Fed Chair nominee Kevin Warsh attempted to assuage concerns about his ability to maintain the Federal Reserve’s independence under President Donald Trump during his Senate confirmation hearing Tuesday.
His efforts were not well received by Senate Democrats.
Warsh’s opening remarks focused on the Federal Reserve’s independence — the major question swirling around his nomination amid Trump’s repeated attempts to pressure the Fed and his nominee to dramatically lower interest rates.
“Let me be clear, monetary policy independence is essential. Monetary policymakers must act in the nation’s interest,” Warsh said at the hearing. “Fed independence is up to the Fed.”
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The heated exchanges, however, began early in the hearing. Sen. Elizabeth Warren, the top ranking Democrat on the Senate Banking Committee, asked Warsh if Trump lost the election in 2020. She called it a “test” of his “courage.”
Warsh declined to answer the question directly.
“If you can’t answer these questions, you don’t have the courage and you don’t have the independence,” Warren said.
“I agree with you on independence, senator,” Warsh responded.
Warren later jumped in between other senators’ questioning to request the federal ethics office’s certification of Warsh’s assets be entered into the record to demonstrate that Warsh is out of compliance.
Warsh had also dodged questions from Warren about whether his undisclosed assets include investments in Trump’s family companies, companies controlled by the Chinese government or were in any way tied to Jeffrey Epstein.
Sen. Tim Scott, who chairs the committee, said Warsh has 90 days following his confirmation to divest his assets. Warsh said that if he is confirmed, he will divest a “large majority” of those before he is sworn in.
When Warren began to protest, Scott cut in.
“Here’s what we’re not going to do. We’re not going to have two chairmen,” Scott said.
The Senate’s Banking Committee is working against the clock to install Warsh atop the central bank before current Fed Chair Jerome Powell’s term ends on May 15. Democrats are not the only tension point around his nomination.
Sen. Thom Tillis, who sits on the committee, has vowed to block Warsh’s confirmation as long as a Justice Department criminal probe into Powell remains open, raising concerns among Republicans of an impending standoff with the White House.
Tillis praised Warsh at the hearing as a “rock-solid economist” who believes in the Fed’s independence and will fulfill his promise to divest his assets.
“Let’s get rid of this investigation so I can support your confirmation,” Tillis said.
Tillis walked through details of the Fed’s building-renovation process — the subject of the Justice Department’s probe — and defended the high price tag as typical budget overruns for unexpected costs.
“If we put everybody in prison in federal government that had had a budget go over, we’d have to reserve an area of roughly the size of Texas for a penal colony,” Tillis said.
Overall, Warsh’s efforts to ease the concerns of the panel didn’t seem to go far. Trump’s nominee cited Warren specifically in his opening remarks. “At the onset of the financial crisis, as Senator Warren said, our central bank played an indispensable role,” Warsh said.
Warsh served as a Fed Board governor from 2006 to 2011 and acted as a “liaison” between the central bank and Wall Street. Warsh previously served on former President George W. Bush’s National Economic Council.
Warren, in turn, questioned Warsh’s record on the financial crisis. In a meeting with her last week, Warren said Warsh had “no regrets” about his policymaking in the aftermath of the 2008 financial crisis.
Warren also pressed Warsh on Trump’s actions, saying Trump has tried “repeatedly and illegally” to take over the Fed, including through his attempted firing of Fed Governor Lisa Cook over allegations of mortgage fraud, a case which is before the Supreme Court.
“Trump’s economic failures are causing him political problems, and he wants the Fed to use monetary policies to artificially juice the economy in the short term, and this is his last chance to do that before the November elections,” Warren said in her opening remarks.
Warsh’s confirmation hearing could “create more opportunities for Trump’s corruption,” particularly regarding his family’s crypto venture, she said.
Warren wasn’t the only Democrat to criticize Warsh for sidestepping questions.
“I must commend you on the way you can circularly go around questions and not answer them. It’s a skill. Unfortunately it’s not a good skill for the chairman of the Federal Reserve,” Sen. Jack Reed said during the hearing.
Warsh’s allies in the room included Sen. Dave McCormick, who introduced him as a personal friend. Warsh’s family, Treasury Department Deputy Under Secretary Derek Theurer, and former NFL star Larry Fitzgerald sat behind Warsh during the hearing.
“There is no one more fitting, no one more qualified to face this consequential moment,” McCormick said.
“Confirming Kevin Warsh will make sure that affordability is at the center of our economic agenda,” Scott said.
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