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Frank Kelly | The impact of the Justice Department’s appeal of the Powell case
3/16/2026
The potential impact of the Justice Department’s appeal of the Powell case: A major delay in Warsh’s confirmation and Vice Chair Jefferson becoming Acting Chair for several FOMC Meetings.
Francis (Frank) J. Kelly
Founder & Managing Partner, Fulcrum Macro Advisors and Senior Political Strategist for DWS
The Justice Department’s decision March 13 to appeal the court’s harsh ruling quashing subpoenas as part of their investigation of Chair Jay Powell is likely to present two outcomes markets have not focused on yet: Fed Chair-nominee Kevin Warsh’s confirmation is likely to be significantly delayed as the appeals process proceeds and Vice Chair Philip Jefferson will likely become the acting Fed Chair.
Considering the speed – or lack thereof – of federal appellate cases and the Trump Administration’s penchant to push cases they lose all the way to the Supreme Court, we can easily see Warsh’s Senate confirmation held up until late summer or even early fall. Also, there is reason to believe President Trump may want the case to continue because it is the one small leverage point he has left to pressure Powell to step down before the end of his term, even if it is a long shot.
However, recall that Senator Tom Tillis (R-NC) strongly reaffirmed Friday his determination to hold up Warsh’s confirmation – a view and position quietly being supported by a number of other senators from both side of the aisle – until the Justice Department drops the investigation of Powell.
According to Treasury officials we talked to over the weekend, the White House is considering whether it can name Federal Reserve Governor Stephen Miran as Acting Chair if Warsh is not confirmed by May 15th, Powell’s last official day as chair. But we would quickly note that under the law – the Federal Reserve Act – it does not appear to provide for that, especially since the President has already nominated Warsh to be chair. Moreover, that begs the question: Why would Senator Tillis and other senators allow the confirmation of an acting chair if they will not allow the confirmation of Warsh to be permanent chair? They most likely will not.
So, what happens? Again, looking at the Federal Reserve Act for what would happen following the expiration of Powell’s term as chair, the law dictates that the Vice Chair becomes the Acting Chair – meaning, Vice Chair for Monetary Affairs Philip Jefferson would step in to serve as Fed Chair until Warsh is confirmed.
With Federal Open Market Committee meetings scheduled for June, July, and September, Jefferson – a Biden appointee – would preside over two and perhaps three rate setting meetings. Looking at Jefferson’s past rate setting votes and reviewing his most recent public speech given on February 6th, Jefferson is highly likely to move cautiously on any notion of cutting rates further as President Trump is demanding.
We also continue to believe Powell will not step down from the Federal Reserve when his term as chair ends, choosing to serve out the remaining two years of his term as a governor (which expires January 31, 2028). We also continue to believe the U.S. Supreme Court is going to rule in favor of Governor Lisa Cook, allowing her to keep her seat which also expires January 31, 2028. All of which means President Trump may have to wait two years to fully reshape the Fed.