Warsh Defends Fed Independence, Signals Overhaul in Confirmation Hearing
By Juliegrace Brufke | Quincy News Correspondent
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Washington (Quincy News) — WASHINGTON – Kevin Warsh, President Donald Trump’s nominee to chair the Federal Reserve, testified before the Senate Banking Committee on Tuesday, defending his independence from the White House and calling for sweeping changes to how the central bank operates.
Warsh argued the Fed’s slow response to inflation in recent years was a serious policy failure and said he would pursue what he called a “regime change” if confirmed, including a new inflation framework and changes to the Fed’s communication practices. He would not guarantee the current eight annual meetings would continue and declined to commit to holding a press conference after each one.
“Right now, Fed chairs and other central bankers around the FOMC, they speak quite frequently. There was no lack of transparency. But I would say this, I think truth seeking is more important than repetition,” Warsh told lawmakers. “If a press conference were held, I think it would be incumbent to hear what the reporters of the day had in mind.”
Democrats on the committee pressed Warsh repeatedly on whether he could remain independent from a president who has publicly demanded rates as low as 1% and encouraged a Justice Department investigation of sitting Federal Reserve Chair Jerome Powell over cost overruns on a building renovation. Sen. Elizabeth Warren (D-Mass.) told Warsh that Trump wants the Federal Reserve to artificially boost the economy for political reasons and questioned whether any nominee could withstand that pressure.
The sharpest exchange centered on reports that Trump privately told Warsh he wanted interest rates cut before his confirmation, which Warsh denied.
“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,” he told the committee.
Sen. Ruben Gallego (D-Ariz.) told Quincy News the conflicting accounts put the Fed’s credibility at risk regardless.
“We have to protect the independence of the Federal Reserve,” he said. “It threatens me that we have public reporting that the president told Kevin Warsh he wanted to see interest rates cut, and that Kevin Warsh under oath said that did not occur. So someone is lying right now. Either Kevin Warsh just lied under oath or the president is lying. Either way, it doesn’t help build the credibility of the Federal Reserve.”
The hearing comes one week before the Federal Open Market Committee (FOMC) meets April 28-29, and Powell’s press conference on April 29 is expected to be his last as Fed chair. Powell has said he would remain in place on a temporary basis if needed.
While Republicans are broadly expected to support Warsh in a confirmation vote, he faces some hurdles along the way.
Sen. Thom Tillis (R-N.C.) has said he does not want to see a vote until the Justice Department drops its criminal probe against Powell, an investigation ostensibly over cost overruns on the Fed’s headquarters renovation that a federal judge has already moved to block.
Tillis made clear his objection is not with Warsh personally, telling the nominee, “Let’s get rid of this investigation, so I can support your confirmation.”
With Republicans holding only a 12-10 majority on the Banking Committee, Tillis has enough leverage to stall the nomination before it reaches the full Senate floor.
Other Republicans were unambiguous in their support. Sen. Jim Banks (R-Ind.) told Quincy News that he believes Warsh is the right choice.
“Kevin Warsh understands the importance of keeping inflation low and making sure our economy works for working people,” he said. “He is highly qualified for this role and we need to confirm him ASAP.”
Senior sources close to the process tell Quincy News they believe Warsh will ultimately be confirmed despite the obstacles.
Former Fed Chair Janet Yellen has said she doubts Warsh could quickly move the 12-member FOMC to cut rates, noting that a majority of members remain reluctant to act while inflation remains above the 2% target.
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