Kevin Warsh Fed Chair Confirmation Hearing Begins: Live Updates

Warsh has previously said he wants “systemic change” at the Fed. It will be interesting to see if he uses that word today, or if he tones down the scope of the changes he wants in front of senators.

It’s worth pointing out that much of what Mr. Warsh wants to do at the Fed will require approval from his new colleagues.

Lowering interest rates, shrinking the balance sheet and entering into Treasury and Fed agreements all require approval from the Federal Open Market Committee. Mr. Warsh needs to get the OK from the Fed’s board of governors to deregulate banks.

— Steve Reisman, Kevin Breuninger

Sen. Dave McCormick (R-Pennsylvania) is scheduled to introduce Warsh at the hearing.

Banking Committee member McCormick told CNBC’s “Squawk Box” on Tuesday before the hearing that he expected the hearing to go “well.” McCormick said Warsh has experience both inside and outside the Fed, along with an understanding of investments and financial markets.

“President Trump made a great choice,” McCormick said. “I think that’s clear to the members of the committee this morning.”

McCormick was the CEO of hedge fund giant Bridgewater Associates.

— Emily Wilkins, Alex Harring

A Fed led by Mr. Warsh will likely mean lower interest rates, less regulation and smaller balance sheets.

Publicly, Warsh has largely held to the idea that the Fed has room to ease monetary policy, but he has not reiterated that position since the Iran war began about two months ago. Although he has long advocated for less central bank influence in bond markets, he has been less vocal about the vagaries of banking regulation.

President Trump, who nominated Mr. Warsh for the post, told CNBC’s “Squawk Box” on Tuesday that he would be disappointed if Mr. Warsh did not lower interest rates.

—Jeff Cox

Mr. Warsh, 56, is an Ivy League-educated lawyer who has worked in finance, politics and monetary policy.

A native of Albany, New York, he graduated from Stanford University and Harvard Law School. Warsh worked at Morgan Stanley before joining the Bush administration.

Mr. Warsh served as a member of the Federal Reserve Board of Governors from 2006 to 2011. He managed venture capital investments within the technology industry for investor Stanley Druckenmiller, a role that helped him amass at least $135 million in assets.

— Alex Harring

The Banking Committee did not vote on Warsh’s nomination at Tuesday’s hearing and has not yet said when a vote will take place.

That timeline could depend on what happens next in the Justice Department’s ongoing criminal investigation into Powell, and whether the man named Warsh is successful. President Trump said Tuesday in an interview with CNBC’s “Squawk Box” that he has not asked the Justice Department to close the investigation.

U.S. District Judge James Boasberg last month blocked the Justice Department from issuing subpoenas related to the Powell investigation, blocking an effort led by U.S. Attorney Jeanine Pirro, a staunch ally of President Trump.

And on April 3, Boasberg denied Pirro’s motion to reconsider the sentence, starting a 30-day countdown until the government files a notice of appeal, according to a Justice Department manual.

This essentially means Pirro has until May 3 to decide whether to continue with the investigation.

Why this matters: If the Banking Committee tries to move forward with Warsh while the Powell investigation remains active, Sen. Thom Tillis, R-N.C., has vowed to block his nomination.

Therefore, the Banking Committee is likely to remain in a pattern until early May, or at least until the Justice Department’s next steps are known.

Additionally, the Senate will be in session the week of May 4th, so the earliest vote on Warsh could come the week of May 11th.

— Kevin Breuninger and Emily Wilkins

The main obstacle to getting President Trump’s Fed nominee through the Senate is members of the president’s own party.

Sen. Thom Tillis, RN.C., has vowed to prevent Mr. Warsh from leaving the Banking Committee unless the Justice Department resolves the criminal investigation against Mr. Powell. In an interview with CNBC’s “Squawk Box” on Tuesday before the hearing, President Trump said he had no intention of canceling the hearing.

If Mr. Tillis were to side with all Democrats on the committee in rejecting Mr. Warsh’s nomination, the committee would reach a stalemate.

Mr. Powell said that while the Justice Department’s investigation is ostensibly focused on the cost of ongoing renovations to two Federal Reserve buildings in Washington, it is actually intended to target Mr. Powell, who has refused to cut interest rates as quickly or as quickly as President Trump’s demands.

Mr. Tillis said he liked Mr. Warsh and argued that his economic blockade was about freeing the Fed from executive branch influence.

“I love the candidate,” Tillis told reporters at the Capitol last week. “I’m not going to spend five minutes asking about his qualifications, because he’s qualified. I’m going to spend five minutes talking about a sham investigation that I’m going to vote against unless the investigation is closed.”

President Trump has repeatedly criticized Tillis, who has become more vocal since announcing plans to retire from the Senate after his term ends in January.

— Kevin Breuninger and Emily Wilkins

Mr. Warsh was seen exiting the elevator and entering the Banking Committee’s office across the street from the hearing room.

He did not speak or answer any questions before entering the office.

— Kevin Breuninger and Emily Wilkins

Appearing on CNBC’s “Squawk Box” before the hearing, President Trump did not say he would approve an “off-ramp” that would have allowed the Justice Department to abandon its criminal investigation of Powell and clear the way for Warsh’s confirmation.

President Trump was asked whether the Senate Banking Committee could take over the Justice Department investigation.

President Trump responded that cost overruns related to the Federal Reserve’s ongoing headquarters renovation work “need to be figured out.”

Trump said of Warsh: “I think Kevin will have to have an office next to me in the White House because that building will never be completed.”

Trump added that he “couldn’t imagine” Powell “putting money into construction.”

“But it’s possible,” he added.

— Kevin Breuninger

President Trump said ahead of his confirmation hearing that he would be disappointed if Warsh did not lower interest rates “soon” after being confirmed as the next Fed chair.

Asked directly on CNBC’s “Squawk Box,” Trump said, “I would.”

— Kevin Breuninger

Senate Banking Chairman Scott Scott preemptively criticized Democrats on the committee before the Warsh hearings, telling CNBC’s “Squawk Box” that Democrats would focus too much on candidates’ wealth and politics rather than Fed policy.

“What we’re not seeing from Democrats today is a conversation about the American Dream and why it’s so important for us to talk about the Fed’s balance sheet, not Kevin Warsh’s balance sheet,” Scott said.

“They’re going to spend too much time talking about the Fed’s balance sheet and not enough time talking about the Fed’s balance sheet,” he said. “They’ll spend too much time talking about politics and not enough time talking about a favorable interest rate environment for homeownership, starting a small business, and getting average people in this country to have more money in the economy and less money on the sidelines.”

— Kevin Breuninger

Senate Banking Committee Chairman Scott Scott told CNBC’s “Squawk Box” ahead of the hearing that Warsh intends to restore an independent Fed, arguing that the separation of the central bank’s executive branch from politics had been undermined under the Biden administration.

“Warsh is a man who has been through the gauntlet. He’s ready for the job, and frankly, more Americans will experience their American Dream with him in charge,” Scott said.

“It’s time for the Fed to regain its independence,” the South Carolina Republican said. “Under the Jay Powell and Biden administrations, we’ve seen a lot of climate discussions and decisions that prioritize climate. We want to prioritize every kitchen table in America by having a Fed chair who has ‘directly in mind’ everyday Americans.”

— Kevin Breuninger

The Senate Banking Committee hearing is scheduled to begin at 10 a.m. ET and last about two hours, but could be shortened or extended.

R.S.C. Chairman Tim Scott is expected to open the proceedings with remarks centered on how the Fed’s decisions will affect everyday Americans’ finances.

He is also expected to stress the importance of maintaining the central bank’s independence and allowing it to focus on its dual mission of creating price stability and full employment in the United States.

Mr. Scott will be followed by remarks from Ranking Member Elizabeth Warren, D-Mass., who has recently questioned aspects of Mr. Warsh’s extensive financial disclosures.

Warsh will then deliver his own opening remarks, which may differ from the prepared statement obtained by CNBC on Monday.

The remaining 22 members of the Banking Committee (12 Republicans and 10 Democrats) will each have five minutes to ask questions of Mr. Warsh.

— Kevin Breuninger and Emily Wilkins