Fed nominee Warsh endorses independence from White House as Trump declines off-ramps
Add Axios as your preferred source to
see more of our stories on Google.
Fed chair nominee Kevin Warsh. Photo: Andrew Harnik/Getty Images
President Trump's nominee to lead the Federal Reserve committed to keeping monetary policy independent from politics at his confirmation hearing Tuesday — as Trump showed no signs of de-escalating a stalemate that is holding up Kevin Warsh's nomination to lead the central bank.
The big picture: Warsh, testifying before the Senate Banking Committee, presented a vision of the Fed "staying in its lane" and focusing on price stability, implicitly attacking the central bank's leadership over the last decade for mission creep.
- It came just two hours after Trump, appearing on CNBC, indicated that he has no intention of seeking to wind down a Justice Department investigation of chair Jerome Powell over expensive building renovations.
- Sen. Thom Tillis (R-N.C.) is blocking Warsh's nomination from moving through the banking committee until that investigation, which he and Powell see as a blatant pretext to punish Powell over interest rate policy, is resolved.
- During the hearing, Tillis used his allotted time to slam Trump for pursuing the probe into Powell: "Let's get rid of this investigation so I can support your confirmation," he said to Warsh.
Between the lines: Powell's term as chair is up on May 15; he has said he will continue serving as chairman pro tempore if his successor is not yet confirmed.
Driving the news: Asked whether he would take an off-ramp to get Warsh's nomination on track, Trump said that "we have to find out why a small building cost close to $4 billion," before discussing the Fed building's sheetrock walls and insulation.
- "I'm afraid Kevin will have to have an office next to me in the White House, because that building's not going to be done."
State of play: Warsh, in his opening statement, said, "I am committed to ensuring that the conduct of monetary policy remains strictly independent."
- He said that he does "not believe the operational independence of monetary policy is particularly threatened when elected officials" state their views on rates policy.
- He also emphasized that it is monetary policy where independence is "at its peak." By contrast, he added, that degree of independence "does not extend to the full range of its congressionally mandated functions," such as stewardship of public money, bank regulation and international finance.
The intrigue: During the hearing, senators on both sides of the aisle pressed Warsh on whether he would take cues from Trump in setting monetary policy. Over the past year, Trump has unleashed an intense pressure campaign to secure lower rates.
- One key moment was when Sen. John Kennedy (R-La.) asked Warsh whether he would be Trump's "human sock puppet," repeating language used earlier by Sen. Elizabeth Warren (D-Mass.).
- "Absolutely not," Warsh responded.
Zoom in: Democrats tried to pin down Warsh on whether Trump had explicitly asked him to commit to lower interest rates during the Fed chair interview process.
- Trump "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 said.
- Warsh pushed back on reporting from the Wall Street Journal late last year that said Trump had asked "whether he could trust [Warsh] to support interest-rate cuts if he were chosen to lead the central bank."
Of note: Hours earlier, Trump was asked by CNBC if he would be disappointed if Warsh did not lower rates. The president responded: "I would."
What to watch: Warsh appears set to face united disapproval from the panel's Democrats, who objected to proceeding with this hearing amid the president's attacks on Powell and pressed him on his financials.
- Warren called Warsh "uniquely ill-suited" for the Fed chairmanship, citing his long ties to Wall Street.
Editor's note: This story has been updated with additional details from the hearing.
