Kevin Warsh appeared before senators today at an often confrontational hearing on his nomination to be Federal Reserve chairman, where he pledged to be independent while accusing the Fed of eroding public trust by straying from its mission.
Warsh, who previously served on the Fed board from 2006 to 2011, was nominated by President Trump earlier this year to succeed Jerome Powell as Fed chairman. His nomination currently lacks the votes to clear the Senate Banking Committee, as Sen. Thom Tillis (R-N.C.) said he would block the nomination until the Justice Department drops a criminal investigation into Powell and cost overruns related to renovations to the Fed’s headquarters.
During his opening remarks, Warsh said his time on the Fed board during the height of the financial crisis led him to respect the work of the institution. “But I also witnessed an institution that was tempted to play a larger role in the economy and society,” he said. “So let me very clear: Monetary policy independence is essential. Monetary policymakers must act in the nation’s interests. Their decisions are the product of rigor, deliberation and unclouded decision-making.”
Warsh was pressed by committee Democrats on a media report suggesting he told Trump that he would cut interest rates. Warsh said he never committed to any path on interest rate policy. He also declined to answer questions about Trump’s attempt to fire Fed Governor Lisa Cook and investigate Powell, saying that since both cases involved legal matters, it would be improper to comment.
Warsh said he intended to reform “an institution that has lost its way a little bit.” He said one of his first acts as chairman would be to order a review of the data the central bank uses to set monetary policy.
“Independence has to be earned,” he said. “It is earned by delivering on the promises, the commitments the Fed has made. And as the Fed hasn’t delivered on those promises, we shouldn’t be surprised that we hear politics are entering the room at the Fed. We need to get the politics out of it.”
