The US Senate is expected to confirm Kevin Warsh this week as chair of the Federal Reserve, as Donald Trump continues his campaign to influence the world’s most important central bank.
The Fed’s influence over the economy spans from the job market to mortgage rates, and its every move is carefully scrutinized by investors on Wall Street. Warsh’s confirmation comes at a turbulent time for the central bank, which has fallen under intense scrutiny from Trump for not lowering interest rates.
The vote is expected to be split along party lines. Democrats criticize Warsh for being Trump’s “sock puppet” at a time when the president has pushed past the typical boundaries between the White House and the nonpartisan Fed.
Warsh served on the Fed’s board as a governor from 2006 to 2011 and developed a reputation as a so-called “inflation hawk” during the 2008 recession crisis – advocating for higher interest rates to mitigate rising prices.
But since Trump started his second term, Warsh publicly aligned himself with the president’s stance that interest rates are now too high. In a Wall Street Journal op-ed last November, Warsh called the Fed’s leadership “broken” and called the bank “an institution whose reach has extended far beyond its grasp”.
Warsh told the Senate that he will be an “independent actor” as Fed chair, but resisting pressure from the White House will be difficult amid the legal assault Trump has foisted upon the central bank for going against his wishes. When pushed by Democrats in Congress, Warsh refused to answer whether Trump had lost the 2020 election.
Trump’s battle with the Fed culminated in a criminal investigation against the outgoing Fed chair, Jerome Powell. Trump accused Powell of fraud over renovations at the Fed’s headquarters that went over budget.
Though the justice department ended its investigation after a Republican senator said he would hold up Warsh’s nomination, Powell announced last month that he would stay on the Fed’s board as a governor until any inquiry into the renovations are “well and truly over with transparency and finality”.
In his last press conference as chair, Powell noted that Warsh testified that he will withstand political pressure from Trump and that he will “take him at his word”. But the outgoing Fed chair also made some of his most pointed remarks to date about the current risk to Fed’s independence, which is crucial for the health of the economy.
“The institution is being battered over these things. We’re having to resort to the courts to enforce our … ability to make monetary policy without political considerations,” Powell said. “I’d like to think we can get out of that era and go back to respecting what the law says and what custom has been.”
