Why Tim Scott Thinks Jerome Powell Staying on the Fed Board Is a “Significant Mistake”
The Senate Banking Committee Chair didn’t mince words, here’s what Powell staying means for Trump, the incoming Fed Chair, and the 113-year-old tradition he just broke.
Sometimes a single sentence from a powerful lawmaker is all it takes to expose the fault line running through an institution.
That sentence came Tuesday from Senator Tim Scott (R-S.C.), chair of the powerful Senate Banking, Housing and Urban Affairs Committee:
“He’s breaking 75 years of precedent. Every time you get a new chairman, the former chairman leaves. That’s good news because what you don’t want are these philosophies in conflict.”
Scott was speaking at the Milken Institute Global Conference in Beverly Hills, and he didn’t stop there. He called Jerome Powell’s decision to remain on the Federal Reserve Board of Governors after his chairmanship ends on May 15 a “significant mistake.” And earlier that same day, speaking to the New York Post, Scott said he was “praying” Powell would leave and suggested the outgoing chair might be “poking the president in the eye.”
This isn’t just Washington gossip. It’s a story about power, precedent, and a central bank caught between two men who fundamentally disagree on how America’s economy should be run.
What Tim Scott Said, And Why It Matters
To understand Scott’s criticism, you have to understand his position. He’s not just any senator. As chair of the Senate Banking Committee, he’s the man who will steer Kevin Warsh, President Trump’s nominee to succeed Powell, through the confirmation process.
Scott’s committee already voted along party lines to advance Warsh’s nomination, and a full Senate vote is expected as soon as next week. So when Scott speaks publicly about Powell, he’s not just offering an opinion, he’s signaling where the institution’s future leadership stands.
And the message is clear: Powell’s decision to stay on the board as a rank-and-file governor, a position he can legally hold until January 2028, is, in Scott’s view, a direct challenge to the incoming chair. It’s like a CEO who, after being replaced, decides to stay in the building and keep a seat at the boardroom table, voting on strategy the new boss wants to change.
Scott told the New York Post explicitly that Powell may be looking to impede the agenda of Kevin Warsh. Warsh has been a vocal critic of Powell and plans to steer the Fed away from issues like ESG and the massive expansion of the central bank’s balance sheet, both hallmarks of the Powell years.
The 75-Year Precedent Powell Is Breaking
Here’s a question you might be asking: Has a former Fed Chair ever stayed on the Board before?
Almost never. The last time it happened was Marriner Eccles, in 1948. That’s 78 years ago. And by many historical accounts, it was a disaster.
The norm exists for a genuinely sensible reason, and Scott nailed it: you don’t want two conflicting philosophies wrestling inside the same boardroom. When a new Fed Chair is appointed, markets, lawmakers, and the public need a clean slate. A former chair still sitting at the table, still voting on interest rates, still influencing policy, muddies that clarity instantly. How does a market price a Fed decision when it’s not clear whether the vote reflects the new chair’s view or the old one’s?
This is not a technical or trivial question. It’s the reason the precedent has held for three-quarters of a century.
Trump, Legal Pressure, and the Renovation Saga
Powell says he’s staying not out of defiance, but out of necessity. An investigation into cost overruns on the Federal Reserve’s $2.5 billion headquarters renovation, first raised by Scott himself during a June 2025 hearing, led to a Department of Justice probe into Powell’s testimony before Congress.
Earlier this month, U.S. Attorney Jeanine Pirro dropped that criminal probe after setbacks in federal court, referring the matter to the Fed’s own inspector general. But Powell says he will not leave the board until the investigation is completely resolved "with transparency and finality."
To Powell’s defenders, this makes perfect sense: leaving now could be seen as an admission that he had something to hide. To his critics, Trump and Scott among them, it looks like an excuse. A way to linger. To deny the president a majority on the seven-member board, where only three governors are currently Trump appointees.
RealClearPolitics put it bluntly: "Powell has been emboldened and knighted by the media because of his public spats with Trump."
How This Would Actually Work: Powell and Warsh on the Same Board
Assume Warsh is confirmed, as expected, in mid-May. He becomes Chair, and Powell becomes a governor. Both have a vote on the Federal Open Market Committee (FOMC). They sit in the same room and decide the direction of interest rates for the world’s largest economy.
This is, to borrow a phrase, unprecedented in living memory.
Powell has said he intends to maintain a "low profile" and support the new chair. But words are one thing; votes are another. The minute Warsh wants to reverse a Powell-era policy, say, shrinking the Fed’s balance sheet faster, or signaling a different tolerance for inflation, Powell’s presence becomes a complication. What if Powell dissents? What if he becomes the voice that markets listen to instead of the new Chair?
As one analyst noted: "Warsh set up for failure with Powell staying."
What It Means for Fed Independence
Stepping back from the personalities, there’s a structural question that matters deeply: does Powell staying strengthen or weaken Fed independence?
Powell himself says he’s staying to defend independence. He argues the legal attacks against the Fed, the DOJ probe, the pressure to cut rates, are unprecedented threats to the central bank’s ability to make policy without political interference.
But Scott’s counterargument is almost elegant in its simplicity: precedent itself is a guardrail of independence. The tradition of chairs departing completely exists because it protects the institution from the very conflict Powell is now creating. Breaking it, even for noble reasons, may trade one threat to independence for another.
This is the tension at the heart of the whole drama, and it’s one without an easy answer.
What Investors Should Watch For
If you’re trying to understand the consequences as an investor or just a financially engaged reader, here’s a practical set of signals:
Confirmation vote on Kevin Warsh: Expected as soon as the week of May 11. A smooth confirmation could actually reduce the uncertainty Powell’s presence creates, because Warsh’s authority would be formally established before Powell’s chair term ends on May 15.
Powell’s first vote as a governor: The June FOMC meeting will be the first test. Markets will scrutinize whether Powell votes with Warsh or charts his own path.
Inflation and rate trajectory: The transition comes as the Fed confronts "no risk-free paths" in managing elevated inflation and a softening labor market simultaneously. Internal dissent could delay rate adjustments.
Legal resolution: If the IG investigation concludes cleanly, Powell’s stated reason for staying disappears, and his next move will be telling.
A Meaningful, Unprecedented Crossroads
Jerome Powell is no stranger to pressure. He guided the economy through a pandemic and withstood years of public attacks from the sitting president. But his decision to remain on the Fed Board after May 15 may prove to be the most controversial move of his tenure, not because staying is illegal, but because it breaks a quiet, powerful tradition that has protected the institution for more than seven decades.
Tim Scott’s words, "significant mistake", reflect a genuine concern shared by many: that two Fed philosophies fighting in the same room could harm the clarity markets depend on. Whether you side with Powell or Scott, one thing is certain, this is territory the Fed hasn’t navigated in nearly 80 years, and the consequences will unfold over the months ahead.
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