Trump’s bid to interfere with the Fed likely to be checked [U.S. Midterm Elections]

[Financial News]  With Democrats scoring a sweeping victory in the U.S. midterm elections and securing control of the United States Senate, strong checks are expected to be placed on President Donald Trump’s attempts to exert partisan pressure on the Federal Reserve (Fed).
Foreign media reported on the 4th (local time) that the election results are expected to serve as a decisive bulwark against Trump placing allies on the Fed Board, while also creating significant political pressure on Fed Chair Kevin Warsh as he pursues his policy agenda.
The biggest anticipated change is at the United States Senate Committee on Banking, Housing, and Urban Affairs, which oversees the Fed. Senator Elizabeth Warren (Democrat, Massachusetts), a prominent progressive and fierce critic of Warsh, has emerged as the strong favorite to replace the committee’s current chair, pro-Trump Senator Tim Scott (Republican, South Carolina).
Warsh took office last May in an extremely polarized vote of 54 in favor and 45 opposed, with the support of just one Democratic senator. In a report, economists at Monetary Policy Analytics, the monetary-policy analysis firm of former Fed governor Larry Meyer, said, “Warsh’s plans for a closed and opaque approach to running the Fed will face a major test in hostile hearings led by Democrats.”
JPMorgan Chase chief economist Michael Feroli also said the election results could deal a direct blow to Warsh, whose term runs through 2030. Feroli said, “If Warsh wants to secure another term, as his predecessors did, he will need to do more than just look out the windows of the Capitol. He should walk the halls of Congress himself and focus on persuading Democratic lawmakers.”
The midterm election results dealt a direct blow to President Trump’s plan to reshape the Fed Board. Of the Fed’s seven governors, three were appointed by former President Joe Biden. Former Chair Jerome Powell, who was chosen by both Trump and Biden but is now at odds with Trump, also remains on the Board.
Trump has repeatedly and forcefully criticized the Fed’s interest-rate hikes, aimed at curbing inflation, saying the Fed Board is “hostile and biased.”
In particular, the White House plans to press ahead within days with administrative proceedings to remove Fed Governor Lisa Cook for cause, citing errors in her past loan applications. Court proceedings are expected to follow. And even if the administration wins in court and removes Cook, it would be virtually impossible for Trump’s preferred replacement to clear confirmation hearings in a Senate controlled by Democrats.
Since Democrats made the cost of living and the prices people face key campaign pledges in the midterm elections, they are expected to put strong pressure on Warsh over whether the Fed is fulfilling its mandate to stabilize prices.
At the same time, Democrats will have sweeping investigative powers to launch broad inquiries into senior officials’ ethics and financial transparency, including details of $1 million in asset sales that came to light during Warsh’s confirmation process.
The Democrats’ recapture of the Senate has given the Fed’s policy independence a legal and institutional shield for the time being. However, the Fed’s top leadership, led by Warsh, now faces a new political challenge: strict oversight and close scrutiny by a Congress led by Democrats.
[email protected] Yoon Jae-joon Reporter