Senate Control Shifts, White House Can No Longer Install Its Own People: Is the Alert Over the Fed's Independence Lifted?

By: Long Yue, Wall Street CN

Over the past two years, the Federal Reserve's independence has faced rare pressure. The White House once attempted to remove an incumbent Fed governor—a first in Fed history. But with the shift in Senate control, this lever's effectiveness is rapidly fading.

According to the ZhuiFeng trading desk, JPMorgan Chase Chief Economist Michael Feroli pointed out in a research report released on November 4 that the change in Senate control will significantly reduce the aforementioned risks. The reason is straightforward: Fed governors must be confirmed by the Senate, meaning the White House now must nominate someone acceptable to Democratic senators, or the seat will simply remain vacant.

Powell's 'Legacy': The Only Vacancy

For the next two years, there is only one seat expiring on the Board of Governors—Chair Powell’s own term, which ends in January 2028.

This means that under the new Senate landscape, if the White House wants to fill this seat, it has no choice but to nominate a candidate acceptable to Democratic senators, or simply leave the seat empty.

Feroli wrote in his report: "The election results mean that the administration now needs someone acceptable to Senate Democrats to replace Powell, otherwise the seat must remain vacant."

Wall Street CN noted that US media also believe Democrats’ return to control of the Senate, particularly the Senate Banking Committee, has effectively blocked Trump’s ability to install allies on the Fed board. Senator Elizabeth Warren, a long-time supporter of Fed independence, is expected to chair the banking committee. This could subject future Trump nominations for Fed officials to stricter scrutiny or even delays. It may also grant the Fed and its Chair Warsh greater room to raise interest rates to combat inflation.

What’s the Point of Removing Cook?

The White House has previously pushed to remove Fed Governor Cook. However, following the change in Senate control, the practical significance of this move has shrunk considerably.

Feroli’s report directly points out this logic: even if the removal succeeds, the resulting vacancy will not fall into the administration’s preferred hands. In other words, the political cost of removing Cook will yield no corresponding personnel payoff.

Beyond the Board of Governors, the selection of regional Fed presidents is similarly affected.

The report mentions that multiple media outlets have previously reported that the Federal Reserve Bank of Atlanta had contacted at least one former Trump administration official during its search for a new president. Feroli points out that the shifting political landscape in Washington could alter the priorities in such selections.

However, this does not mean the Fed can rest easy henceforth. The president still holds the power to nominate governors, and the executive branch can still pressure the central bank through other administrative and legal channels. While Democratic control of the Senate can block certain appointments, it cannot fully restrict the White House from pressuring current Fed officials.

New Pressures Facing Warsh

Current Fed Chair Kevin Warsh’s term expires in May 2030. Before the next election, the Senate’s political landscape will very likely remain dominated by Democrats—which adds another hurdle to Warsh’s path to reappointment.

Feroli wrote in his report: "Unless he is content to serve only one term, Warsh needs to spend less time gazing out the window and more time walking the corridors of Congress."

This echoes advice Powell publicly gave to his successor before leaving office. Powell once said: "Congress is our window to democratic accountability. Going to Congress and engaging with people is not a passive burden, but an active, regular obligation."