US Senator Scott, facing block on Fed chair nominee, says Powell is not a criminal

By Ann Saphir

Feb 4 (Reuters) - Republican Senator Tim Scott on Wednesday said he does not believe Federal Reserve Chair Jerome Powell broke the law when he testified to Congress last summer, and would say that to any prosecutor who came asking.

The remarks are the first direct pushback from the ​chair of the Senate Banking Committee against a criminal investigation launched by the Trump administration into Powell that now threatens to derail Senate confirmation of President Donald ‌Trump's pick to lead the Fed when Powell's leadership term ends in May.

It comes more than three weeks after the Fed chair disclosed the central bank had been served with Department of Justice subpoenas regarding Powell's ‌statements to the Senate Banking Committee in June about the Fed's building renovations, on which the White House had accused the Fed of overspending.

The revelation of the probe, which Powell said was an attempt at intimidation amid Trump's broader aim of getting the Fed to cut interest rates, drew broad condemnation from Democrats and notably from Republican Senate Banking Committee member Thom Tillis, who called the investigation political interference and said he would block the nomination of any Fed nominee while it was ongoing.

Trump on Friday said he had picked former Fed Governor Kevin Warsh to ⁠succeed Powell, whom Trump has repeatedly berated for not reducing interest ‌rates and repeatedly threatened to try to oust.

The Senate Banking Committee must approve Fed nominees by a majority before sending them to the Senate floor for confirmation by the full Senate membership. Tillis' no-vote and Democrats' unified opposition to a nomination proceeding under the shadow of ‍an investigation they say threatens Fed independence would mean a tie that would trap Warsh's nomination at the panel.

Warsh, who agrees with Trump that rates should be lower, is popular among Republicans, but Tillis' stance has quashed for now any movement forward on Warsh's nomination.

"I do not believe that he committed a crime during the hearing," Scott told Maria Bartiromo on Fox Business Network, noting it ​was he who asked Powell about the building renovations. He said he would tell any prosecutor who might come to his office that he found Powell "to be inept ‌at doing his job, but ineptness or being incompetent is not a criminal act."

Scott said he had had productive conversations with Tillis, who will, he said, vote for Warsh.

"I believe we can solve the Jay Powell issue and move forward with a strong vote for all Republicans on the committee," Scott said.

Meanwhile Tillis on CNBC gave no hint of backing down, calling the DOJ probe a "vindictive" act that seemed to him to be "an attempt to try and force somebody out of the Fed Board because you disagree with their policies."

Beyond thwarting Trump's plans for the Fed by stalling the Warsh nomination, Tillis said the DOJ probe could also mean that Powell may decide to stay on at the Fed ⁠as governor even after his leadership role ends.

Powell's term as governor runs to 2028, and though nearly ​all Fed chairs leave the central bank when their chair terms are complete, Powell has declined to say ​if he will do so. Staying on would deny Trump an open Fed Board seat to fill with another proponent of rate cuts, and would also complicate the leadership of any new Fed chair with the presence of the influential former chair also at the policy-setting table.

"The ‍perverse consequence of this is maybe Fed Chair ⁠Powell will think about being on the board for two more years," Tillis said. "I know how I would react to this: I'd be there for the remaining two years because I don't want to reward bad behavior, but that's a decision that Chair Powell makes and he's probably a little bit less confrontational than ⁠I tend to be."

In a separate television appearance fellow Senate Banking Committee member Kevin Cramer said he felt Tillis' opposition to Warsh's nomination because of the DOJ investigation was not a "winning strategy."

Asked if he thought Powell would ‌stay on as governor, Cramer expressed the hope that Powell would "exit gracefully."

Still, Cramer said of Powell, "I don't think that he belongs in a federal ‌courtroom or a federal penitentiary."

(Reporting by Ann Saphir and Howard Schneider; Editing by Andrea Ricci )