Hassett eyes Powell board exit after renovation probe as Warsh confirmation looms

WASHINGTON, DC: National Economic Council Director Kevin Hassett signaled a potential end to the standoff at the Federal Reserve on Monday, 11, predicting that Chair Jerome Powell will likely resign from the Board of Governors once a pending internal investigation concludes.

The announcement comes just days before Powell’s term as chair is set to expire this Friday, amid a contentious transition to President Trump’s nominee, Kevin Warsh.

Hassett’s comments on CNBC’s “Squawk Box” suggest that the administration believes Powell is looking for an "off-ramp."

According to Hassett, Powell would likely leave the board if Federal Reserve Inspector General Michael Horowitz releases his findings soon and Powell is "happy with the results."

This would effectively end Powell's tenure at the central bank entirely, despite his separate term as a board member officially running through January 2028.

Inspector General probe provides potential off-ramp

The controversy centers on a $2.5 million renovation project at the Federal Reserve, which has drawn repeated fire from President Trump.

The Inspector General's probe, led by Michael Horowitz, was initiated in late April following the dismissal of a criminal investigation by US Attorney Jeanine Pirro.

Powell has been vocal in his criticism of the previous criminal inquiry, labeling it a politically driven effort by the President.

While Powell has previously stated he would remain on the board to ensure the investigation reaches "transparency and finality," Hassett believes a favorable report would satisfy that requirement.

"I would expect that he would leave" if the report results are satisfactory, Hassett added, indicating the administration expects a swift resolution to the leadership overlap.

Powell vows to protect institutional integrity

Despite the administration's predictions, Powell has maintained a firm public stance regarding his departure.

Following his final meeting with the Federal Open Market Committee as chair, he reiterated his commitment to seeing the Horowitz investigation through to the end. 

He told reporters that his decisions are "guided entirely" by the best interests of the institution.

Powell’s determination to stay has been seen as a move to defend the Fed against political interference. He noted that he is "encouraged by recent developments" but remains focused on the remaining steps of the oversight process.

This dedication to "finality" has created a unique scenario where the outgoing chair could remain as a governor while a new chair takes the helm.

Senate maneuvers toward Warsh confirmation vote

As the legal drama unfolds, the focus on Capitol Hill has shifted to Kevin Warsh, the President's pick to succeed Powell. The Senate Banking Committee recently advanced Warsh’s nomination in a narrow 13-11 partisan vote.

A critical procedural hurdle is scheduled for Monday evening, with a vote set to limit debate on the nomination ahead of a final confirmation.

The timing of Warsh’s potential confirmation coincides perfectly with the expiration of Powell’s chairmanship this Friday.

If Warsh is confirmed and Powell follows Hassett’s predicted "off-ramp," it would mark a total reset of Federal Reserve leadership. However, until the Inspector General’s report is officially released, the central bank remains in a state of high-stakes transition.