Senate Banking Chair Tim Scott believes Fed Chair Powell committed no crime in testimony

WASHINGTON – Senator Tim Scott, the chairman of the powerful Senate Banking Committee, said Wednesday he does not believe Federal Reserve Chairman Jerome Powell committed a crime during his testimony before Congress last year. The statement offers a crucial, albeit critical, defense of the central bank chief even as a Department of Justice investigation into that very testimony continues to unfold.

Scott's comments introduce a complex new dynamic into the escalating political battle over the Federal Reserve's leadership, simultaneously undercutting the severity of the probe while maintaining his call for Powell's replacement.

The situation places the independence of the world's most influential central bank under an intense spotlight, with a presidential nominee's confirmation hanging in the balance.

A Nuanced Defense

In a Wednesday morning interview on Fox Business, Sen. Scott (R-S.C.) was unequivocal in his critique of Powell's job performance but drew a sharp line at accusations of criminality.

"I have found him to be inept at doing his job," Scott said of Powell. "But ineptness or being incompetent is not a criminal act."

Scott, whose questions to Powell during a Banking Committee hearing last June form the basis of the DOJ's scrutiny, suggested the Fed Chair was simply ill-prepared for the line of questioning.

• On Powell's Performance: Scott stated, "I believe what he did was made a gross error in judgment. He was not prepared for that hearing." This reflects a deep dissatisfaction with Powell's leadership and communication with Congress.
• On Criminality: Despite his harsh assessment, Scott was clear in his legal conclusion. "I do not believe that he committed a crime during the hearing," he affirmed, marking his first significant public comments since Powell revealed the existence of the probe over three weeks ago.
• On Fed Leadership: Scott left no doubt about his desired outcome, expressing support for President Donald Trump's push to install new leadership. "I believe that it's time for a new [Fed] Chair, and thank God Almighty, we're getting ready to get one," he said.

The Confirmation Standoff

Scott's remarks come amid a high-stakes blockade within his own party that threatens the confirmation of Kevin Warsh, President Trump's pick to succeed Powell.

Fellow Republican Senator Thom Tillis of North Carolina, a key member of the Banking Committee, has vowed to oppose Warsh's nomination until the Justice Department drops its investigation into Powell. Tillis, who is retiring in January, argues the probe represents an unacceptable encroachment by the executive branch on the Federal Reserve's independence.

In a Wednesday interview on CNBC's "Squawk Box," Tillis doubled down on his position.

• Tillis's Vow: The retiring senator said he is prepared to continue his block "for the remainder of this Congress, if that's what's necessary to get to the truth" and preserve the Fed's autonomy.
• Committee Math: The Senate Banking Committee is composed of 12 Republicans and 11 Democrats. If Tillis joins all Democrats in opposing Warsh, he can single-handedly prevent the nomination from advancing to the full Senate for a vote.
• The President's Pressure: On Monday, President Trump publicly endorsed the investigation, which is being led by U.S. Attorney for Washington Jeanine Pirro, a known ally. "Take it to the end and see," Trump said, while also taking a jab at the retiring Tillis for the obstruction.

Background: A Politicized Central Bank

The current firestorm is the culmination of years of public pressure by President Trump on the Federal Reserve, an institution that has long operated under a strict code of political independence to ensure its decisions on monetary policy are based on economic data, not political favor.

The President has frequently railed against Powell—his own appointee—for not lowering interest rates as aggressively as he would like. The current DOJ investigation is seen by many analysts and lawmakers, including Sen. Tillis, as an unprecedented escalation of that pressure campaign.

While the specific statements from Powell's June 2024 testimony under review have not been made public, the existence of a criminal probe into a sitting Fed Chair is without modern precedent and has sent shockwaves through financial markets and Washington.

What's Next: A High-Wire Act

Despite the firm opposition from his colleague, Chairman Scott projected confidence that he could navigate the impasse and secure Warsh's confirmation.

"I believe that we're going to resolve that issue. We're going to move forward, and Thom Tillis will be voting for Kevin Warsh as the next chairman of Federal Reserve. That's my prediction," Scott said, praising Tillis as a productive committee member.

This places Scott in the role of chief negotiator, tasked with brokering a deal that satisfies the White House's desire for a new Fed Chair while addressing a fellow senator's grave concerns about institutional integrity.

• The Path Forward: Scott suggested a resolution was possible, stating, "I believe we can solve the Jay Powell issue and move forward with a strong vote from all Republicans on the committee." What that solution entails remains unclear.
• Focus on Tillis: All eyes will be on Sen. Tillis to see if he maintains his blockade. His leverage is significant, but he faces pressure from his party's leadership and the President.
• The Fate of the Fed: The outcome of this conflict will have lasting implications. A successful confirmation of Warsh following the controversial probe could signal a new era of diminished Fed independence. A successful blockade by Tillis would be a powerful, albeit temporary, defense of the central bank's traditional autonomy.

The confirmation hearing for Warsh, originally scheduled for October 30, remains in limbo as Washington waits to see if Chairman Scott's prediction of party unity will prove true.