By Nick Timiraos
The Federal Reserve succession drama now comes down to a decision only Jerome Powell can make.
The Justice Department said on Friday it would halt its criminal investigation of the Fed chair. Initial ambiguity about whether the probe was truly over kept the path uncertain through the weekend. But Sen. Thom Tillis (R., N.C.), the Republican holdout whose vote threatened to stall the nomination of Powell's successor, Kevin Warsh, said Sunday that he had received assurances from the Justice Department that the probe was effectively finished. In backing Warsh's vote, Tillis cleared a path for the Senate to confirm him before Powell's term as chair expires May 15.
What's left unresolved is whether Powell will give up his seat on the Fed's board when his chairmanship ends or stay on as a governor, a position he can hold until January 2028. Fed chairs have almost always left the board when their chairmanship ends.
Powell laid out his own test for that decision at a March news conference when he said that, at a minimum, the criminal probe needed to be "well and truly over, with transparency and finality." Whether that threshold has now been met is unclear.
A pending Justice Department appeal of a federal judge's March ruling against the probe's subpoenas would be limited to preserving subpoena power, not reviving the Fed investigation, Tillis said. Still, he said on NBC's "Meet the Press" that Powell might want to see that appeal through before deciding.
"It could be a lengthy process," he said. "Hopefully not."
If Powell leaves the board, President Trump gets a second vacancy to fill beyond the seat being used to install Warsh. If Powell stays, Trump has no other scheduled vacancies on the Fed's board before Powell's governor term expires in January 2028.
Powell in March described his threshold as a minimum condition, not a sufficient one. Even if the probe was "well and truly over," he said, his ultimate decision to stay or leave would be based on "what I think is best for the institution and the people we serve."
Trump administration officials have said they hope and expect Powell to follow the tradition of his predecessors and leave. But Trump himself has spent the past year breaking other norms around the Fed, including not just the criminal probe of Powell, but also the attempted firing of Fed governor Lisa Cook.
People who know Powell say that, after nearly 14 years at the Fed including eight as chair, he is more than eager to return to private life. But agreeing to leave at a moment when the administration has been trying to push him out could, at least implicitly, validate the pressure campaign Powell has spent the past year avoiding. Each step the administration has taken in recent months has made the simple act of departing harder, not easier.
"Powell has absolutely earned a retirement at the time and of the nature of his choosing. He has given mightily to the country," said David Wilcox, a former senior Fed economist who worked with Powell. "But history has a habit of sometimes being cruel, and it has conspired to put him in a circumstance where he has to make a difficult decision."
Two forces point in opposite directions: Staying would deny Trump another seat from which to challenge institutional norms; leaving would give Warsh, a former Fed governor, room to lead the central bank and the rate-setting Federal Open Market Committee.
Powell himself hasn't signaled which way he is leaning, and the small circle of advisers and friends who might know are declining to discuss it.
Some who admire the job Powell has done think the right move now is for him to leave if the probe is truly over.
"I really do give some weight to this idea that [Warsh] will have been legitimately confirmed and he has a right to" make his imprint, said Jared Bernstein, who chaired President Joe Biden's Council of Economic Advisers. "It's just a bad institutional practice for the new CEO to have the old CEO on the FOMC."
The job of protecting the Fed's independence shouldn't depend alone on Powell, he added. "Powell deserves his chance to get on with his life," said Bernstein.
Staying would also leave Powell exposed to continued political attacks. Trump has spent the past year positioning him as a scapegoat for the economy's troubles. Remaining on the board would keep him in that position even as monetary-policy decisions pass to Warsh.
Most modern Fed chairs have left the board when their terms ended. The lone exception is Marriner Eccles, the Fed chair from 1934 to 1948. He remained on the board for three more years, initially at President Harry Truman's request after Truman chose a new chair. Eccles played a pivotal role in a clash with Truman over how much authority the White House should have in setting interest rates, a confrontation that ultimately secured the Fed's modern independence.
The Fed's main headquarters building, the renovation of which sparked the criminal probe of Powell, is named for Eccles.
According to Bob Woodward's 2000 biography, Alan Greenspan would almost certainly have stayed had Bill Clinton not reappointed him in 1996, though the case Woodward described was about Greenspan's love of the work, not about defending the institution's policy-setting prerogatives.
Jon Faust, who served as Powell's senior adviser from 2018 until 2024, said in an interview earlier this year that Powell would stay only "very unhappily, with great disappointment" -- and only if he believed his seat was the difference between the administration succeeding in compromising the Fed's independence and being constrained from doing so.
"It looks political if he stays, and to what benefit?" said Faust.
Others think that the threshold Faust described has already been crossed, and they worry that handing Trump a working majority on the Fed's board could lead to further incursions on the institution's traditional autonomy.
Powell is also the only governor on the board to have been appointed by presidents of both parties. He was named to the board by Barack Obama, elevated to chair by Trump in his first term, and reappointed by Biden. Whoever takes his seat could accelerate a drift that has already overtaken other multimember regulatory bodies in Washington, where votes increasingly split along the lines of which president made the appointment.
Wilcox, who is now at Bloomberg Economics and the Peterson Institute for International Economics, said he hoped Powell would stay. He cited four considerations: time to evaluate Warsh's defense of the institutional norms Powell preserved, possible legal protection if the probe were reopened, denying Trump another seat on the board, and the example Powell would set for other governors who also might otherwise leave before their terms end.
The most consequential of these is the math of the board itself. The danger isn't a steady erosion of independence one seat at a time. "The tipping point comes when the president gains a willing majority who are prepared to dismantle the institutional structure," Wilcox said.
Trump appointed two current governors -- Michelle Bowman and Christopher Waller -- in his first term and is on track to fill a third seat with Warsh. If Trump also gains Powell's seat, the administration will have a working majority on the seven-member board.
With four sympathetic votes, Wilcox said, the board could take dramatic steps to dismantle the institution's traditional structure, potentially including attempts to remove regional reserve bank presidents. (Waller said last week he would "absolutely" oppose any effort to fire bank presidents over a policy dispute.)
If Powell stays, that arithmetic becomes even harder, and it could stiffen the resolve of other governors whose terms run beyond Powell's, said Wilcox.
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