Judge Rejects Subpoenas of Fed in Powell Case, DOJ to Appeal
Summary
- A federal judge rejected DOJ subpoenas in the criminal investigation of Fed Chair Jerome Powell, but US Attorney Jeanine Pirro plans to appeal the decision.
- The DOJ's appeal is expected to significantly delay the Senate confirmation of Kevin Warsh as the next Federal Reserve Chair.
- Jerome Powell's term as Fed Chair expires on May 15th; if Warsh is not confirmed by then, President Trump may appoint Steven Myron as acting chair.
- Markets perceive Steven Myron as potentially more compliant with the administration's desire for lower interest rates, raising severe market concerns regarding the future of Federal Reserve independence.
Trade Ideas
"Appealing the ruling will only delay the confirmation of Kevin Warsh as the next [Fed Chair]." Kevin Warsh is viewed by the market as a traditional, independent hawk. Delaying his confirmation in favor of a potentially dovish acting chair threatens Fed independence. If the market believes the Fed will artificially suppress short-term interest rates to appease the White House, bond vigilantes will demand a significantly higher term premium on the long end of the curve to compensate for future inflation risks. This will drive long-term yields higher and bond prices lower. SHORT TLT to capitalize on a steepening yield curve and the sell-off in long-duration Treasuries driven by inflation fears. A severe macroeconomic shock or recession triggers a massive "flight to safety" bid into long-duration US Treasuries, overriding political concerns.
"Trump could name Steven Myron as acting chair... Myron is somebody who would be much more to do the some would say the president's bidding versus Kevin Warsh." If the DOJ's appeal successfully delays Kevin Warsh's confirmation, a politically compliant acting Fed Chair may take over in May. A central bank that prioritizes a political mandate (lowering rates) over strict inflation targeting erodes institutional credibility. This dynamic forces capital into hard, non-fiat assets as markets preemptively price in currency debasement and higher structural inflation. LONG GLD and BTC as primary hedges against the politicization of US monetary policy and the resulting loss of purchasing power. Kevin Warsh's confirmation is expedited, or Steven Myron assumes the role but maintains strict, hawkish independence, crushing inflation hedges.
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