US President Donald Trump’s candidate to chair the Federal Reserve, Kevin Warsh, faces one of the most momentous occasions of his career this Tuesday during his confirmation hearing in the Senate. During his statement, he will promise to protect the institution’s autonomy. “I believe that the independence of monetary policy is earned, and better policy decisions are made by avoiding distractions,” Warsh is expected to declare before the committee, according to the draft speech advanced by Politico. “I commit to ensuring that the conduct of monetary policy remains strictly independent,” he will emphasize.
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His statement comes amid US President Donald Trump’s harassment campaign against the Fed. He has been pushing for months for interest rates to be lowered more decisively. Seeing that he is not being heeded, he has tried to assault the institution with appointments of some of his pawns, in an unprecedented attack on the independence of the Federal Reserve. He has also threatened to fire the current chairman, Jerome Powell, whose term ends on May 15. Trump has insulted him, belittled him, and prompted a criminal investigation by the prosecutor’s office into him to force his resignation, which could complicate Warsh’s appointment.
“I do not believe that the operational independence of monetary policy is particularly threatened when elected officials, presidents, senators, or members of the House of Representatives express their opinions on interest rates,” Warsh is expected to say. “Central bankers must be firm enough to listen to the diversity of opinions from all sectors.”
In recent years, Warsh has been critical of the Fed’s role. He believes it has overreacted, advocates for lower interest rates, a different approach to analyzing inflation, and a reduced balance sheet. But he also believes that the Fed’s autonomy must be earned. “The independence of the Federal Reserve is most at risk when it meddles in fiscal and social policies where it has neither authority nor expertise,” Warsh wrote for his speech this Tuesday. “The Federal Reserve should not act as a general-purpose government agency or as an appeals court for matters that are rightly debated and decided in other spheres,” he will say, outlining his view of an institution more detached from current events.
Warsh, 56, a former Wall Street banker, is already familiar with the Fed. He served as governor between 2006 and 2011 during one of the Central Bank’s most complex chapters, amidst the financial crisis and the fall of Lehman Brothers, which tested the institution’s firepower as a guarantor of financial stability.
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The Senate hearing comes at a turbulent time, amidst the US war with Iran, with oil prices subject to extraordinary volatility, while an inflationary spiral is brewing that threatens to test the Fed once again.
His statement on Capitol Hill will be scrutinized by members of the influential Senate Banking Committee. North Carolina Republican Senator Thom Tillis, crucial for approving the nomination, has already warned that he will block any appointment until the investigation launched by the Department of Justice against the current Fed chairman, Jerome Powell, is closed. Powell is being investigated for cost overruns in the construction of the institution’s headquarters. The prosecutor’s file is attributed to pressure from the Trump Administration to force his resignation.
Tillis’s vote is decisive in a committee with 13 Republicans and 11 Democrats. A “no” vote from the Republicans would block the nomination. Tillis, moreover, is under no pressure, as he has already stated that he will retire when his term ends, which gives him a certain margin of independence. Nevertheless, Tillis has stated that Warsh seems like a good candidate to him, but he has emphasized that he will not approve any appointment until the investigation into Powell is concluded.
Another issue that has attracted the attention of lawmakers concerns Warsh’s substantial wealth, valued at over 100 million dollars. He has investments in several companies and investment funds. Last year alone, he received over 10 million dollars in income. Furthermore, he is married to one of the heirs of the Estée Lauder cosmetics empire. His wife’s fortune is around 2 billion. Senators will question him about the risks of potential conflicts of interest.
