Fed nominee Warsh questioned on independence from Trump and personal wealth

[0:00] AMNA NAWAZ, President Trump's pick to lead the Federal Reserve, Kevin Warsh, [0:04] was on Capitol Hill today, facing a slew of lawmaker questions on his monetary policy [0:09] and independence from Trump. All that as the president's pressure campaign against [0:14] current Fed chair Jerome Powell threatens to freeze Warsh's nomination indefinitely. [0:19] SEN. JEROME POWELL, I will now swear in the nominee. [0:21] AMNA NAWAZ, At his confirmation hearing for the Fed's top job, [0:24] Kevin Warsh promised to protect the central bank's independence while pledging what he [0:29] called regime change. [0:30] SEN. JEROME POWELL, The sooner that we can reform the institution, with my colleagues [0:35] if confirmed, the sooner we can ensure price stability, and we can have a new set of leaders [0:41] atop the institution with high credible ethical standards to return the Fed to what it should be. [0:49] AMNA NAWAZ, The former Fed governor criticized monetary policy errors he argued allowed inflation [0:54] to soar. [0:55] SEN. JEROME POWELL, We are still dealing with the legacy [0:58] of the policy errors in 2021 and 2022. Once you let inflation take hold in the economy, [1:07] it's more expensive and harder to bring it down. [1:09] AMNA NAWAZ, But among his biggest challenges today, [1:12] addressing senators' concerns he could withstand presidential pressure. Democratic Senator Ruben [1:17] Gallego. SEN. B. SEN. WASH, Mr. Warsh, I think you're incredibly qualified. [1:20] A lot of us are actually worried about the integrity of the Federal Reserve. We're worried about what this [1:24] means for the economic markets and we're worried about what this means for inflation. [1:29] We're worried about your independence. I take my responsibility to be an independent [1:35] leader of the Federal Reserve very seriously if confirmed by this body. [1:40] I take the integrity of the office and my personal integrity very seriously. [1:46] Warsh's nomination follows a relentless campaign of criticism and threats of firing from President [1:51] Trump aimed at current Fed Chair Jerome Powell, all while pushing for him to lower interest rates. [1:58] Republican Senator John Kennedy. [2:00] The problem is that President Trump has said he's not going to appoint anybody [2:05] who wouldn't agree to lower interest rates. Have you agreed with the president that you're going to [2:12] lower interest rates? Senator, I'm glad you framed it that way. The president never asked me to [2:18] predetermine, commit, fix, decide on any interest rate decision in any of our discussions, [2:27] nor would I ever agree to do so. [2:29] Warsh found support among some Republicans on the panel, like Senator Tim Scott, [2:33] who argued his previous Fed service during the Great Recession left him battle-tested. [2:38] SEN. TIM SCOTT, He helped our economy through the crisis and restored faith in the economy. [2:44] He has seen the economy in its darkest days and understands how economic decisions [2:52] affect job growth, our economy, and the opportunities that we have come to love as Americans. [3:01] But the president's pick, a former banker and investor whose wife, Jane Lauder, [3:06] is heir to the Estee Lauder cosmetics fortune, also faced questions about his own personal wealth, [3:12] reportedly well over $100 million, according to financial disclosure forms, [3:17] likely making him the wealthiest nominee in Fed history. [3:20] SEN. TIM SCOTT, It's critical that the next chair have no financial conflicts, none. [3:25] SEN. TIM SCOTT, Democratic Senator Elizabeth Warren [3:27] pushed Warsh for more disclosure and an asset divestiture plan. [3:31] SEN. ELIZABETH WARREN , You have $100 million in undisclosed assets. [3:35] SEN. ELIZABETH WARREN , And what I'm asking is, are any of those with this outfit that invests in [3:43] companies affiliated with President Trump or his family, companies that have facilitated money [3:48] laundering, Chinese-controlled companies, or financing vehicles set up by Jeffrey Epstein? [3:53] It's a yes or no question. [3:54] SEN. TIM SCOTT, Senator, I have worked tirelessly with the ethics [3:58] officials at the Office of Government Ethics. [3:59] SEN. ELIZABETH WARREN , Yes. And you have not revealed $100 million in assets. [4:00] SEN. ELIZABETH WARREN , Come do an ethics agreement with them. [4:01] SEN. ELIZABETH WARREN , Come do an ethics agreement with them. [4:02] SEN. ELIZABETH WARREN , And have agreed, Senator, [4:04] to sell all of my financial assets. [4:07] SEN. ELIZABETH WARREN , That's not my question. [4:08] SEN. ELIZABETH WARREN , Complicating Warsh's path, a Department of Justice criminal probe [4:12] opened under Trump's second term into Jerome Powell's handling of renovations at Fed headquarters. [4:17] Republican Senator Tom Tillis has said he will block Warsh's confirmation until that investigation is dropped. [4:24] SEN. TOM TILLIS , We have got to end this investigation. [4:26] Big DOJ didn't know about it. The president didn't know about it. Let's get rid of this investigation [4:31] so I can support your confirmation. [4:33] SEN. ELIZABETH WARREN , For now, [4:34] a standoff over Warsh's full Senate confirmation and an uncertain future for the nation's central bank. [4:40] SEN. ELIZABETH WARREN , For more perspective on the Fed and Warsh, [4:43] I'm joined now by David Wessel. He's director at the Hutchins Center on Fiscal and Monetary Policy [4:49] at the Brookings Institution. David, always great to see you. [4:51] DAVID WESSEL , Good to be here. [4:52] SEN. ELIZABETH WARREN , So you watched the hearings. What stood out to you today? [4:54] DAVID WESSEL , A couple of things. One is, Kevin Warsh did not, despite the president's [4:58] demands, seem like the guy who's really ready to cut interest rates anytime soon. [5:03] SEN. ELIZABETH WARREN , He came off very much as an inflation hawk. [5:08] He didn't even mention the Fed's mandate to maximum employment in his opening statement. [5:14] And the second thing was, he seemed to be performing for an audience of one, Donald Trump. He would not [5:21] agree that tariffs raised inflation. He would not agree that the president's flip and demand that we [5:27] cut interest rates to one percent would lead to higher prices. He wouldn't comment on the president's [5:34] persecution of Jay Powell. He just was determined not to put any space between him and the president. [5:40] SEN. ELIZABETH WARREN , I mean, he also said that he never heard from the president [5:42] about pressure to lower interest rates, never committed to doing that. We know that's a big issue [5:46] for the president, though. If he's confirmed, how do you see him navigating that? [5:50] SEN. ELIZABETH WARREN , I think you're right. I think he has two challenges. One is, [5:53] he has to figure out what's the right thing to do with interest rates. It's a pretty tricky time. [5:58] If you tell me what's going to happen in the Middle East, it might be clearer. But I think his real [6:02] challenge is going to come when the president realizes that Kevin Warsh cannot get the Fed to cut [6:08] interest rates anytime soon, and certainly not to the degree that the president would like. And then, [6:14] when the president goes after him, as I expect he will, Kevin Warsh will be judged by the Powell [6:19] standard. Will he be as resolute and firm in defending the Fed from presidential pressure [6:25] as Jay Powell was? And that's going to be a very tough test for him to meet. [6:29] SEN. ELIZABETH WARREN , He delivered some very blunt messages about regime change, [6:33] criticizing the policy of the past and decisions made by his potential predecessors. What did you [6:38] take away from the way he was talking about that? [6:40] SEN. ELIZABETH WARREN , Well, this is echoing what he's been saying as he campaigned for the job. [6:44] It's almost like he's been saying everything's gone to hell at the Fed since I stepped down [6:48] 15 years ago. I think he's going to... [6:51] SEN. ELIZABETH WARREN , As Fed Governor, we should say. [6:52] SEN. ELIZABETH WARREN , As Fed Governor, yeah. He's going to have to [6:55] find a way to explain to the staff and the other members of the Fed Policy Committee, like, [7:00] I think you did a lot of wrong things, but I want you to work with me. So, [7:04] I think it's all part of the same pattern. Some of it I don't quite understand the logic of, [7:09] but he's going to be... I think he's going to have a hard time demonstrating regime change or a radical [7:15] shift on an institution which has a lot of inertia and where he's one vote of 12 on the committee. [7:21] SEN. ELIZABETH WARREN , We often see these confirmation hearings devolve [7:23] into clear partisan lines, but there was bipartisan concern and questions about the Fed's independence, [7:29] how he would maintain that. Did that surprise you? [7:31] SEN. ELIZABETH WARREN , No. I think that members of Congress understand [7:34] that an independent Fed that makes monetary policy decisions [7:38] based on its own judgments is better for the economy than one that bends to what the White [7:43] House wants, which is almost always lower interest rates. I think it was still pretty partisan hearing. [7:48] The Democrats said, you're a terrible choice, and the Republicans says you're a great choice. [7:53] Even Tom Tillis says, as long as if the president would drop his investigation of Jay Powell, [7:58] I'd vote for your confirmation. [7:59] SEN. ELIZABETH WARREN , On that point, [8:00] if that DOJ probe is not dropped against Jay Powell, how do you see this process playing out? [8:06] SEN. ELIZABETH WARREN , I think that Jay Powell's made clear that he's not leaving [8:10] until they drop the investigation with finality. So I expect that he's going to be there for a while. [8:17] It's going to be really interesting to see what happens on May 15th when his term is chairman up. [8:22] Jay Powell and the Fed say Jay Powell becomes the temporary chairman, but the White House has been [8:27] suggesting that maybe there's some legal opinions that say that they could designate another governor. [8:32] So I worry that there'll be some kind of fight over that, more litigation. [8:37] And I think that would be unsettling to the public and to the markets. [8:40] SEN. ELIZABETH WARREN , We'll wait and see what happens next. [8:42] Have you back then to talk about it some more. [8:43] DAVID WESSEL , The Brookings Institution. [8:45] Thank you so much. DAVID WESSEL , You're welcome. [8:46] Support journalism you trust. Support PBS News. Donate now, or even better, [9:04] start a monthly contribution today.