Kevin Warsh, nominated by President Trump to succeed Jerome Powell as the Federal Reserve Chair, has been actively engaging with lawmakers on Capitol Hill, rallying support from crucial Republican senators and possibly garnering backing from some Democrats as well.

Despite Warsh’s efforts, his nomination remains stalled, according to a source familiar with the situation who spoke with On The Money. The source described the situation as “at an impasse.”

As of this report, Senator Thom Tillis of North Carolina is steadfast in his stance. Although he endorses Warsh’s candidacy, he has refused to advance Warsh’s nomination from the banking committee to the Senate floor. Tillis insists that he will not take further action until the Department of Justice under Trump ceases its investigation into Powell, which he views as politically motivated over Powell’s testimony regarding the costly renovations at the Federal Reserve’s headquarters.

“Senator Tillis believes Kevin Warsh is the right choice for Fed chair and will vote to support him in the committee once the investigation into Chair Powell is concluded,” Tillis’s spokesperson conveyed to On The Money.

Jerome Powell has denied any wrongdoing in his testimony, asserting that the Department of Justice’s probe is an attempt to politicize the Federal Reserve, an institution meant to operate independently of political influence. Critics, including the president, argue that Powell underestimated the $2.5 billion costs of the so-called “Taj Mahal on the Mall,” justifying the investigation.

The ongoing deadlock is causing concern among Wall Street executives at major financial institutions. They fear potential financial turmoil should Warsh not be confirmed to lead the central bank by the time Powell’s term concludes in May.

The Fed, of course, plays a key role in stabilizing markets. The war could get more intense and markets even more volatile, investors and business leaders fret. It’s the main reason every C-suiter I speak to says you don’t need the White House at war with the central bank anytime, but particularly now.

Powell, meanwhile, has already signaled he might stay on as a governor when he relinquishes his chairmanship. He could thwart Trump’s wishes to change the central bank interest rates policy to be more accommodative (aka lower rates). Now he’s saying he might stay as Fed chairman if Warsh isn’t in place, remaining as chair “pro tem.”

A rep for the Fed cited Powell’s past comments that the decision on whether to stay will be “based on what I think is best for the institution and for the people we serve.” 

Given President Trump’s disdain for Powell – he believes among other things that he played politics by aggressively slashing rates during the end of Joe Biden’s presidency while going slow during Trump’s first year in office – and that could set up a battle royale at the worst possible time.

You can see a scenario where the White House sues Powell to relinquish the top post. 

What happens next is anyone’s guess. As Bloomberg Law recently reported: The “Federal Reserve Act, the statute that created the central bank and governs its operations … doesn’t say explicitly what happens when the chair’s term expires and no replacement has been confirmed.” However Fed experts say Powell has the authority to “holdover” if Warsh isn’t confirmed. 

Trump doesn’t seem (at least for now) to be budging by calling off the Powell probe. “The White House remains focused on working with the Senate to swiftly confirm Kevin Warsh as the next Chairman of the Federal Reserve. Warsh’s academic credentials, private sector success, and prior experience on the Fed Board of Governors make him eminently qualified to restore confidence and competence in Fed decision-making,” spokesman Kush Desai said.

Tillis, who is not seeking re-election in the fall, is sticking to his guns despite obvious pressure being applied by GOP senators and even the White House to bend on the Warsh nomination. “Anyone who knows Senator Tillis knows that is not going to happen,” his press rep added. “Senator Tillis has made his position very clear, and it is ultimately up to the Department of Justice to decide whether they want to appeal and drag this process on for months and continue their attack on the Fed’s independence.”

In the meantime, many Wall Street executives are coming around to the belief that Powell could raise interest rates at the end of April, publicly pointing to the rising gas prices from what’s happening with Iran and less publicly asserting his independence from Trump. There’s other stuff on the Fed agenda that gets stymied, like reforming bank capital rules, execs say.

“This is all Trump,” the executive told me. “He can tell (the DOJ) to stop and he just will not.”