Kevin Warsh, nominated by US President Donald Trump to the Federal Reserve board, cited concerns about his independence pending his appointment to the bank amid concerns that Trump could influence monetary policy decisions.
On Tuesday, Warsh, who served on the central bank’s board from 2006 to 2011, faced a wave of criticism during his Senate Banking Committee confirmation hearing, with Democrats raising concerns about his independence if he were appointed to head the Fed.
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Sen. Elizabeth Warren of Massachusetts, the committee’s ranking Democrat, questioned Mr. Warsh’s independence and argued that he would become Mr. Trump’s “sock puppet,” a concern that Mr. Warsh pushed back against and addressed in his opening testimony.
“I don’t think the independence of monetary policy is particularly threatened when elected officials (the president, senators, congressmen) express their views on interest rates,” Warsh said.
“Monetary policy independence is essential. Monetary policymakers must act in the national interest. . . . Their decisions are the product of analytical rigor, meaningful deliberation, and clear decision-making.”
Mr. Warsh, 56, also called for “systemic changes” at the U.S. central bank, including a new approach to controlling inflation and overhauling communications to give colleagues less say in the direction of monetary policy.
Warsh blamed the central bank for soaring inflation after cutting interest rates to near zero in response to the coronavirus pandemic, a policy that continues to hurt American household finances.
Concerned about the impact that artificial intelligence, which promises to boost productivity, would have on jobs and prices, he said he would urgently consider whether new data tools could provide better insights into inflation and discourage policymakers from being too vocal about the direction of interest rates.
“What the Fed needs is a reformed framework and a reformed communication,” said a former Fed director. “There are too many Fed officials giving their opinion on what interest rates should be…It’s just not helpful.”
Mr. Warsh has also long advocated shrinking the Fed’s $6.7 trillion balance sheet. He said at Tuesday’s hearing that such a plan would take time and would need to be discussed publicly well in advance.
Jay Kedia, a fellow at the libertarian Cato Institute’s Center on Finance and Financial Alternatives, told Al Jazeera there are many “encouraging” signs about Warsh’s candidacy.
“At a time when the Fed is in need of serious reform, Mr. Warsh has been put forward as a candidate to replace the Fed,” Kedia said. “Particularly encouraging was his understanding of the negative effects of quantitative easing and his focus on balance sheet reduction. He also rightly criticized mission creep and acknowledged that the Fed would have done better by staying focused on its dual mandate (to keep inflation at 2% and grow employment).”
Quantitative easing, or QE, is an unconventional monetary policy in which central banks lower interest rates to boost the economy, and is a measure taken by central banks in several developed countries during the pandemic.
Mr. Warsh’s personal investments, worth well over $100 million, are also under scrutiny. That includes two holdings in Juggernaut Funds LP, apparently part of his work advising Stanley Druckenmiller’s private investment firm, the Duquesne Family Office.
Warsh’s nearly 70 pages of financial disclosures also revealed that his other holdings include investments in Elon Musk’s SpaceX and predictive trading platform Polymarket.
Before taking office, Mr. Warsh “agreed to divest virtually all of our financial assets, and the majority of them will be sold,” Warsh said, without elaborating.
Mr. Warsh noted that selling stakes does not come without challenges. He said that once that process is complete, “there will be virtually no financial assets” and “you will be sitting on something like cash.”
But Warren asked about the sale plan. “If we don’t know what’s inside, is there a way to find out if such a sale actually takes place?” she asked.
political hurdles
The hearing quickly became contentious, and questions remained about the pace of Warsh’s confirmation process through the Senate.
Although Warren did not directly say that Trump lost the 2020 election, she said the statement was a litmus test for Warsh’s independence from the Republican president who nominated him to lead the Fed.
But even with the focus on independence, Warsh needs 13 votes to pass the 24-member Senate Banking Committee.
North Carolina Sen. Thom Tillis said he plans to join Democrats in voting against President Trump’s nominee, which would create a 12-12 split. The committee has 13 Republicans and 11 Democrats.
Tillis said he would not vote for President Trump until the investigation into current Fed Director Jerome Powell, whose term ends on May 15, is concluded or canceled. Federal prosecutors said last month they found no evidence of wrongdoing. But Jeanine Pirro, the U.S. attorney for the District of Columbia, has not indicated that she will close the investigation.
Mr. Tillis said Tuesday that he would support Mr. Warsh’s nomination if the investigation into Mr. Powell was dropped.
“Today’s confirmation hearing emphasized that Mr. Warsh is aiming for independence with guardrails in place,” said Thelma Hepp, chief economist at market analysis firm Cotality. “He refused to be a political ‘sock puppet’ and insisted the Fed was protecting its autonomy by ‘staying in its lane.’ He offered no advance commitments on interest rates, emphasizing his desire for inflation discipline, a large balance sheet, and clearer communication from the Fed.”
Noel Dixon, senior macro strategist at State Street, said Warsh’s appointment would give the U.S. a “more dovish Fed.”
“When the senator asked if he would lower interest rates to 1%, I think President Trump was probably indicating that he wanted rates to be below 2%, but Warsh didn’t actually say no,” Dixon said. “He didn’t say prices were going to go up. He leaned into that in a way and said there would be a lagging effect, but he didn’t commit to that at all. So he’s just reading between the lines, but he’s kind of giving himself room to potentially justify a rate cut through the end of the year.”
President Trump continues to put pressure on central banks.
He said Tuesday he would be “disappointed” if the Fed didn’t lower interest rates.
Tuesday’s remarks follow comments in December in which the U.S. president said he would not appoint someone to lead the central bank without his consent.
“The public needs to know whether Mr. Warsh has the courage to stay true to his principles, or whether he is willing to sacrifice his independence to further deregulate Wall Street,” Graham Steele, an academic at Stanford University’s Rock Corporate Governance Center, told Al Jazeera in an email.
Warsh praised the government for pushing for greater banking deregulation. In a November 2025 op-ed for the Wall Street Journal, Warsh argued that President Trump’s “deregulation agenda” is “the most important policy since President Ronald Reagan.”
