Sen. Tim Scott Urges Jerome Powell to Leave Fed as Chair Term Ends This Month

Federal Reserve Chair Jerome Powell's term ends on May 15, but he intends to stay on as a governor until January 2028. This decision would make him only the third chair in history to remain in such a capacity. Powell stated that his concern involves legal attacks on the Fed that could undermine its ability to conduct monetary policy free from political influences.

Sen. Tim Scott, a Republican from South Carolina, said he is praying for Powell to leave the agency entirely when his chairmanship concludes. During a discussion at the Milken conference in Beverly Hills, California, Scott clenched his fists and looked upward while emphasizing the need for prayer on the issue.

He suggested that Powell's choice to stay might be an attempt to poke the president in the eye and potentially impede the agenda of the nominee to succeed him.

Powell has addressed his decision at a recent news conference, assuring that he would not act as a dissident in his ongoing role. A Fed representative reiterated this stance. Historically, most outgoing chairs have departed the board entirely, and Scott called it a significant mistake for Powell to break with this tradition, arguing it could distract from the Fed's dual mandate of price stability and maximum employment.

Kevin Warsh, nominated to succeed Powell, has criticized aspects of Powell's tenure, including expansions in the Fed's balance sheet and focus on issues like ESG. Scott noted that Warsh aims to steer the agency away from these priorities. The nomination process involved compromises to advance Warsh out of committee, including shifting oversight of a headquarters renovation probe to the Fed's inspector general.

“Honestly, I think it’s going to be his decision … but I do think he’s maybe just poking the president in the eye a little bit." — Sen. These actions, coordinated with fiscal stimulus, led to the shortest recession on record and a swift recovery in unemployment from 8 percent in 2020 to 3.6 percent in 2022. The U.S. economy rebounded faster than other Group of Ten nations. However, sources point to shortcomings, such as maintaining accommodative policy too long, leading to inflation peaking at 9.1 percent in June 2022. The Fed then raised rates aggressively to between 4.25 and 4.5 percent by year's end and implemented quantitative tightening. Powell's introduction of flexible average inflation targeting in 2020 was later abandoned as it proved ill-suited to supply chain disruptions. The 2023 Silicon Valley Bank collapse prompted the Fed to launch an emergency liquidity facility, highlighting supervision failures. A subsequent review noted that while the bank's management bore responsibility, supervisors did not address vulnerabilities promptly as the institution grew.”

Commentary from Brian Wesbury, chief economist at First Trust Advisors, links Fed policies under Powell to increased inequality and political shifts. He argued that quantitative easing tripled the M2 money supply from $7 trillion in 2008 to $22.7 trillion today, benefiting asset owners while disadvantaging younger generations without assets.

This, Wesbury said, has fueled generational divides and support for socialist policies, as seen in recent New York City elections where Mayor Mamdani, a self-described democratic socialist, won strong youth support. Wesbury contended that Fed actions enabled government to finance large deficits at artificially low rates during COVID, contributing to economic distortions.

He suggested that the Fed's policies have politicized monetary issues, countering claims of violated independence. Attorney and former Securities and Exchange Commission chair, proposed a compromise to resolve a probe into the Fed's $2.5 billion headquarters renovation.

This involved ending a criminal investigation and allowing the inspector general to review cost overruns, potentially recommending further action. The move persuaded Sen. Thom Tillis to support advancing Warsh's nomination from committee. Scott expressed that while the renovation was over budget, he does not believe Powell acted criminally, though some see potential negligence in management and testimony.

He advocated giving the inspector general time to investigate fully. Powell has indicated he will remain until cleared of any potential charges related to the project. Scott laughed off suggestions of petty measures to force Powell out, instead emphasizing that truth about the impact of a predecessor's presence should encourage departure for the Fed's best interest.