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Senators grilled Kevin Warsh, President Trump’s pick to lead the Federal Reserve, on Tuesday over the central bank’s independence and his plans to divest his financial assets amid the push to confirm Fed Chair Jerome Powell’s replacement.
Warsh argued that “independence is up to the Fed” and defended his ethics agreement with the administration during his appearance before the Senate Banking Committee, where Trump’s push for lower interest rates and a criminal investigation into Powell has cast a shadow over the Fed nominee’s prospects.
“I do not believe that independence of monetary policy is threatened when elected officials state their views on rates. Fed independence is up to the Fed,” Warsh said in his opening remarks at Tuesday’s hearing.
“I’m committed to ensuring that the conduct of monetary policy remains strictly independent,” he added.
When pressed by Sen. John Kennedy (R-La.) about whether Trump had ever asked him to commit to rate cuts, Warsh noted that “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.”
His comments earned praise from Republicans, including Sen. Mike Rounds (S.D.), who suggested that Fed independence is “critical” and touted it as “an item that you and I agree on wholeheartedly.”
However, this did little to assuage concerns from Democrats, including Sen. Elizabeth Warren (Mass.), who serves as ranking member on the committee and argued that Trump is not simply stating his views on interest rates.
“The president has repeatedly and illegally attempted to take over the Fed,” she said. “His bogus attacks on Governor Lisa Cook and Chair Powell were designed to threaten all the members of the Fed to do Trump’s bidding and open more spots for Trump flunkies.”
Sen. Jack Reed (D-R.I.) also pointed to Trump’s remarks to CNBC on Tuesday morning, in which he said he would be disappointed if Warsh did not immediately cut interest rates.
“It’s very hard to separate President Trump’s obsession with rate cuts, his attacks on the Federal Reserve, on Chairman Powell particularly, and your nomination,” Reed said. “So this independence thing seems to have evaporated quite quickly between President Trump’s statements and your positions.”
Trump, who has long battled with Powell over interest rates, amped up pressure to cut them over the past year as the Fed has kept rates higher than the president would like amid stubborn inflation.
He has repeatedly threatened to fire Powell if he does not step down when his term as Fed chair comes to an end on May 15. However, Powell can technically stay on as a member of the board until 2028.
The Fed chair has vowed to remain on the board amid the criminal investigation into his handling of renovations at the Fed’s facilities. U.S. Attorney Jeanine Pirro, a staunch Trump ally, approved a probe into cost overruns on the renovations in November.
Trump separately attempted to fire Cook over mortgage fraud accusations last August, becoming the first president in the Fed’s history to oust a sitting member of the central bank. Cook challenged her firing in a case that was heard by the Supreme Court in January.
However, the administration’s efforts could prove costly to Trump’s hopes of confirming Warsh as Fed char.
Sen. Thom Tillis (R-N.C.), who sits on the Senate Banking Committee, has vowed to oppose Trump’s pick as long as the Powell probe continues. Without his support, the Republicans on the panel cannot advance Warsh to the full Senate for a vote.
“You have extraordinary credentials. They’re impeccable,” Tillis told Warsh at the hearing Tuesday, adding, “The problem I have is where we are right now.”
“The problem that I have here is that we had some U.S. attorney with a dream or assistant U.S. attorney thinking it would be cute to bring Chair Powell under an investigation just a few months before the position was going to be open,” Tillis said, seemingly taking aim at Pirro.
While Tillis is the chief obstacle to advancing Warsh out the committee, other Republicans appear keen to move past the Powell drama.
“We need to understand where this substantial amount of money has gone, and we need to ensure that every institution, including the Fed, is always making decisions that are in the best interest of the American people,” Sen. Katie Britt (R-Ala.) said Tuesday.
“I urge everyone involved to make sure that any outstanding questions on this matter come to fruition, so that we can get answers and move on and have a smooth and timely transition and a confirmation process,” she added.
Senate Majority Leader John Thune (R-S.D.) similarly suggested last week that “it’s in everybody’s best interest to wrap up the investigation.”
The push to get Warsh across the finish line comes at a moment when the GOP is searching for an economic win ahead of the midterms.
Republicans have become increasingly nervous in recent weeks over Trump’s handling of the war with Iran, which has created upheaval in the markets and sent gas prices soaring just months out from the elections.
Warsh also faced heavy scrutiny from Democrats on Tuesday about his recent ethics disclosure and agreement. The report, filed with the U.S. Office of Government Ethics, showed his financial assets are valued between $131 million and $209 million.
In a tense exchange with Warren about his plans for divesting, Warsh noted that he intends to sell his assets as part of his ethics agreement.
“It sounds like your fight might not be with me, but the Office of Government Ethics,” he said to the Massachusetts Democrat. “I’ve come to full agreement with them and have agreed to divest all of those assets.”
Reed was less than satisfied with Warsh’s response to questions about the ethics agreement, saying, “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 or the Federal Reserve.”
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