Time is running out on the Fed, Trump administration's game of chicken

• The legal and political clash underway right now is the stuff of central banking history — and it is unclear who will blink.
• What happens next in the nomination of Kevin Warsh, the president's pick to succeed Powell on May 15, is as cloudy as ever.

Catch up quick: A federal judge Friday quashed the Justice Department's subpoenas of the Fed over documents about its building renovation and Powell's testimony about them, characterizing them as blatantly pretextual.

• The judge, James Boasberg, cited numerous comments and social media posts by President Trump assailing Powell and demanding his removal.
• The court, Boasberg wrote, "is left with no credible reason to think that the Government is investigating suspicious facts as opposed to targeting a disfavored official."
• He added that "it is hard to see the renovations and testimony as anything other than a convenient pretext" for "another, unstated purpose: pressuring Powell to knuckle under."

Zoom out: For a brief window Friday, this looked like an off-ramp that would enable Warsh's confirmation to proceed.

• It looked like a way for the Justice Department to quietly wind down its inquiry, and thus for Republican Sen. Thom Tillis to relent in his refusal to allow Warsh's confirmation to move through the Senate Banking Committee while the DOJ investigation is ongoing.
• The U.S. Attorney for the District of Columbia, Jeanine Pirro, then held a press conference that was the opposite of backing down, calling it an "outrageous" decision, attacking the judge and pledging to appeal the ruling.
• "Jerome Powell today is now bathed in immunity, preventing my office from investigating the Federal Reserve," Pirro said. "This is wrong and it is without legal authority."
• Trump also showed no sign of de-escalating in a social media post Sunday night, attacking the judge and saying that both Powell and the renovation building contractor "should also be heavily investigated."

Of note: One of the precedents Boasberg cited is a case in which the courts ruled that the courts could quash Manhattan District Attorney Cyrus Vance Jr.'s grand jury subpoena for Trump's business records if the subpoena was improper and meant to interfere with his official duties.

Between the lines: That all leaves a few possibilities for where things go from here.

• Maybe the appeals process moves with uncommon alacrity, or in the sober light of morning, the DOJ looks to quietly drop the Fed case, Tillis relents, the Senate confirms Warsh, and he takes office in May.
• Maybe Tillis backs down. His statements Friday afternoon gave no hint of that, however.
• Maybe the Senate confirms Warsh without moving the nomination through the Banking Committee, which is a rarely used procedure that would cause some bad blood, but is doable. (It happened in 2022 with Ketanji Brown Jackson's Supreme Court nomination, which was deadlocked on the Judiciary Committee).

Yes, but: There are also weirder possibilities if Warsh is not confirmed by May 15.

• Twice in the past, the sitting chair has remained in place after their term as chair lapsed (Powell in 2022 and Alan Greenspan in 1996). But those were cases where the president had reappointed them and they merely awaited confirmation. Trump, of course, very much wants Powell out.
• You could imagine scenarios in which the Board of Governors, in selecting a "chairman pro tempore" during a vacancy, instead turn to vice chair Philip Jefferson.

The bottom line: None of this is normal. And the clock is ticking for the key parties to resolve it.