May 15 Countdown! Powell Refuses to 'Hand Over Power' Early, Trump Threatens 'Fire on the Spot', Fed Leadership Transition Falls into Legal Quagmire

The transfer of power at the Federal Reserve chairmanship is facing severe tests. As current Chair Powell's term expires on May 15, whether Kevin Warsh, nominated by Trump, can be confirmed by the Senate in time remains highly uncertain, with a legal and political game over the leadership of the Federal Reserve taking shape. Trump explicitly stated this week that if Powell remains in office after his term expires, he will be fired. Powell insists that, according to legal provisions, he will continue to serve as "Acting Chair" until his successor is confirmed. The two sides hold opposing positions, plunging the leadership of the world's most important central bank into unprecedented uncertainty. The immediate trigger for this standoff is Republican Senator Thom Tillis vowing to block Warsh's nomination from reaching a full Senate vote until the Department of Justice terminates its investigation into Powell. Analysts warn that if the White House chooses to forcibly advance the power transfer through legal means, it could shake market confidence in the Federal Reserve's independence. Tillis Obstruction Makes Warsh's Path to Chairship Bumpy Warsh is scheduled to attend a Senate Banking Committee hearing next Tuesday, but whether he can complete the confirmation process before May 15 is shrouded in doubt. The core of the resistance comes from Republican Senator Tillis. He clearly stated that he would block Warsh's nomination from reaching a full Senate vote unless the Department of Justice drops the investigation into Powell—an investigation focusing on whether Powell made false statements to Congress regarding the approximately $2.5 billion renovation of the Federal Reserve headquarters. Senate Banking Committee Chairman and Republican Senator Tim Scott expressed confidence that the Department of Justice would conclude the investigation within "a few weeks," but there are currently no signs that the investigation is about to end. Trump himself has clearly indicated he hopes the investigation continues, even though a federal judge ruled this month that the government's subpoena was merely an excuse to pressure Powell into cutting rates. Washington D.C. federal prosecutor Jeanine Pirro has promised to appeal that ruling. On Tuesday, two government prosecutors and an investigator went to the Federal Reserve renovation site to request a tour but were denied access. From a procedural timeline perspective, the situation is equally dire. According to Reuters, there has only been one instance in Senate history where a nomination was completed between hearing and confirmation in less than a month, and that was for an ordinary Federal Reserve governor, not the chairmanship of the world's most important central bank. Does Powell Have the Right to Remain? If Warsh fails to be confirmed before May 15, the question of who leads the Federal Reserve 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 expires, I will continue to serve as Acting Chair. This is the law and also a precedent that has occurred multiple times before, including in situations involving myself." The "Federal Reserve Act" stipulates that board members "shall continue in office until their successors are appointed," providing clear legal grounds for Powell to remain. However, Trump allies cite a different legal logic. Conservatives recently circulated a memorandum from the Carter administration arguing that the President has the authority to designate a current board member as Acting Chair during the period when a nominee awaits confirmation. Some of Trump's allies believe he has the right to designate one of the nominees—such as Stephen Miran, Michelle Bowman, or Christopher Waller—to act as Chair. Most legal scholars remain skeptical. Columbia Law School Professor Lev Menand stated that Powell has the right to remain, and the President designating someone else "lacks legal basis," pointing out that the analysis from the Carter administration era is "extremely weak." Furthermore, the Federal Vacancies Reform Act of 1998 explicitly prohibits the President from designating acting officials in multi-member commission agencies. Firing Threat—Unprecedented Constitutional Risk If Trump's threat to fire Powell is carried out, it will set a historical precedent and almost certainly trigger legal challenges. Trump explicitly stated this week that if Powell does not voluntarily leave after his term expires, "I will have to fire him." This statement aligns with his previous public criticisms of Powell—he once called Powell a "idiot" and a "stubborn mule," accusing him of refusing to cut rates. Such actions would be unprecedented. Last summer, Trump's attempt to fire Federal Reserve Governor Lisa Cook faced legal challenges; the case is currently pending before the U.S. Supreme Court, and Cook remains in office. Derek Tang, an analyst at LH Meyer, pointed out that if the White House chooses the "nuclear option," pushing forward through litigation and challenges, it could shake market confidence in the Federal Reserve, although he added that the market currently seems to show no obvious concern about this potential risk. Powell's Departure Hinges on the Investigation Even if Warsh is eventually confirmed, whether Powell will leave the Board early remains uncertain. Powell's term as a board member extends to January 2028, far beyond his term as Chair. He had previously tended to follow the convention of many former Chairs, voluntarily resigning from the board after the new Chair takes office. However, declassified legal documents show that Powell believes resigning while the investigation is still active would endanger the Federal Reserve's ability to independently set interest rate policy. He clearly stated last month that he would not leave the board until the investigation is "fully concluded, transparent, and resolved." Analysts point out that the increased possibility of Powell remaining on the board could instead constrain Warsh's room to reshape the Federal Reserve. Tang stated, "People will examine Powell's role not only economically but also morally." Successors Face Tricky Circumstances Even if the power transfer is successfully completed, the policy environment facing the new Chair is equally challenging. Krishna Guha, Vice Chairman of Evercore ISI, warned, "Applying political pressure on the central bank during periods of energy price shocks carries risks, even if it ultimately yields no results. This marginally increases the risk of rising inflation expectations because markets may worry that the Federal Reserve cannot take necessary measures to bring inflation back to target in the medium term." Tang of LH Meyer raised a more practical question: "In the coming months, the reality of inflation will be very severe. Do you really want your own person sitting in that position to become the scapegoat for maintaining high interest rates?" White House spokesperson Kush Desai stated, "The White House remains focused on working with the Senate to confirm Kevin Warsh as the next Federal Reserve Chair as soon as possible." But amidst Tillis's obstruction, the unresolved Department of Justice investigation, and Trump's hardline stance, the path to achieving this goal is becoming increasingly convoluted.