Warsh Vows to Protect Fed Independence in Senate Hearing Opening Remarks

Fed Chair Nominee Kevin Warsh delivers his opening remarks before the Senate Banking Committee.

Kevin Warsh repeatedly pledged to act independently if he’s confirmed as the next Federal Reserve chair, rejecting Democratic concerns he would be a “sock puppet” for President Donald Trump, who continues to demand lower interest rates.

Warsh, in testimony before the Senate Banking Committee Tuesday, called for a slew of changes to the way the US central bank makes its decisions, including a new framework for dealing with persistent inflation and a new way of communicating with the public. But he provided few specifics and avoided answering questions about the near-term path of interest rates.

He also insisted the president never asked him to commit to any particular rate decision.

“The president nominated me for the position, and I’ll be an independent actor if confirmed as chairman of the Federal Reserve,” Warsh said, in response to questions from Democrats about how he planned to handle pressure from Trump. In her opening remarks, the senior Democrat on the panel, Senator Elizabeth Warren said Warsh would be Trump’s “sock puppet” at the Fed.

Warsh’s ability to placate the White House while maintaining credibility on inflation with investors was seen as a key test for him heading into the hearing. Tuesday morning, Trump said he’d be disappointed if Warsh didn’t cut rates as soon as he took office.

Early in his testimony, Warsh blamed the Fed for allowing inflation to surge following the Covid-19 pandemic, and said quickly rising prices remain a problem for Americans. In response, he said the central bank needed a new framework for dealing with persistent price pressures, without offering more specifics.

Follow the reaction in real time on Bloomberg’s TOPLive blog

“While it’s true that inflation is less problematic, meaning the rate of change in prices is less severe than it was some years ago, hard working Americans are no doubt feeling it,” Warsh said. “I think that means a regime change in the conduct of policy. I think that means a different, new inflation framework.”

Warsh didn’t say what that meant for interest rates. Pressed by Democrat Chris Van Hollen whether he agreed with Trump’s call for the Fed to lower rates to around 1% this year, Warsh dodged.

“Unlike many of my colleagues past and present, I don’t believe in forward guidance,” he said. “I don’t believe that I should be previewing for you what a future decision might be.”

Asked by Warren whether Trump had lost the 2020 presidential election, Warsh demurred, saying Congress had certified Joe Biden as president after that vote.

Warsh also emphasized he would sell any undisclosed assets before being sworn in as Fed chair.

Warsh and his wife, Jane Lauder, reported assets worth at least $192 million in financial disclosures filed as part of his nomination. But his total net worth is likely much larger and makes him one of the wealthiest Fed officials in the central bank’s history.

Warsh’s path to confirmation remains highly uncertain. A key Republican voter on the committee, Senator Thom Tillis of North Carolina, has vowed not to approve any Fed appointment until a Department of Justice investigation into the Fed and Chair Jerome Powell is closed. The investigation involves a building renovation and Powell’s congressional testimony on the project.

Tillis has said the probe is politically motivated, and his vow to hold up Warsh’s confirmation has raised the possibility Warsh won’t be sworn in before Powell’s term as chair expires on May 15.

Read More: How Trump’s Fed Drama Might Extend Powell’s Tenure: Explainer

For his part, Trump has no plans to back down on the probe, according to a White House official.

In an interview Tuesday, Tillis told reporters he welcomed a proposal from the committee’s chair, Senator Tim Scott, that Congress open an investigation into the Fed renovations, allowing the DOJ to drop its probe.

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