Kevin Warsh, President Donald Trump’s nominee for chairman of the Federal Reserve Board of Governors, testified in his confirmation hearing on Tuesday. Here are the key takeaways.
Warsh appeared before the Senate Banking, Housing, and Urban Affairs Committee, where he faced a number of questions, ranging from his monetary policy philosophy, the independence of the Fed, and his personal finances.
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Trump nominated Warsh, 56, earlier this year to replace outgoing Fed Chairman Jerome Powell, whose term is ending in mid-May. Powell is under investigation by the Justice Department, a major point of conversation during the hearing.
Other than Fed independence, Warsh was asked a number of times about interest rates and what he thinks about the country’s inflation situation. He also stressed reform at the central bank, arguing that in recent years the Fed has pushed the remits of its congressional mandate.
Fed independence
Fed independence was the most pressing issue on lawmakers’ minds heading into the hearing.
Earlier this year, in a video statement, Powell announced he was being investigated by the Justice Department for claims he made about the Fed headquarters renovation during congressional testimony. But he argued that the inquiry is an effort by Trump to influence interest rate policy.
Warsh vowed repeatedly throughout the hearing that he would remain a faithful steward of the Fed’s independence if he were confirmed as its next chairman.
“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.”
Still, he argued that politicians, including Trump, weighing in on interest rate policy is not necessarily a threat to Fed independence.
“I do not believe that independence of monetary policy is threatened when elected officials state their views on rates,” he said. “Fed independence is up to the Fed.”
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.”
Sen. John Kennedy (R-LA) later pushed Warsh on Warren’s comments.
“Are you going to be the president’s human sock puppet?” Kennedy asked.
“Senator, absolutely not,” Warsh responded. “I’m honored the president nominated me for the position, and I’ll be an independent actor if confirmed as chairman.”
Throughout the hearing, Republicans on the panel also affirmed that Fed independence is crucial.
“I think Fed independence is critical, and I think that’s an item that you and I agree on wholeheartedly,” Sen. Mike Rounds (R-SD) said.
Sen. Thom Tillis (R-NC), a member of the banking committee, has threatened to block Warsh until the legal investigation into Powell has concluded. He reiterated that stance during the Tuesday hearing.
Still, Tillis said he is supportive of Warsh and believes him when he says he intends to lead the central bank independently of the president.
“Let’s get rid of this investigation so I can support your confirmation,” Tillis said.
Interest rates
Going hand in hand with the theme of Fed independence were questions about Warsh and interest rates. Some Democrats have alleged that Warsh was nominated to do Trump’s bidding and lower interest rates.
But Warsh said Trump never asked him to commit to any interest rate decisions during his vetting process.
Kennedy asked specifically whether he agreed with the president to lower interest rates if he is confirmed and becomes head of the central bank.
“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.
Warsh also blamed too-high inflation on “a legacy of the policy errors” that happened in 2021 and 2022 as the country was emerging from the pandemic.
“Once you let inflation take hold in the economy, it’s more expensive and harder to bring it down, and so the fatal policy error going back four or five years is still a legacy that we’re dealing with,” Warsh said.
The Fed nominee said there needs to be a “regime change in the conduct of policy” at the Fed and that means “a different, new inflation framework.”
Democrats also questioned Warsh about how he was seen as more of an inflation hawk when he was a Fed governor and now is taking a more dovish tack toward monetary policy.
Warren tried to characterize him as a flip-flopper on interest rate policy.
“When the job of Fed chair became available during Trump’s first term as president, Warsh held on to his high-interest-rate, inflation-hawk views, and Trump passed him by,” Warren said. “Regretful, he soon reversed course and called for the Fed to pause interest rate hikes. Then once Trump left office, Mr. Warsh flipped again, and was even criticizing the Fed for cutting rates in the fall of 2024.”
Financial disclosures
Democrats also, particularly early in the hearing, attacked Warsh over his financial disclosures.
Ahead of the meeting, Warsh disclosed financial interests exceeding $100 million. He is married to Jane Lauder, who serves on the board of Estée Lauder Companies.
Citing confidentiality, he declined to reveal the underlying values of the biggest investments. The Office of Government Ethics said Warsh would have to divest from several dozen holdings. Warsh has said he would divest if confirmed.
“You have more than $100 million in investments that you have refused to disclose to ethics officials and to the public,” Warren said.
She then asked if he is invested in any companies affiliated with Trump, companies that have facilitated money laundering, Chinese-controlled companies, or financing vehicles started by Jeffrey Epstein.
Warsh repeatedly emphasized that he has worked “tirelessly” with the Office of Government Ethics regarding his financial disclosures and that he would divest if confirmed to the Fed.
Fed mission creep
Republicans have criticized the Fed in recent years for perceptions that it has breached the limits of its remit by looking into climate change and other areas associated with liberal causes. Warsh said the Fed needed reform and that it needed to get back to its central mission during the hearing.
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Committee Chairman Tim Scott (R-SC) tied such initiatives directly to Fed independence.
“For example, under the Biden administration, the Fed pushed climate-focused initiatives only to reverse that climate agenda as soon as President Trump took office,” Scott said. “When actions appear to shift with changing political priorities, it can undermine confidence in the independence of this great institution.”