The threat to the Fed’s independence isn’t over

President Donald Trump has repeatedly attacked the independence of the Federal Reserve. Friday’s dropping of a Justice Department probe into Federal Reserve Chair Jerome Powell doesn’t fully resolve the threat, though it will clear a path to the confirmation of Trump’s nominee for chair, Kevin Warsh.

“I think we would be foolish to conclude from this that the Fed is out of the woods,” said Lev Menand, a professor at Columbia Law School. 

Warsh has long pledged to keep the Fed independent, including at his nomination hearing Tuesday. But it remains to be seen how he can hold up against a president who has said lowering interest rates was a litmus test for his nominee. Trump isn’t shy about telling normally independent parts of the federal government what to do. The Fed is one of the few holdouts that remain largely outside his control.

U.S. Attorney Jeanine Pirro on Friday said she would drop her investigation into cost overruns at Fed renovation projects and Powell’s testimony about them. Sen. Thom Tillis, R-N.C., has refused to allow Warsh’s nomination to proceed to a full Senate vote while the investigation is pending, because he sees it as a threat to the Fed’s ability to decide interest rates free of political considerations. 

Tillis hasn’t said whether he will drop his resistance now that Pirro has backed off. Pirro said she wanted to see the results of an investigation by the Fed’s inspector general. “I will not hesitate to restart a criminal investigation should the facts warrant doing so,” she said in a statement.

The prospect of Pirro potentially reopening the investigation might give the Fed pause, said Scott Alvarez, former general counsel at the Fed. Pirro’s office told a judge in March it had no specific evidence of wrong doing that could support issuing subpoenas. The Fed will likely want to know what facts might cause Pirro pick the investigation back up again.

“I would guess that the ambiguity in Pirro’s statement might cause Jay to worry about harassment by DOJ after he’s left the Fed,” Alvarez said. The Fed is likely trying to clarify that, he said.

The Fed declined to comment. Warsh didn’t immediately respond to a request for comment. 

“The White House remains as confident as before that the Senate will swiftly confirm Kevin Warsh as the next Federal Reserve Chairman to finally restore competence and confidence in Fed decision-making,” White House spokesman Kush Desai said in a statement.

Trump nominated Powell in 2017 to the chair he now holds, but the president quickly soured on him because he disliked how Powell handled interest rates. During his first term in the White House, Trump considered firing Powell but didn’t take action. 

In his second administration, Trump has gone further. He has berated…