The US Senate has voted to approve Trump’s pick for the position of Federal Reserve chairman
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The US Senate has confirmed President Donald Trump’s nominee to lead the Federal Reserve, Kevin Warsh, will bring new leadership to the world’s most powerful bank at a difficult time in the global economy.
Warsh was confirmed as chairman Wednesday in a vote that fell largely along party lines.
His nomination was thrown into doubt in recent months after Republican Rep. Thom Tillis said he would block the nomination as long as the Justice Department continues to investigate current chairman Jerome Powell.
Powell’s investigation was dismissed in April, clearing the way for the Senate to confirm Warsh.
Senate Majority Leader John Thune urged his colleagues to support Warsh during a speech Wednesday morning, saying it’s important that the Federal Reserve chairman “not only understands the macro economy” but also “appreciates the micro economy: and hard-working Americans, their jobs and their livelihoods.”
“Kevin Warsh is that kind of guy,” Thune said.
The introduction of a criminal investigation into the chairman of the Federal Reserve, Jerome Powell, politicians on all sides are asking what the independence of the institution in charge of the country’s monetary policy could mean.
Warsh, 56, a former chief executive of the Federal Reserve, becomes chairman at an unusually difficult time for the independent agency.
Inflation has exceeded the Fed’s five-year target of 2 percent and is now rising rapidly due to rising gas prices.
The Fed’s interest rate-setting committee is divided and last month saw its most controversial vote in more than three decades. Powell, after years of personal attacks on Trump and an unprecedented legal investigation by the Justice Department, plans to stay on the Federal Reserve board even after his term as chairman ends, potentially creating a competitive powerhouse.
Trump wants change
The Federal Reserve has faced numerous threats to its autonomy from Trump, who has repeatedly attacked Powell for not lowering interest rates. Trump also sought to fire Fed governor Lisa Cook and launched an investigation into Powell’s handling of the building.
Kevin Hassett, director of the White House’s National Economic Council, said in an interview with Fox News on Sunday that he believes markets are comfortable that Warsh will “help lower interest rates over time.”
“Obviously, it’s data driven,” Hassett said. “I’m not putting pressure on Kevin Warsh.”
In December, Trump said on his social media that he wants a Federal Reserve chairman who will cut interest rates when the stock market rises – the opposite of what traditional economics would dictate – and added, “Anyone who disagrees with me will never be Fed chairman!”
Trump’s comments raised concerns about whether Warsh would set rates based on economic conditions or seek to cut rates to please Trump, even if doing so would raise inflation.
US President Donald Trump criticized Jerome Powell, chairman of the US Federal Reserve, for not cutting interest rates at a press conference on Monday.
At Warsh’s confirmation hearing last month, Democratic Senator Elizabeth Warren mocked him as a “sock puppet” for Trump. Warsh refused to say that Joe Biden won the 2020 presidential election against Trump, who lied that voter fraud cost him his re-election bid.
Warsh denied at the hearing that Trump had pressured him to lower the Fed’s key rate.
“The president has never asked me to commit to any interest rate decision,” Warsh said at the time. “I wouldn’t agree to do that either if you had it.”
He went on to say that he will be an “independent actor” if he is confirmed as chairman.
Warsh is critical of the Fed’s past leadership
Warsh has been critical of the Federal Reserve’s recent record, particularly the 2021-22 inflation rate — the worst in four decades — and called for “regime change.” However, he gave only broad details of what that change would entail.
He called for less Fed communication, which would be a sharp change after decades of increased transparency. He argued some of its communication tools, such as quarterly forecasts of where its key rate might be headed, made it difficult for officials to shift gears.
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Senate Democrats also criticized Warsh for not fully disclosing the details of his vast fortune, which disclosures show is at least $100 million. His investments include Polymarket and SpaceX, but he hasn’t revealed how big those investments are. He promised that he will sell all these goods within 90 days of being sworn in.
“He’s going to be the richest Fed chairman in history, but he’s refusing to come clean to the American people about who he’s caught with,” Warren said.
Difficult economic conditions
The Federal Reserve is still grappling with how to respond to a 50 percent increase in gasoline prices caused by the Iran war. This increase in inflation raised the rate of inflation, which reached 3.8 percent in April.
The Fed is tasked by Congress to keep rates stable, which it wants to do by raising its short-term rate to make borrowing and spending more expensive, cooling growth and inflation.
It often seems to pass short-term prices that result from supply disruptions, such as the cessation of the oil war over the Strait of Hormuz, because those prices usually decrease – or even reverse – once the supply is restored.
The Fed’s rate-setting committee has kept rates unchanged for three straight meetings as it assesses the impact of rising gas prices. At its most recent meeting last month, three members of the committee objected to language that said the next step would be to drop it. They chose a neutral language that would allow hiking.
Many Fed watchers saw those objections as a warning to Warsh that he would not be able to lower the engineering rate easily.
