Trump’s Fed nominee Warsh rejects ‘sock puppet’ label, calls for ‘regime change’
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The news: Donald Trump’s nominee to lead the US Federal Reserve, Kevin Warsh, told the Senate Banking Committee that the US president has never asked him to commit to cutting interest rates.
During a contentious two-hour hearing Warsh, 56, called for “regime change” at the Fed and a new inflation framework, without going into the details.
His comments came just hours after Trump told CNBC he would be “disappointed” if Warsh didn’t cut immediately upon taking the job, and suggested Warsh may end up working from the White House because the Fed’s headquarters renovation would not be finished in time.
At the hearing, Warsh said he would be an “independent actor” if confirmed, pushing back against Democratic Senator Elizabeth Warren’s characterisation of him as Trump’s “sock puppet.”
Senators pressed him on financial disclosures showing assets of between USD131 million and USD209 million, including two stakes worth more than USD50 million each in the Juggernaut Fund. If confirmed, that would make him the wealthiest person ever to lead the Federal Reserve.
Warsh said he would divest most holdings under a deal with the Office of Government Ethics.
Warren called him “uniquely ill-suited” for the role and a Trump “sock puppet”. Under questioning from Warren, Warsh also declined to say whether Trump lost the 2020 election.
Republican Senator Thom Tillis said Warsh’s credentials were “impeccable” but stood by his position to block the nomination in committee until the criminal DOJ investigation into current chair Jay Powell is finalised.
What they said: “Let’s get rid of this investigation so I can support your confirmation,” Tillis said at the hearing.
“Having a sock puppet in charge of the Fed would also give the president access to the Fed’s powerful authorities to enrich himself, his family and his Wall Street buddies,” Warren said.
A federal judge has ruled the probe is a thinly disguised effort to pressure Powell into lowering interest rates or resigning to make way for a more compliant successor.
Speaking to CNBC about the Fed’s ongoing headquarters renovation, which sits at the centre of the DOJ probe, Trump said: “I’m afraid Kevin will have to have an office next to me in the White House, because that building’s not going to be done.”
At the hearing, Warsh said: “The president never asked me to predetermine, commit, fix, decide on any interest rate decision in any of our discussions, nor would I ever agree to do so.” He added, “I will be an independent actor if confirmed as chair of the Federal Reserve.”
On his broader vision for the central bank, Warsh was unequivocal. “We need regime change at the Fed,” he said. “We need a framework, new tools and new communications.”
“I believe a reform-oriented Federal Reserve can make a real difference to the American people,” Warsh added. “The fatal policy errors going back four or five years are a legacy that families are still working through. I don’t think we need policy continuity that brought about the greatest mistake in macro-economic policy in 45 years, that divided the country, that caused a surge in inflation.”
On the Fed’s accountability for price stability, Warsh said: “Congress tasked the Fed with the mission to ensure price stability, without excuse or equivocation, argument or anguish. Inflation is a choice, and the Fed must take responsibility for it. Low inflation is the Fed’s plot armor.”
