• Senator Thom Tillis (R-N.C.) will support Kevin Warsh's nomination to succeed Federal Reserve Chair Jerome Powell only after the Justice Department's criminal investigation into Powell is resolved.
  • The DOJ probe, launched in January 2026, focuses on Powell's June 2025 congressional testimony regarding the Fed's $2.5–4 billion headquarters renovation, alleging misrepresentation of costs and features.
  • Tillis's hold on the Senate Banking Committee could delay Warsh's confirmation amid Republican opposition, with Powell calling the investigation "unprecedented" and politically motivated.

A Political Stalemate Over Fed Leadership

Senator Thom Tillis has thrown a wrench into the planned transition at the Federal Reserve, stating he would back Kevin Warsh's nomination to replace Chair Jerome Powell only after the ongoing Justice Department criminal probe into Powell is settled. This condition, articulated by Tillis in recent discussions, threatens to stall Warsh's confirmation process, according to people familiar with the matter. The North Carolina Republican's position on the Senate Banking Committee gives him significant leverage, effectively blocking advancement without a rare 60-vote discharge—a move seen as unlikely in the current divided Senate.

"Without a deal to resolve this probe, the confirmation could be dead in the water," one source close to the committee said, speaking on condition of anonymity. Efforts to reach Tillis's office for further comment were unsuccessful as of Tuesday afternoon.

The DOJ investigation, initiated in January 2026, centers on Powell's testimony last June about the Federal Reserve's massive headquarters renovation project. Prosecutors are examining allegations that Powell misrepresented costs and features, such as marble installations, elevators, and water features, in the $2.5–4 billion overhaul of the historic Marriner S. Eccles Building. President Trump affirmed on a recent Monday that the investigation continues under U.S. Attorney Jeanine Pirro, criticizing the project as "gross incompetence or theft" and comparing it unfavorably to his own real estate ventures.

Powell fired back in a January 11, 2026, statement, labeling the probe "unprecedented" and suggesting it was politically motivated retaliation for the Fed's independent monetary policy decisions, including rate settings that have defied administration preferences. "This is about intimidation over our rate policy," Powell asserted, contrasting his service under four presidents. His defiance has sparked debates on central bank autonomy versus accountability, with Trump allies amplifying "theft" claims in public forums.

Meanwhile, the Fed's policy stance remains in focus. On January 28, 2026, the Federal Open Market Committee held the federal funds rate steady at 3.5–3.75%, citing stabilizing unemployment and elevated inflation at 2.9% PCE. The committee indicated it was positioned to address dual-mandate risks after prior cuts, with some members viewing policy at the "higher end of neutral." This backdrop adds urgency to the leadership question, as stakeholders—from Fed staff facing office disruptions to Congress overseeing costs—watch closely.

Short-term, Warsh's confirmation appears stalled until the probe concludes, potentially delaying the Fed leadership transition slated for May 2026. Trump nominated Warsh in late 2025, but Tillis's hold complicates the timeline. Long-term, experts warn that if political probes like this succeed, it could undermine Fed independence, per Powell's warnings. The renovation itself, aimed at addressing safety and waterproofing issues in the 1930s-era building, has ballooned in cost, drawing scrutiny amid broader U.S. economic pressures like persistent inflation above the 2% target.

In related developments, Trump has reiterated no plans to dismiss the probe, while Powell's statement ties it directly to rate disputes. The FOMC continues to balance inflation and unemployment concerns amid these political headwinds, with no immediate resolution in sight for the nomination impasse.