Jerome Powell, Kevin Warsh, and a 13-11 Vote: The Fed Tips Into the Era of Political Appointments
|5 min
usdejpukfrkr
The Senate Banking Committee confirmed Kevin Warsh as Jerome Powell's successor by a 13-11 vote -- the first fully partisan vote on a Fed chair in committee history. The Bundesbank and BoJ are preparing a coordinated response.
In Washington on April 30, the [Senate Banking Committee](https://www.banking.senate.gov/) met at 10:00 AM to vote on Kevin Warsh's nomination as Federal Reserve chair. The result came in at 11:47: 13 in favor (Republicans), 11 against (Democrats). According to Fortune, which documented the sequence the same day, this is the first fully partisan vote on a Fed chair in the history of the Senate Banking Committee. The last time a partisan vote decided a nomination -- Alan Greenspan's 1994 reconfirmation -- the divide was narrower: 18 votes against 4, with dissenters in both camps.
Charges Dropped
On April 26, the Department of Justice dropped its charges against Jerome Powell, opened in March 2026 (see our analysis). The investigation concerned allegations of mismanagement of the Fed headquarters renovation, with no solid factual basis. The DOJ decision was announced 96 hours before Warsh's hearing -- undisguised political exchange. Powell remains on the Board of Governors until May 15, 2026, then will return to ordinary governor status until his governor term expires in 2028. This forced Warsh-Powell coexistence over two years has no precedent since Marriner Eccles, who served under chair William McChesney Martin from 1951 to 1955 after having been chair himself.
Loretta Mester, former president of the Cleveland Fed, told CNBC on April 30: "Both Kevin and Jay will be able to interact, and I think the rest of the FOMC will be able to interact, although I grant that it may be challenging." The phrase betrays the technical concern: the FOMC operates on internal consensus, and the presence of a former chair durably at odds with his successor weakens the unity of voice that signals to markets.
The Warsh Profile: Hawk Turned Dove
Kevin Warsh, 56, Fed governor from 2006 to 2011, is known for restrictive monetary positions during the 2008-2009 crisis. He criticized Ben Bernanke's quantitative easing and advocated faster rate tightening. But his 2024-2025 public interventions -- notably in the Wall Street Journal and at the Hoover Institution -- marked a reversal: Warsh defended the possibility of aggressive rate cuts in case of slowdown, aligning his speech with White House preferences.
The policy rate stands at 3.6% as of May 1, 2026. Fed Funds Futures contracts (CME FedWatch) anticipate a cut to 3.1% by September 2026 and 2.5% by year-end 2026 under a Warsh chairmanship. This trajectory -- 110 basis points in 8 months -- is three times faster than the baseline anticipated at end-March (30 bp over the same period). Equity markets rallied 4.2% on the week (S&P 500), 10-year yields fell 35 bp.
The German and Japanese Response
The Bundesbank and the Bank of Japan have begun discreetly calling for safeguards to protect central bank independence. According to Reuters and Nikkei, informal contacts took place between Joachim Nagel (Bundesbank) and Kazuo Ueda (BoJ) during the week of April 27. A formal declaration is expected before May 15 -- the end of Powell's term. The precedent invoked is the Turkish central bank under Erdogan: between 2019 and 2023, six governors were dismissed or resigned, sending the Turkish lira down 75% against the dollar and inflation to 85% in October 2022. The scenario Berlin and Tokyo seek to avoid is not the immediate repetition of Turkey, but the gradual erosion of the American credibility premium.
Treasuries: Who Pays the Erosion?
US Treasury bonds are held 30% by foreign creditors. Japan held $1,060 billion at March 31, 2026 (Treasury International Capital), China $760 billion, the UK $720 billion, Luxembourg $410 billion. Gulf sovereign wealth funds (UAE, Saudi Arabia, Norway) collectively hold about $850 billion. A monetary policy aligned with the presidential calendar reduces the stability premium these creditors accept: if lost duration translates into a long-end adjustment of just 25 bp, the carry effect for the US Treasury exceeds $75 billion per year.
The Greenspan Precedent
In 1994, Alan Greenspan's reconfirmation by 18-4 had already signaled the beginning of Fed politicization -- opponents were Democrats and progressive Republicans. But Greenspan benefited from solid technical legitimacy: 7 years of prior chairmanship, a curriculum focused exclusively on price stability. Warsh has 8 years of distance from his last Fed operational experience and has never chaired a monetary institution. The distance between the two profiles is not anecdotal: it signals that the selection criterion has become political alignment, not technical depth.
Country-by-Country Impact
- United States: Warsh confirmed by 13-11 in the Senate Banking Committee on April 30; full Senate floor vote expected late May.
- Germany: the Bundesbank is preparing a declaration on central bank independence (internal deadline May 15).
- Japan: the BoJ holds $1,060 billion in Treasuries -- highest exposure among foreign holders.
- United Kingdom: the Bank of England held its policy rate at 4.5% in April -- decision without coordination signal with the pre-Warsh Fed.
- France: Bercy asked the Treasury for a review of exposure to US rate movements before May 30.
- South Korea: the Bank of Korea anticipates won-dollar volatility -- 1,320 won/USD on May 1 against 1,280 at end-March.
CriticalWarningAffectedNeutral
SHARE THIS COMPARISON
Show your friends how the world sees the same news differently.
AI-generated content — Analyses are produced by artificial intelligence from press articles. They may contain errors or biases. Learn more
