Tuesday’s election results handed Democrats the strongest check yet on President Trump’s bid to control the Federal Reserve, by giving them the power to block any allies he might seek to install on its board.
That leaves Trump with the chairman of his choosing, Kevin Warsh, but one seat short of a majority and diminished prospects of getting it. His White House has mounted the most direct challenge to the Fed’s independence in decades, including an unprecedented attempt to fire a sitting governor. The checks on that pressure have so far been piecemeal. They have included a retiring Republican senator’s blockade of Fed nominees, Jerome Powell’s decision to stay on the board after stepping down as chair, and court rulings keeping Fed governor Lisa Cook in her seat for now . A Democratic Senate would provide a broader institutional buffer by covering every nomination to the Fed’s seven-member board of governors for the rest of Trump’s term.
Trump’s ability to remake the central bank’s relationship with the White House as he might have hoped “clearly died Tuesday,” said Mark Spindel, an investment manager and co-author of a book on the Fed’s relationship with Congress. “He simply cannot get people on the board anymore, cannot get partisan seats filled, just full stop.”
Democrats have opposed Trump’s recent Fed picks nearly in lockstep. Only one, Sen. John Fetterman of Pennsylvania, voted for Warsh in May . A Senate that keeps blocking his picks would limit Trump’s ability to shift the Fed’s course through appointments, the main lever presidents have to influence central bank policy. Trump has made no secret that he wants lower interest rates, but the president doesn’t set interest rates; a committee of Fed officials does, and most of its members aren’t presidential appointees.
Previous chairmen have relied on “a really strong vice chair to help guide their own personal thinking and to guide committee consensus,” said Derek Tang, an economist at Monetary Policy Analytics. For Warsh, “that route does seem narrower.”
No Democrat voted to confirm Michelle Bowman as vice chair for supervision last year or Stephen Miran, who filled a vacant seat a few months later.
Rate decisions are the product of deliberations by 19 officials who attend meetings of the Federal Open Market Committee. Twelve members vote at each meeting: the seven presidentially appointed governors, the president of the New York Fed and four of the other 11 regional bank presidents, who aren’t political appointees and vote on a rotating basis. Trump has appointed three of those 12 voters.
