Trump: "Get to the bottom of Powell"

On Monday, February 2, U.S. President Trump made it clear during an interview in the Oval Office that the criminal investigation against Federal Reserve Chairman Powell should not stop. In response to Republican Senator Thom Tillis's ultimatum about "not stopping the investigation will obstruct the nomination of a new chairman," Trump's response was straightforward—let Washington U.S. Attorney Jeanine Pirro continue the investigation.

"Jeanine Pirro should investigate thoroughly and see what happens," Trump emphasized to the reporters present.

This statement not only intensified the tension between the White House and the Federal Reserve but also cast a heavy political shadow over the transition to the next Federal Reserve chairman. The market is currently most concerned that Trump's relentless pursuit of Powell may prevent his nominated successor from taking office smoothly.

Just last Friday, after months of vetting, Trump announced the nomination of Kevin Warsh to succeed Powell as the next Federal Reserve chairman. However, Republican Senator Thom Tillis from North Carolina drew a "red line" on the same day: unless the investigation against Powell is fully resolved, he will oppose any new Federal Reserve nominee.

This poses a substantial risk signal for investors. Tillis is a member of the Senate Banking, Housing, and Urban Affairs Committee, which currently consists of 13 Republicans and 11 Democrats. The political arithmetic is very harsh: if Tillis stands with all the Democrats on the committee against Warsh, it will result in a 12 to 12 deadlock.

This means that Warsh's nomination could be directly stalled at the committee stage and unable to proceed to a full Senate vote. A vacuum or uncertainty in the Federal Reserve leadership is the scenario that financial markets are most unwilling to see.

Targeting "Renovation Gate"

The focal point of the conflict between Trump and Powell is ostensibly centered on the renovation project of the Federal Reserve's Washington headquarters.

In his speech on Monday, Trump used highly impactful language to characterize the problems with this project. He stated:

"This is either serious incompetence or some form of theft, kickbacks. I don't know exactly what it is, but Jeanine Pirro is excellent, and she will get to the bottom of it."

Trump has long criticized the renovation of the Federal Reserve headquarters, which has taken years and cost billions of dollars, believing that it hides corruption. In response, the Federal Reserve has consistently argued that the renovation aims to reduce central bank costs in the long term and has provided explanations for the cost increases.

However, the market generally believes that the "anti-corruption" investigation is a game of monetary policy. Powell revealed on January 11 that he was under criminal investigation and accused it of being a means of pressure from the government.

Powell pointed out that despite facing pressure from Trump to rapidly and significantly cut interest rates, the Federal Reserve still insists on making rate decisions "based on our best assessment of the public interest, rather than following the president's preferences." According to CNBC, as part of Pirro's investigation, the Federal Reserve has yet to comply with the subpoena issued by the grand jury Powell's term will end in May this year, and the game surrounding "independence" and "clearing" will clearly reach its climax in the last few months before his departure.

Risk Warning and Disclaimer

The market has risks, and investment should be cautious. This article does not constitute personal investment advice and does not take into account the specific investment goals, financial situation, or needs of individual users. Users should consider whether any opinions, views, or conclusions in this article are suitable for their specific circumstances. Investment based on this is at one's own risk