Washington: What to Watch Now

by Michael Townsend of Charles Schwab, 3/18/26

Key takeaways

  • Potential appeal in U.S. attorney's probe of Federal Reserve Chair Jerome Powell could delay confirmation of Powell's successor.
  • Department of Homeland Security remains shut down amid congressional standoff over its funding.
  • Senate-approved housing reform bill heads to the House of Representatives, where some members have concerns about certain provisions.

A federal judge on March 13th rejected two criminal subpoenas, undermining the government probe into whether Federal Reserve Chair Jerome Powell lied to Congress last summer when testifying about renovations of the Fed's headquarters in Washington. The judge said the government had not provided any evidence of criminal activity and concluded that the effort was primarily designed to pressure the Fed into lowering interest rates.

U.S. Attorney Jeanine Pirro, the lead prosecutor in the case, said she would appeal. But the decision to appeal could have ramifications for the confirmation of President Donald Trump's nominee to succeed Powell as chair, Kevin Warsh. Senator Thom Tillis (R-N.C.), a member of the Senate Banking Committee that will conduct Warsh's confirmation hearing, has said he will block any Fed nominee, including Warsh, until the criminal investigation into Powell is resolved. Tillis said March 13th that "appealing the ruling will only delay the confirmation of Kevin Warsh."

The situation raises the possibility that Warsh won't be confirmed by the time Powell's term as chair ends on May 15th. Powell could stay on as chair after that date if his successor is not confirmed. With the ongoing personnel drama as backdrop, the Federal Open Markets Committee (FOMC) is set to hold its monetary policy meeting March 17th-18th, at which it is widely believed that it will hold rates steady amidst uncertainty about the Iran war's impact on inflation, the jobs market and the broader economy.

Homeland Security shutdown enters its second month

March 16th marks 31 days that the Department of Homeland Security (DHS) has been shut down due to a stalemate on Capitol Hill over the agency's funding. The most notable disruption has been airport security lines, which have been worsening across the country due to increased absenteeism and resignations by Transportation Security Administration (TSA) agents, who are required to work without pay during the shutdown. Security lines reached three hours or more in several airports last week due to TSA understaffing.

Over the weekend, executives of six major airlines and three cargo companies wrote an open letter to Congress urging lawmakers to end the standoff or risk worsening travel delays. Meanwhile, the spotlight this week will be on the confirmation hearing of Senator Markwayne Mullin (R-Okla.), the president's nominee to succeed Kristi Noem as the new Secretary of Homeland Security. At the March 18th hearing, Mullin is expected to field tough questions about his qualifications, his plans for managing the sprawling agency of more than 260,000 employees and specifically how he plans to manage the Immigrations and Customs Enforcement (ICE) agency. Senate Democrats have refused to fund DHS without significant reforms to how ICE agents operate, while Senate Republicans have blocked efforts to fund TSA agents and other DHS functions separately from ICE, producing the stalemate.