Kevin Warsh, President Donald Trump’s nominee for chairman of the Federal Reserve Board of Governors, has gained approval at the committee level and will head to a confirmation vote before the full Senate.
Warsh, 56, was advanced by the Senate Banking, Housing, and Urban Affairs Committee in a party-line 13-11 vote on Wednesday. The favorable vote comes after Sen. Thom Tillis (R-NC) dropped his blockade of Warsh’s nomination in response to the Justice Department ending its investigation into current Fed Chairman Jerome Powell.
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Trump nominated Warsh earlier this year to replace Powell, whose term is ending in mid-May. Powell was later put under investigation by the DOJ over allegations he misled Congress about building cost overruns. Powell accused the investigation of being politically motivated, and Tillis, who is retiring, promised he would block any Fed nominations until the investigation was ended.
The DOJ dropped its inquiry last Friday.
U.S. Attorney Jeanine Pirro announced that the DOJ was dropping the investigation in a social media post. She said that, instead, the inspector general for the Fed has been asked to scrutinize the building cost overruns.
Warsh faced a barrage of questions about Fed independence during his confirmation hearing before the banking committee last week.
“Let me be very clear: Monetary policy independence is essential,” Warsh told the panel. “Monetary policy makers must act in the nation’s interest. Their decision is the product of rigor, deliberation, and unclouded decision-making.”
But Sen. Elizabeth Warren (D-MA), the banking committee ranking member, pushed back on that assertion. She said Trump has been trying to fire Fed governor Lisa Cook over disagreements, with the case now winding through the Supreme Court. Warren described Warsh as a “sock puppet” who will simply do the president’s bidding.
“Why try to end the independence of the Fed? Because Trump’s economic failures are causing him political problems,” the Massachusetts senator said. “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.”
During the hearing, Warsh also faced questions about interest rates. At the heart of Trump’s feud with Powell was his insistence that the Fed dramatically slash interest rates, despite inflation still running above the Fed’s 2% target.
The headline from that line of questioning came when Warsh affirmed that Trump never asked him to commit to any interest rate decisions during his vetting process.
Sen. John Kennedy (R-LA) asked specifically whether Warsh agreed with the president that he would lower interest rates should he be confirmed.
“Senator, I’m glad you framed it that way — the president never asked me to predetermine, commit, fix, decide on any interest rate decision in any of our discussions, nor would I ever agree to do so,” Warsh testified.
“The president never once asked me to commit to any particular interest rate decision, period. And nor would I ever agree to do so if he had, but he never did,” Warsh added after further questioning.
It is worth noting that Warsh alone cannot cut interest rates, even as chairman. That is because while the Fed chairman leads the Federal Reserve board and messaging, interest rate decisions are up to a 12-person board called the Federal Open Market Committee. The FOMC decides collectively what the course of interest rate policy should be.
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During the hearing, Warsh vowed reform at the Fed and blamed the years of inflation on “a legacy of the policy errors” in 2021 and 2022 as the country was emerging from the pandemic.
If confirmed by the full Senate, Warsh should be in place to lead the Fed’s June meeting.