Sen. Tim Scott Rejects Allegations Against Fed Chair Powell

Senate Banking Committee Chairman Tim Scott, R-S.C., said Wednesday that he does not believe Federal Reserve Chair Jerome Powell committed a crime during congressional testimony last year, even as a Justice Department investigation into Powell's statements escalates, intensifying a political fight over the Fed’s independence.

"I was the one asking the questions," Scott said in an interview with Fox Business, adding that "Powell was responding to me. Obviously, he and I have very, very strong disagreements on many issues, everyone."

Scott said it was time for new leadership at the Fed and sharply criticized Powell's performance, calling him "inept." But Scott drew a line between poor performance and criminal conduct.

"Ineptness or being incompetent is not a criminal act," Scott said. "I believe what he did was made a gross error in judgment. He was not prepared for that hearing. I do not believe that he committed a crime during the hearing."

The investigation focuses on Powell’s testimony to the Banking Committee last year about a long-running renovation of the Federal Reserve’s Washington headquarters campus — a project that has drawn scrutiny on Capitol Hill because of cost overruns and shifting design plans.

Powell has denied wrongdoing and has cast the inquiry as an effort to intimidate the central bank as it resists pressure to lower interest rates.

In a rare video statement released Jan. 11, Powell said prosecutors had moved the matter into a criminal arena. 

"On Friday, the Department of Justice served the Federal Reserve with grand jury subpoenas, threatening a criminal indictment related to my testimony before the Senate Banking Committee last June," Powell said. "That testimony concerned in part a multi-year project to renovate historic Federal Reserve office buildings."

Powell also framed the episode as a broader test of whether monetary policy can be insulated from politics. 

"The threat of criminal charges is a consequence of the Federal Reserve setting interest rates based on our best assessment of what will serve the public, rather than following the preferences of the President," he said.

The probe has unsettled lawmakers in both parties and complicated the confirmation path for President Donald Trump's pick to succeed Powell as chair: former Fed governor Kevin Warsh. 

Powell's term as chair ends in May, though he could remain on the Fed's Board of Governors afterward.

Sen. Thom Tillis, R-N.C., a Banking Committee member, has publicly warned that the Justice Department's actions risk undermining the Fed's independence and has threatened to withhold support from future Fed nominees until the matter is resolved.

"If there were any remaining doubt whether advisers within the Trump Administration are actively pushing to end the independence of the Federal Reserve, there should now be none," Tillis said in a Jan. 11 statement. "It is now the independence and credibility of the Department of Justice that are in question."

Scott said Wednesday that the dispute would ultimately be settled, predicting Tillis would back Warsh. "The issue will be resolved," Scott said, adding, "Thom Tillis will be voting for Kevin Warsh as the next chairman of the Federal Reserve."

• Sen. Tillis Vows to Block Fed Nominee Over Powell Probe
• Fed Chair Jerome Powell Under Criminal Investigation