Election stiffens the Fed's guardrails, but independence risks remain
TLT•Democrats’ midterm victory and expected control of the Senate could block President Donald Trump’s future Fed nominees and increase scrutiny of Chair Kevin Warsh. Elizabeth Warren is likely to lead the Senate Banking Committee, while Trump’s effort to remove Governor Lisa Cook remains ongoing.
1. Senate control shifts
Democrats’ expected control of the Senate gives them a role in confirming Fed nominees, potentially limiting Trump’s ability to add allies to the central bank’s seven-member board. The shift could also bring increased scrutiny of Chair Kevin Warsh, with Senator Elizabeth Warren likely to replace Tim Scott as Senate Banking Committee chair.
2. Warsh faces scrutiny
Democrats could press Warsh on inflation and investigate matters including his disposition of hundreds of millions of dollars in assets before becoming Fed chair. Economists at Monetary Policy Analytics wrote that hostile questioning could test Warsh’s preference for a quieter, less publicly transparent central bank.
3. Cook effort continues
The Trump administration is expected to pursue an administrative procedure in coming weeks to support an effort to fire Governor Lisa Cook over mortgage application errors that predated her appointment. A court challenge is likely, and the article says a Democrat-led Senate would be unlikely to confirm a Trump-selected replacement if Cook were removed.
