Powell investigation disrupts Trump's efforts to find a new Federal Reserve chief

Trump’s Search for a New Fed Chair: The Latest Developments

• President Donald Trump’s campaign to find a successor for Jerome Powell has taken an unexpected twist.

• The current Federal Reserve chair has disclosed that he is the subject of a criminal investigation, which he believes is a form of retribution.

• Meanwhile, Trump is still weighing his options for who will take over the role.

Major Shift in Trump’s Fed Chair Search

As the new year begins, President Trump’s efforts to appoint a new Federal Reserve chair to replace Jerome Powell have entered a dramatic phase.

On Sunday, Powell confirmed reports that he is under criminal investigation regarding his previous testimony to Congress about the $2.5 billion renovation of the Fed’s headquarters.

In a video address, Powell stated that he believes the investigation is a response to his refusal to comply with Trump’s demands for interest rate cuts.

“Facing criminal charges is a result of the Federal Reserve making decisions on interest rates based on what we believe best serves the public, not simply following the President’s preferences,” Powell explained.

Trump, in comments to NBC News, denied any involvement with the grand jury subpoenas sent to the Fed, and criticized Powell’s performance both as Fed chair and in overseeing the building renovations.

The investigation has complicated Trump’s plans to replace Powell, whose term concludes in May.

Who’s Leading the Race to Replace Powell?

Here’s an overview of the top contenders on Trump’s shortlist:

Kevin Hassett

Jim Watson/AFP via Getty Images

Kevin Hassett, a key economic advisor to Trump, has long been seen as a frontrunner for the Fed chair position.

As of January, both Hassett and former Fed governor Kevin Warsh are tied at 40% odds to be Trump’s pick, according to prediction markets Kalshi and Polymarket.

When asked about the investigation into Powell, Hassett supported the idea of examining why the Fed’s renovation costs exceeded initial estimates. The Fed has attributed the overruns to design changes, rising material costs, and unexpected issues like more asbestos than anticipated.

“It’s crucial to track how taxpayer funds are spent and understand the reasons behind those decisions,” Hassett told reporters outside the White House on January 12.

Before joining Trump’s team, Hassett advised several Republican presidential candidates, including George W. Bush, John McCain, and Mitt Romney, on economic policy.

During Trump’s first term, Hassett led the Council of Economic Advisors. He returned to the White House during the COVID-19 crisis but faced backlash for a model predicting coronavirus deaths would drop to zero by mid-May 2020.

In 1999, Hassett co-authored “Dow 36,000,” a book that was later criticized as it took over two decades for the index to reach that milestone.

Kevin Warsh

Ann Saphir/Reuters

Trump has consistently spoken highly of Kevin Warsh, another leading candidate.

In December, Trump told The Wall Street Journal that Warsh was his top choice, saying, “I think the two Kevins are both great, and there are a couple of other excellent candidates as well.”

Earlier, Trump had named Hassett, Warsh, and current Fed Governor Christopher Waller as his top three picks.

Warsh’s odds in prediction markets surged in December, dipped, and are now climbing again.

During Trump’s first term, Warsh was reportedly considered for the Fed chair role before Powell was nominated in 2017.

Warsh began his career at Morgan Stanley in mergers and acquisitions, later serving as an economic advisor in the George W. Bush White House before being appointed to the Fed in 2006.

He played a significant role in the Fed’s response to the 2008 financial crisis and was known as the central bank’s main link to Wall Street.

Since leaving the Fed, Warsh has echoed Trump’s criticisms of Powell, advocating for a change in leadership at the central bank.

“The Fed’s missteps on inflation have lingered. That’s why I believe the President is right to push for a new direction in Fed policy,” Warsh told CNBC in July.

Christopher Waller

Patrick Semansky/AP

Federal Reserve Governor Christopher Waller, who currently serves with Powell, has said he felt positive about his interview for the role.

In November, Waller expressed satisfaction with his discussion with Treasury Secretary Scott Bessent, who is leading Trump’s selection process.

CNBC reported in December that senior officials described Waller’s interview with Trump as “strong.”

Despite favorable press coverage, Waller’s chances have dropped below 10% in major prediction markets as of January.

Waller, a veteran of the regional Fed system, was considered a conventional choice when Trump nominated him in 2019. That same year, Trump also nominated Judy Shelton, a Fed critic, leading to a contentious confirmation process for both.

Waller was confirmed by the Senate in December 2020 by a narrow 48-47 vote, the closest margin for a Fed governor since 1980.

In July, Waller and Governor Michelle Bowman both dissented from the Fed’s decision not to cut interest rates, marking the first dual dissent in over three decades.

Rick Rieder

Lucas Jackson/Reuters

Another prominent name on Trump’s list is from Wall Street.

Rick Rieder is the chief investment officer for global fixed income at BlackRock and has decades of experience, including a stint at Lehman Brothers.

Rieder oversees about $2.4 trillion in assets and has served on the Fed’s Investment Advisory Committee on Financial Markets.

Michelle Bowman

Mark Schiefelbein/AP

Federal Reserve Governor Michelle Bowman was once seen as a possible candidate, but her prospects have faded in recent months.

Trump appointed Bowman to the Fed in 2018, and she was reappointed in 2020. In June, she narrowly secured confirmation as vice chair of supervision.

Bowman began her career as an intern for Senator Bob Dole and later held roles at FEMA and the Department of Homeland Security during the George W. Bush administration. She also served as vice president at her family’s bank in Kansas before becoming the state’s chief banking regulator.

In September 2024, Bowman became the first Fed governor since 2005 to vote against an interest rate decision. In July, she again dissented, this time joined by Waller.

Other Names No Longer in the Running

Reuters

At one point, Trump’s shortlist reportedly included nearly a dozen candidates.

According to CNBC, the following individuals are no longer being considered: David Zervos (Jefferies), Dallas Fed President Lorie Logan, former St. Louis Fed President James Bullard, Fed Governor Philip Jefferson, and Marc Sumerlin, a former economic advisor to President George W. Bush.

Former Fed Governor Larry Lindsey has also withdrawn from consideration, as he told CNBC.