The Quiet Coalition Defending the Fed

WHEN SENATORS FROM BOTH PARTIES AGREE TO STOP AN INVESTIGATION, SOMETHING IS UP.

On paper, Sen. Thom Tillis of North Carolina and Sen. Elizabeth Warren of Massachusetts represent opposite poles of American politics. In practice, their convergence in the current Federal Reserve fight reveals something far more consequential than partisan overlap. It reveals a structural defense of a monetary regime that rewards capital absorption over capital deployment—and stability over growth.

What unites them is not personal loyalty to Jerome Powell, nor opposition to Kevin Warsh as an individual nominee. It is an instinct to preserve a Federal Reserve that operates above democratic consequence and, crucially, outside coordination with the elected government’s economic strategy.

So when Tillis blocks a Fed nomination and Warren joins him in demanding the investigation be dropped, the through-line is not ideology. It is structural defense.

This matters because the Trump administration’s economic critique of the Fed was never simply rhetorical. It centered on a specific claim: that the Federal Reserve has, at key moments, acted not as a stabilizing partner to Treasury policy but as a counterweight to it—tightening preemptively, suppressing expansion, and treating real growth as a risk variable rather than an objective.

The current Senate standoff inadvertently validates that claim.

If the Fed were merely independent, coordination would not be threatening. Independence does not preclude alignment. But the intensity of the opposition—crossing party lines, freezing nominations, and insisting investigations be terminated rather than resolved—suggests something else is being protected: a system that benefits from early boom suppression.

That system quietly favors a familiar cast of financial beneficiaries.

Large primary-dealer banks such as JPMorgan Chase, Citigroup, and Goldman Sachs thrive in environments of elevated but managed interest rates. High rates without runaway growth sustain spread income, repo financing, and Treasury carry trades, all while limiting competitive credit expansion to smaller banks, new entrants, and domestic enterprises. Predictability—not expansion—is the profit center.

Asset-management giants like BlackRock, Vanguard, and State Street also benefit. Index-heavy portfolios gain when tighter money suppresses small-cap challengers and concentrates capital in incumbent mega-cap firms. Volatility drives inflows into passive products even when real returns stagnate. In this framework, volatility is not a bug of monetary policy; it is a feature.

Underfunded pension systems and other liability-driven investors gain relief as well. Higher discount rates improve actuarial optics without requiring productivity gains or structural reform, while slower wage growth dampens future liabilities. This constituency rarely speaks publicly, but its influence in Washington is persistent and bipartisan.

Even offshore dollar holders—foreign central banks and sovereign funds parking reserves in U.S. Treasuries—benefit when American growth is capped but yields remain attractive. A Treasury-aligned, growth-tolerant Fed would weaken the dollar, repatriate capital, and redirect investment toward domestic production. That is good for American workers and builders, but less appealing to global absorbers of dollar liquidity.

Against this backdrop, the Trump administration’s call for the Federal Reserve to work with Treasury rather than against it becomes easier to understand. Treasury sets fiscal direction, debt-issuance strategy, and growth priorities. The Fed’s role is to support those objectives while managing inflation and volatility—not to preemptively choke expansion before it materializes.

Yet over the past two decades, monetary doctrine has evolved toward exactly that posture. Wage growth is treated as inflationary by default. Rapid expansion is managed down early. Asset deflation and labor slack are tolerated as acceptable trade-offs for “credibility.” The result is an economy that produces liquidity but hesitates at growth.

That is why the prospect of an investigation into Fed leadership is so destabilizing to Washington. It risks reframing monetary policy as a set of consequential choices with distributive outcomes, not a technocratic ritual beyond scrutiny. It risks making the Fed answerable not just for process, but for results.

The Senate’s reaction—freezing nominations, demanding investigations be dropped rather than concluded, and admitting there may be no procedural path forward—signals how intolerable that reframing would be to the current order.

This fight is not about one chairmanship or one administration. It is about whether American monetary policy exists to preserve balance sheets or to enable growth; to protect absorbers or to empower builders.

A Fed that “kills booms early” protects institutions that profit from yield, volatility, and concentration. A Fed aligned with Treasury empowers labor, energy, manufacturing, and domestic investment—areas where returns must be earned rather than clipped.

The quiet coalition forming around this standoff is not ideological. It is structural. And until that structure is challenged openly, the United States will continue to generate liquidity without confidence, capital without courage, and stability without growth.