall Street Observer

The nominee for Federal Reserve Chair appointed by U.S. President Trump, Wash, is facing strong resistance from Senate Democrats, as his undisclosed assets of over $100 million have sparked ethical compliance controversies. This deadlock has intensified concerns in the market about whether the smooth transition of the leadership of the world's most important central bank is feasible.

According to the Financial Times, Elizabeth Warren, the ranking Democrat on the Senate Banking Committee, launched a fierce attack on Wash on Thursday, accusing him of concealing key financial assets and bluntly stating that if confirmed, he would become Trump's 'puppet.' On the same day, all 11 Democratic members of the committee jointly pressured for a complete postponement of Wash's confirmation hearing.

This personnel dispute, coupled with legal actions by the U.S. government against current Federal Reserve officials, has significantly reduced Wash's chances of approval before current Chair Powell's term ends on May 15. Investors are closely monitoring the direct impact of this political game on the Fed's independence, as any power vacuum at the leadership level or political tendencies could reshape the market's pricing of the U.S. future interest rate path.

With the rising opposition from both party lawmakers, the Senate hearing scheduled for next week (April 21) is destined to be a highly contentious confrontation, and the Fed's power transition is facing unprecedented uncertainty.

Asset Disclosure Sparks Compliance Controversy

The crux of the uproar lies in Wash's massive and opaque financial situation. According to a 69-page disclosure document published by the U.S. Office of Government Ethics (OGE), Wash recently declared assets worth over $130 million. Among them, over $100 million is invested in multiple funds operated by Stanley Druckenmiller's family office Duquesne. However, Wash refused to disclose the underlying assets of a fund named Juggernaut, citing a confidentiality agreement.

Elizabeth Warren expressed "deep concerns" about this. She pointed out that over $100 million in assets flowing to an entirely unknown entity is not just a warning signal but a "fireworks and sparklers warning signal." Warren emphasized that although Wash has pledged to divest these assets, it does not solve the problem since the lack of initial disclosure means the outside world cannot verify whether these financial entanglements have been thoroughly resolved before assuming the Fed chair.

Despite OGE stating that Wash's disclosure report complies with federal ethics standards and can be brought into compliance by divesting some assets, Democrats insist that no one in the Trump administration has been able to smoothly advance a nomination without fully disclosing financial holdings and conflicts of interest.

Bipartisan Pressure, Hearing Faces Delay Risk

In addition to the asset transparency issue, Wash's nomination process is becoming a bargaining chip in the bipartisan game surrounding the independence of the Federal Reserve. The 11 Democratic members of the Senate Banking Committee have sent a letter to the committee's Republican Chair, Tim Scott, clearly stating that Wash's nomination process should not proceed until the investigation into current Fed Chair Jay Powell and Fed Governor Lisa Cook is completed.

Wash not only faces a collective attack from Democrats but also encounters obstruction from within the Republican Party. Senate Banking Committee Republican member Thom Tillis previously vowed to block Wash's confirmation in the committee until the Justice Department drops the investigation into Powell.

Currently, Republicans hold a slim majority in the committee with 13 to 11, meaning that Tillis's single opposing vote is enough to keep Wash from advancing to a full Senate vote.

White House Pressure and Concerns Over Fed Independence

The current deadlock surrounding the nomination stems from the escalating conflict between the Trump administration and the Federal Reserve. Trump has repeatedly criticized Powell for not lowering interest rates quickly enough, even calling him a "fool," and telling the media that rates will come down "when Wash is in."

Currently, the Trump administration is exerting pressure on the Fed through two legal disputes. One is the announcement last year to dismiss Governor Lisa Cook, whose term was supposed to extend until 2038, on unproven mortgage fraud charges, a case currently before the Supreme Court. The second is a criminal investigation by the U.S. Department of Justice into Powell's handling of a $2.5 billion overrun at the Fed headquarters renovation project.

Although a federal judge recently quashed a subpoena related to the renovation project, Trump's longtime ally, D.C. Federal Prosecutor Pirro, has indicated plans to appeal, with her team even making an unannounced visit to the Fed site this Tuesday.

This week, White House Chief Economic Advisor Kevin Hassett revealed that the DOJ's involvement is because the President wants an investigation into the overrun issue. Trump has publicly endorsed this investigation and threatened to fire Powell directly if he does not resign voluntarily after his term ends.

Power Transition Full of Variables

The dual pressure from a judicial investigation and congressional obstruction is significantly impeding the smooth transition of power at the Federal Reserve. If Woah is unable to obtain Senate confirmation by May 15, the helm of U.S. monetary policy will face legal uncertainties.

Powell has explicitly stated that if his successor is not confirmed, he will remain in office as Acting Chair, emphasizing that this action is fully supported by law and precedent. Legal experts broadly support Powell's position, pointing out that the Federal Reserve Board has the authority to assign a member to temporarily act as Chair in case of a vacancy, and several independent precedents from last year have confirmed that the President does not have the power to unilaterally appoint an acting nominee for positions requiring Senate confirmation without Senate support.

However, there is growing concern that the Trump administration will challenge this legal framework and attempt to forcefully arrange for other Board members to take over. This potential legal conflict may further undermine market confidence in the Fed's decision-making independence, forcing investors to reassess risks in a policy environment shrouded in uncertainty.