Hassett Drops Out of Fed Race Amid Powell Probe

Kevin Hassett has officially withdrawn from consideration to become the next chair of the U.S. Federal Reserve. The decision came after President Donald Trump indicated he preferred Hassett to remain in his current White House role, significantly narrowing the field of candidates and intensifying the focus on the political and legal pressures surrounding the central bank's leadership.

The race for the top job at the Fed is now defined by more than just monetary policy. With a criminal investigation into current Chair Jerome Powell underway and the prospect of a contentious Senate confirmation process, political viability has become a critical factor for any potential nominee. This dynamic is set to prolong uncertainty over the future of Fed governance and the direction of interest rates.

Why Kevin Hassett Is No Longer in the Running

In a recent television interview, Hassett confirmed that discussions with President Trump about the Fed chair position had been ongoing for months, describing the situation as unresolved. However, Trump’s public remarks last week effectively made the decision for him. During a White House event, the president told Hassett directly that he wanted him to stay in the West Wing.

That conversation appears to have settled the matter. Hassett later acknowledged that Trump might be right to keep him in his current post, noting that several strong candidates were still in contention. He added that he felt valued in his role and viewed the president’s comments as encouraging.

With Hassett out, the list of potential successors has shrunk to four individuals. According to sources familiar with the selection process, the focus is shifting rapidly as the administration weighs its options.

Political Practicality Overtakes Policy

As the search for a new Fed leader continues, the criteria appear to be evolving. One candidate gaining attention is Rick Rieder, whose appeal is reportedly based less on ideological alignment and more on political pragmatism. Insiders suggest he is viewed as a candidate who might face a smoother confirmation process in the Senate, a key consideration at a time of heightened political friction.

The selection process is now heavily influenced by several overlapping factors:

• A smaller pool of viable candidates.

• Growing concerns about Senate confirmation risks.

• An emphasis on political durability over specific policy stances.

• Intensifying scrutiny of the Fed's governance and independence.

• Legal challenges affecting the current leadership.

Powell Faces Criminal Investigation

Adding another layer of complexity is the criminal investigation into current Fed Chair Jerome Powell. The inquiry centers on cost overruns from renovations at the Federal Reserve's headquarters in Washington. While presented as a matter of financial oversight, the probe carries significant political weight.

Powell has suggested the investigation is linked to his independent stance on interest-rate policy. In a video posted on the Fed’s website, he implied that the threat of legal action was a consequence of his resistance to the president's calls for lower rates.

A U.S. attorney approved the subpoena related to the investigation, which concerns Powell's testimony to Congress about the project's costs. President Trump has publicly denied directing the probe, but his past statements have consistently reflected his frustration with Powell's leadership.

Senate and Legal Hurdles Complicate Fed Reshuffle

The controversy has also hardened positions in the Senate. A senior Republican on the Senate Banking Committee warned that any Fed nominee put forward by Trump will now face more aggressive scrutiny. This resistance could delay or even prevent the appointment of a new chair before Powell’s term officially ends on May 15.

Furthermore, the administration faces significant legal constraints in its efforts to reshape the Fed's board:

• By law, Federal Reserve governors serve 14-year terms.

• A governor can only be removed "for cause," a standard that is not clearly defined.

• Even if replaced as chair, Powell can remain a member of the board until 2028.

• The administration is also attempting to remove another governor, but court challenges could slow this process.

The other governor targeted for removal has denied allegations of mortgage fraud, calling them baseless, and the dispute is expected to move to the courts. This adds another element of uncertainty to the Fed's future composition. Currently, three of the seven governors already favor lower interest rates, aligning with the president’s view. Replacing additional members could decisively shift the board's policy direction.

Meanwhile, the Treasury secretary, who had previously taken himself out of the running, is now leading the search for a new chair. While President Trump continues to distance himself from the Powell investigation, his public comments signal a clear desire for change. Speaking recently to a business group, he remarked that Powell would be gone soon.