The Senate is set to consider whether to confirm Kevin Warsh as Federal Reserve chairman, despite opposition from Democrats who want to halt the process.
The Senate Committee on Banking, Housing, and Urban Affairs is scheduled to consider the nomination in a hearing April 21. Warsh is President Donald Trump‘s pick to replace current Fed Chair Jerome Powell. If Warsh’s nomination moves forward, the full Senate would need to approve.
On Thursday, 11 Democratic members of the committee sent a letter to Chair Sen. Tim Scott, saying the hearing and subsequent vote should be delayed until investigations into Powell and Gov. Lisa Cook are closed.
The letter states that it would be “absurd on its face to allow President Trump to handpick the next Chair of the Federal Reserve as his Department of Justice actively pursues criminal investigations of not one, but two sitting members of the Federal Reserve Board.”
Powell’s term as Fed chair ends May 15. But, he has the option to remain on the board of governors as a regular member until 2028. Trump, who wants to see the central bank lower interest rates dramatically, has been sharply critical of him.
The banking committee’s 11 Democrats, including ranking member Elizabeth Warren of Massachusetts, Jack Reed of Rhode Island, Mark Warner of Virginia, and Chris Van Hollen of Maryland, decried the investigations as “part of the Trump Administration’s broader effort to take control of the Fed.”
Battle for the Fed
Trump has publicly feuded with Powell as the Fed paused interest rate cuts amid fears of renewed inflation. This week, Trump threatened to fire Powell if he does not resign after his term as chair ends.
In January, Powell revealed he was the subject of a Justice Department criminal probe over his Senate testimony about recent renovations to the Fed’s headquarters in Washington, DC.
Trump has also attempted to fire Cook, a Biden appointee, over allegations of mortgage fraud. That challenge reached the Supreme Court. It is still deliberating over the legality of such a move.
Scott has publicly said he does not believe Powell committed a crime. Crucially, Sen. Thom Tillis, a Republican on the Banking Committee, has said he will not vote to confirm any Fed nominee until the DOJ’s probe of Powell is publicly ended.
A number of other Republicans are growing impatient with the probe and want it to end, including Senate Majority Leader John Thune, Politico reports.
A conclusion of the probe would allow Warsh’s nomination to proceed even without support from Democrats. Senate Republicans increasingly hope the DOJ finds an off-ramp for the investigation.
Replacing Powell has been a priority for Trump, who wants to see interest rates significantly lowered to reduce borrowing costs for the government and consumers.
The Fed’s 12-member Federal Open Market Committee sets interest rate policy. It has held firm on rate cuts over the last several policy meetings. The majority found that inflation remains uncomfortably high.
Tough questions expected
The Fed uses higher interest rates to fight inflation. Lower rates stimulate the job market, in line with the central bank’s dual mandate of price stability and maximum employment.
Warsh served as a Fed governor from 2006 to 2011. He has publicly said he would advocate for more aggressive rate cuts and reforms at the Fed.
Warsh’s hearing comes after the Office of Government Ethics released financial disclosures that revealed his vast financial holdings. Those include over $100 million in assets, with stakes in SpaceX and prediction marketplace Polymarket.
Democrats are expected to sharply grill Warsh over his wealth, which would make him the richest Fed chair in history by far.
Warsh is also expected to face tough questions about the future of Fed independence, and whether he would follow Trump’s dictates for lower rates.
By law and tradition, the Fed is structured to be independent from political whim and influence. History shows that keeping interest rates artificially low for political purposes can lead to runaway inflation and capital flight. That would wreak havoc on the economy and ultimately driving up borrowing costs.
Instead, the Fed is supposed to set rates based on its mandate. Even so, policymakers often have honest disagreements about what interest rate would be ideal for the economy.
Warsh’s confirmation hearing is set to begin on April 21 at 10 a.m. ET.
