Kevin Warsh, Trump's pick to replace Powell at Fed, faces confirmation hearing

[0:00] kitchen table people across our country want to have confidence in our [0:05] institutions now that your nomination goes in the direction of reinforcing [0:11] why they should have confidence in the institutions you've been nominated by [0:16] the president to be the chairman of the Federal Reserve System the Federal [0:20] Reserve plays a powerful role in our economy monetary policy choices made at [0:26] the Federal Reserve can affect the Americans ability to buy groceries [0:30] whether or not they can afford a home how far their paycheck goes especially at [0:37] the end of the month and in South Carolina I hear all the time how families [0:42] are working hard doing everything right and still feeling squeezed dynamics made [0:49] prices go up and paychecks have not kept pace too many parents are stretching [0:54] every single dollar they have just to cover the basics and too many workers [1:00] are wondering when the economy will start to feel stronger at their kitchen table [1:06] not just on paper Congress President Trump and his administration are focusing [1:12] on fixing the disastrous mistakes of Bidenomics to restore Americans confidence [1:18] in our economy through efforts like the working families tax cut bill we are [1:23] helping Americans keep more of their hard-earned money compared to the average tax return [1:31] under President Biden over four years the average return is up 24 percent since then [1:39] just in the last year the average tax return is now around thirty four hundred dollars and eleven [1:46] percent increase because President Trump and his leadership decided to focus to focus on [1:53] hard-working Americans who are struggling to make ends meet paycheck to paycheck nearly half the [2:02] country half the returns filed in 2026 claimed either deduction for tipped income overtime earnings [2:11] senior citizens or auto loan interest for major parts of the working families tax cut bill that [2:19] every single person on this dais to the right voted for under President Trump's leadership Americans [2:27] are keeping more of their hard-earned money about three hundred dollars more every month it is necessary [2:35] that Congress continues to put money back in the hands of everyday Americans and that is why it is important [2:42] and I want to be clear here that is why it is important that we confirm Kevin Warsh to be the Federal Reserve Chair the [2:52] Federal Reserve has a clear dual mandate to promote stable prices and maximum employment the policies of the Fed [3:02] therefore directly affect Americans cost of living and their income and when the Fed is successful in fulfilling its dual mandate [3:11] affordability affordability improves with Americans taking home more money and paying less for everyday [3:21] necessities unfortunately in recent years the Fed has faced real challenges there have been questions about its [3:30] decisions its focus and whether it has engaged in issues far outside its jurisdiction under the Biden [3:41] administration the Federal Reserve appeared to move with the political winds raising real concerns about [3:46] politics and weaponizing one of the most powerful weapons we have for good economically the entire Federal [3:54] Reserve system for example under the Biden administration the Fed pushed climate focus initiatives only to [4:03] reverse that climate agenda as soon as President Trump took office when actions appear to shift with changing [4:11] political priorities it can undermine confidence in the independence of this great institution and [4:20] independent Federal Reserve is essential to achieving its mission markets depend on it families depend on it and [4:30] that independence must be protected the American people expect the Federal Reserve to stay focused on the economy not [4:39] not politics today's hearing is an opportunity to refocus the Federal Reserve on its dual mandate to [4:46] increase economic stability and affordability for everyday Americans Kevin Warsh is battle tested and brings the [4:57] necessary experience from his time as a Federal Reserve governor during the Great Recession during his first term as [5:06] governor he helped our economy through the crisis and restored faith in the economy he has seen the [5:13] economy in its darkest days and understands how economic decisions affect job growth our economy and the [5:25] opportunities that we have come to love as Americans we want every citizen in this country to have a chance to live their [5:35] version of the American dream and that means having our private sector economy [5:40] running as strong as possible which means your focus has to be on everyday Americans and not politicians not the [5:52] political wins but on everyday Americans who desperately want to restore their confidence in our [6:02] institutions today this committee will examine the plans Mr. Warsh has for his return to the Fed this time as chair and how he [6:11] plans to lead the institution at a critical moment to deliver lower cost and real relief for working families for folks [6:19] back home in the great state of South Carolina and across the country the goal is simple they want lower costs and more [6:28] opportunities the Federal Reserve plays a key role in bringing prices down and helping wages go up confirming Kevin Warsh will make sure that [6:39] affordability is at the center of our economic agenda Senator Warren is now recognized thank you Mr. Chairman and if I may I just want to start by saying one of our [6:52] members lost a child yesterday and I know our hearts go out to Mark Warner and his family and that that is true on both sides of the aisle that we may disagree on [7:05] policies and we may do so vigorously but when it comes to the safety and security and the health of our families I know we are as one and we are praying for that [7:18] I remember I think it would be appropriate for us to take a few seconds of silence on his behalf 36 years old one thing you don't want to do as a parent thank you [7:38] thank you thank you Mr. Chairman and appreciate all you do so we should not be having this hearing today and here's the context first over the past year President Trump has racked up one economic failure after another and Americans know that [7:57] that consumer sentiment just hit its lowest level on record ever inflation is rising and families are paying more for groceries more for health care more for utilities more for housing all thanks to [8:12] Trump's chaotic tariffs and one big beautiful bill and now his war with Iran is putting American troops in harm's way and further driving up the cost of nearly everything here at home [8:25] second in your testimony you said it's perfectly fine for elected officials to state their views on interest rates but that is not what Donald Trump is doing the president has repeatedly and illegally attempted to take over the Fed his bogus attacks on Governor Lisa Cook and Chair Powell were designed to threaten all the members of the Fed to do Trump's bidding and open more [8:54] more spots for Trump flunkies why try to end the independence of the Fed because Trump's economic failures are causing him political problems and he wants the Fed to use monetary policies to artificially juice the economy in the short term and this is his last chance to do that before the November elections having a sock puppet in charge of the Fed would also give the president access to [9:24] to the Fed's powerful authorities to enrich himself his family and his Wall Street buddies it could mean granting special accounts to his family's crypto company or bailouts to his friends on Wall Street if they get into trouble in other words a Fed under Donald Trump's control creates more opportunities for Trump's corruption third the nominee before us today Kevin Warsh is you need to [9:55] he was uniquely ill suited for the job as Fed chair in our meeting last week we discussed the 2008 financial crash where 8 million people lost their jobs 10 million people lost their homes and millions more lost their life savings [10:13] giant banks however got hundreds of billions of dollars in bailouts Mr. Warsh was a Fed governor from 2006 to 2011 that's before during and after the crash and he said to me that he has no regrets about anything he did [10:32] so let's take a deeper dive into Mr. Warsh's record in the years leading up to the 2008 financial crisis he was an enthusiastic cheerleader for credit default swaps and complex securitizations he dismissed repeated and increasingly urgent concerns from housing advocates across the country regarding subprime mortgages he refused to use the Fed's authorities to address the [11:02] risks that the risks that were building in the financial system and when the crisis hit and the economy blew up Warsh took on the job of Wall Street's personal liaison on the Fed board he was quick to respond to concerns from Wall Street CEOs and he worked tirelessly to arrange multi-billion dollar bailouts for them with nothing for American families no regrets he says no regrets [11:31] he says no regrets after the crash most people on the Fed saw millions of Americans unemployed people had lost their homes and said now might be a good time to lower rates and make the cost of borrowing cheaper for businesses to avoid more layoffs and make it cheaper for Americans who are worried about paying their mortgages or their credit cards but not Mr. Warsh nope he wanted to keep interest rates high [12:00] and he sang the same song for more than a decade even as the economy struggled when the job of Fed chair became available during Trump's first term as president Warsh held on to his high interest rate inflation hawk views and Trump passed him by regretful he soon reversed course and called for the Fed to pause interest rate hikes then once [12:30] Trump left office Mr. Warsh flipped again and was even criticizing the Fed for cutting rates in the fall of 2024 but as soon as Donald Trump became president a second time Warsh reversed himself once more and began shouting from the rooftops about how the Fed should cut interest rates evidently he learned his lesson this time around he sucked up to Donald Trump to snag his [13:00] dream job his dream job Mr. Chairman last week every single Democratic member of this committee asked that you postpone this hearing and instead conduct oversight on the president's role in directing bogus criminal probes into Chair Powell and Governor Cook the Senate should not be aiding and abetting Donald Trump's illegal takeover of the Fed by installing his chosen sock puppet as chair it's an invitation for [13:30] for corruption and for economic catastrophe we have the power to stop it and we should be using that power thank you Mr. Chairman well there you have it I'll just say it is interesting that we're going to hear from Senator Dave McCormick and his introduction of Kevin Warsh was last time unanimously confirmed by the United States Senate unanimously confirmed by the U.S. Senate Dave the floor is yours. [14:06] Thank you Mr. Chairman ranking member Warren distinguished colleagues it's really a great honor to introduce my friend Kevin Warsh and welcome him and Jane here today Kevin has been a friend for many years Winston Churchill observed that for great leaders there comes and I quote a special moment where they are figuratively tapped on the shoulder and offered the chance to do a very special thing [14:42] because a question in my hand he thinks we felt this is it was one who battle fencing the door they could it be easy and he haven't come to do so telaver's the chance Right He told you you have a special indication [14:48] are my organization that it was another [14:59] number of people I'm a [15:01] number seven women who came in there yes wake [15:07] so you [15:10] White [15:10] the [15:13] chair of the Federal Reserve. Now, I'm not going to belabor Kevin's academic and professional [15:19] record. They speak for themselves. Instead, I'd like to tell you about a man who Dina and I worked [15:26] with decades ago and who has been someone I've called a friend for almost 30 years. President [15:33] George W. Bush famously appointed Kevin to the Federal Reserve in 2006 when Kevin was just 35. [15:40] He was the youngest appointed board member in history. But President Bush saw in Kevin what I [15:48] believe you will see in him with your questions today. Wisdom that belied his age now deepened by [15:58] experience. A moral clarity, a moral clarity even in the most turbulent of times. A sharp and [16:08] independent intellect further strengthened by decades immersed in unforgiving global financial [16:15] markets. And a deep, deep, honest understanding of how the decisions made in the marble hallways [16:24] of Washington affect the lives of hardworking Americans. Now, I, I, unlike many on this [16:32] committee, have seen these virtues on display across decades of friendship. I first met Kevin [16:39] in the late 1990s when he and my younger brother were junior associates on Wall Street. And a decade [16:45] later, we served together in the crucible of the global financial crisis. I, as the undersecret of [16:51] Treasury for International Affairs, and Kevin on the Fed board. For nearly two years, we worked hand in [16:57] hand to contain the damage and navigate the country through the crisis. And I know that then Chairman [17:03] Ben Bernanke relied heavily on Kevin during those turbulent times. And I did too. And I've continued to [17:10] seek his counsel regularly in the years since. Now, Kevin came to Washington all those years ago as an [17:17] outsider, an idealistic young man determined to serve his country, one who has succeeded beyond all [17:27] expectations. And he returns today as the ideal candidate to lead the Fed at this most crucial juncture. [17:36] If confirmed, Kevin will inherit a Federal Reserve in need of repair and confronting serious uncertainty, [17:44] an overextended balance sheet, a poor record on inflation, and a weak understanding of the profound [17:54] opportunities offered in today's economy. He is uniquely suited to confront these challenges. He brings a [18:03] reformer's heart. He will shake up a stagnant institution at a time when change is sorely needed. He possesses a deep [18:14] understanding of markets and is trusted by leaders across the financial industry. But, but he equally [18:22] understands the real economy. Born and raised in upstate New York, he knows from personal experience, how the [18:31] actions of the Fed can change the lives of working families. It's no small thing. It's no small thing to [18:38] know firsthand how an increase in gas prices or mortgage rates or an uptick in unemployment affect [18:45] everyday Americans. The Federal Reserve must, must not be ruled by pointy head economists pouring over [18:55] outdated models and reams of market data. It needs a leader. It needs a leader who understands that the Fed's [19:02] mandate of stable prices and maximum unemployment serves a higher purpose, the preservation of the [19:11] American dream. Now, colleagues, Kevin Warsh has lived the American dream. I know in my heart, he will always [19:19] fight to keep that dream alive for all Americans. He is the right man for this pivotal moment. And I urge you, I urge you [19:30] not to get caught up in the politics of the moment and support his speedy confirmation. Thank you, Mr. Chairman. [19:38] Thank you, Senator McCormick. I will now swear in the nominee. Will you please stand and rise, raise your right [19:46] hand? Do you swear that the testimony that you are about to give is the truth, the whole truth, nothing but the [19:52] truth to help you God? Do you agree to appear and testify before any duly constituted committee of the Senate? [19:59] You may sit down. Your written statement will be made part of the record in its entirety. [20:04] Please keep your oral comments to five minutes. Mr. Warsh, you are now recognized. [20:10] Thank you, Mr. Chairman. I appreciate your consideration today. I've known you for quite a [20:15] while, and I certainly appreciate the many courtesies you've given me, not just since the president's [20:20] nomination, but long before. It's an honor to be with you, with Ranking Member Warren, and with the entire [20:26] committee. I'm deeply grateful to President Trump for asking me to take on this public trust, because [20:34] that's what it is, a public trust. The president believes that real economic growth in the U.S. [20:41] and real take-home pay will accelerate. I share the president's confidence in our country and its [20:48] people. America's economic growth potential is rising as we sit here today. I'm also especially [20:56] happy that my wife, Jane, is here. She's been with me for many of the most important moments in my life. [21:02] I'm grateful for her love and her personal accomplishments. I reciprocate that with somewhat [21:09] of my own love, though I'm a little more stoic than she. And about every 20 years, I reintroduce [21:16] her to this committee. She sat behind me 20 years ago, and it was almost 20 years ago to the day, [21:23] and so let me offer today what I said then. Jane, happy anniversary. I'm also thinking of my late [21:32] mom and dad. They were paying great attention to this hearing 20 years ago. They're no longer with [21:39] us, but I was always proud of them and the values they taught me, and I hope they'd be proud of me [21:45] today. We start today with a note of broad agreement, even though we might have heard different narratives [21:52] at the outset of this hearing. This is a time of great consequence for the nation's economy. [21:59] As a former Fed governor and friend or colleague of the last five Fed chiefs, from whom I've learned [22:06] plenty of lessons, I'm particularly alert to the challenges and opportunities confronting the [22:13] institution that I cherish, the Federal Reserve. To the president, to the Congress, the nation, I owe my [22:22] best judgment and my most faithful efforts in serving the mission that you and Congress assigned [22:28] to the Federal Reserve, including full employment and stable prices. The American people are counting [22:35] on the Fed to deliver on its commitments, perhaps now more than ever. The real highlights of my life [22:42] are not on my resume, as Senator McCormick said. They include the individuals with whom I worked and from [22:48] whom I learned. I graduated from high school in upstate New York. I had some exceptional teachers there [22:56] and some brilliant classmates. I've learned we're lucky in life if we start out with good influences [23:03] in learning and in character. A public school education gave me both of these, and I'm grateful. [23:10] I made my way to Stanford and found myself in the company of some of the most highly accomplished [23:15] economists and policymakers. George Shultz, former Secretary of State and Treasury, [23:21] was among the great patriots at the Hoover Institution, who I came to know as a teacher, [23:26] mentor and friend. He passed away right after COVID at age 100, but I still feel him with me. [23:33] I could not have imagined a better formative experience than working from and learning from [23:39] folks like him. I could tell you about all the things I learned, but maybe the most important [23:45] was to be around people completely devoted to the ideas and ideals of our country. Silicon Valley in [23:52] the early 90s, another fitting backdrop for all the things we confront today. I found myself in the [23:58] right place at the right time. The U.S. was at the vanguard of a new era of technological leadership, [24:05] and I just looked out my door to see it. Now, in the last 15 years, I've gained deep experience in [24:11] macro and in markets working with Stan Druckenmiller. He never held a position in government, but is no [24:17] less a patriot. He never got a Ph.D. in economics, but I don't know a finer economic thinker. Without [24:24] their guidance and the guidance of Condi Rice, my friend and I should say my boss at the Hoover [24:30] Institution, I doubt I would be sitting before you today as the president's Fed chairman nominee. But I'm [24:37] certain of one thing. Absent their tutelage, absent their example, I would not be as prepared for the urgent [24:45] mission critical task at hand. In between these bookend experiences, I served quite a while ago as a [24:52] governor at the Federal Reserve at the at the birth, at the onset of the financial crisis. As Senator Warren [25:01] said, our central bank played an indispensable role and we benefited enormously from the credibility that our [25:09] predecessors had built up and passed down to us governors of the Fed at the time. In these unusual [25:16] and exigent circumstances, I saw the Fed and its people at their very best. But I also witnessed an [25:22] institution that was tempted to play a larger role in the economy and society. So let me be very clear. [25:30] Monetary policy independence is essential. Monetary policy makers must act in the nation's interest. [25:38] Their decisions, the product of rigor, deliberation and unclouded decision making. And as Senator Warren [25:45] said, I do not believe that independence of monetary policy is threatened when elected officials state [25:51] their views on rates. Fed independence is up to the Fed. That has three implications. First, Congress is [26:00] tasked with the mission to ensure price stability. Inflation is the Fed's choice. Second, Fed independence is at [26:07] its peak in the conduct of monetary policy. And third, as the chairman said, the Fed must stay in its lane. [26:16] I'm committed to ensuring that the conduct of monetary policy remains strictly independent. Equally committed [26:23] to work with the administration and Congress on non-monetary matters that are part of the Fed's remit. [26:29] And I commit myself to accountability. Finally, I'll just say this, Mr. Chairman. Milton Friedman [26:36] had a phrase that always stayed with me. He always worried about government officials that lured and [26:42] hung around with what he called the tyranny of the status quo. Status quo practices and policies are [26:48] especially harmful when the world is changing this fast. If confirmed as chairman, I will be faithful to [26:55] the Constitution, to the Federal Reserve Act, and to the very best of the Fed's traditions. I believe a [27:01] reform-oriented Fed can make a real difference to the American people. And if confirmed, I will seek [27:07] to create an environment in which the best people do their best work. Candor and goodwill will go a [27:13] long way in pursuing those objectives. And I suspect this hearing, Mr. Chairman, will put us to the test. [27:19] It's a real privilege to be here. Thank you, sir. I will say that we typically stick to a five-minute [27:25] opening comments. I would encourage all of us to stick with our five minutes as it relates to our [27:31] questions and answers. We have full attendance today, and it's going to be really important for [27:36] us to stick as closely to the five minutes as possible. If we go over by much, you'll hear me, [27:43] which is an indication that you're already over. And I'll do my very best to keep us on time. [27:48] Kevin, there are so many questions to talk to you about, to ask you about, to be honest with you. [27:55] And I just want to name a couple of them, and we'll look forward to hearing more on these topics. [28:01] I will not have enough time to delve into some of the most important issues facing our country. [28:05] I'll take two of those issues and focus my time. I'm sure my colleagues on either side will have [28:11] a conversation with you and ask questions about AI. The AI future is going to have massive impact [28:18] on where we go as a nation. It's got a massive impact on your dual mandate as it relates to [28:24] full employment. Our production may go up while our employment stays flat. So this is a really [28:30] important question that at some point we should delve into. I also think that someone should spend [28:35] some time talking about our balance sheet. We have nearly a $7 trillion balance sheet at the [28:41] Federal Reserve. Too much attention has been paid to your balance sheet and not enough attention has [28:47] been paid to the nation's balance sheet. I think it's really important for us to dig into that issue as [28:52] well. Digital assets, the future of finance in the world seems to have a major component of it being [28:59] artificial, being digital assets. The market structure legislation we don't want your comment on, but the [29:05] important role of the blockchain in the future is another really important part of the future of our economy. [29:12] I will spend some time talking about affordability and the importance of the independence of the Fed. [29:21] One of the things I've appreciated about your previous comments is the importance [29:25] that you have placed on the dual mandate, stable prices, which typically comes through the form of [29:31] interest rate changes, as well as promoting maximum employment. I think those two will become more [29:36] challenging in the current environment. One, obviously, the second one being the AI and the [29:41] future of full employment. You've criticized the Federal Reserve for getting too big, [29:47] mismanaging inflation. I'm sure you know the definition of transitory, so I won't ask you, [29:51] but I've got a feeling you know and some of your predecessors did not. Compromising the independence of [29:57] the Fed, I think we should spend more time on finance, less time on climate change, on politics, on [30:05] who is or who's not in charge. I think you would agree on those issues, though I will not ask you. [30:10] I will ask you, however, that under your leadership, how will you steer the Federal Reserve to address [30:17] the real life issues of affordability is my first question, and my second question will be about how [30:24] do you make sure that the Federal Reserve stays out of the lane of external influences? Well, thank you, [30:32] Mr. Chairman. There's probably no more pressing question than the cost of living. We know at the [30:39] Federal Reserve that price stability was an objective that the that you and your colleagues gave to the [30:45] Fed. So when over the course of the last several years, especially after the after COVID, when prices [30:53] went up to the tune of 25 to 35 percent for virtually all deciles of the American people, that's an indication [31:01] that the Fed missed its mark. And we are still dealing with the legacy of the policy errors in 2021 and [31:09] 2022. Once you let inflation take hold in the economy, it's more expensive and harder to bring it down. [31:18] And so the fatal policy error going back four or five years is still a legacy that we're dealing with. [31:24] We need, in my judgment, fundamental policy reforms to fix it. And while it's true that inflation is [31:31] less problematic, meaning the rate of change in prices is less severe than it was some years ago, [31:37] hardworking Americans are no doubt feeling it. I think that means a regime change in the conduct of [31:43] policy. I think that means a different new inflation framework. I look forward to working with my [31:49] colleagues at the Fed, if confirmed, to achieve that. I think it means, as you suggested, using tools [31:55] differently. The Fed has an interest rate tool and a balance sheet tool. My view is the interest rate tool [32:01] gets in the cracks. It's fairer. The balance sheet tool disproportionately helps those with financial [32:07] assets. The interest rate tool hits the entire economy. So we need a new framework, new tools, and I'd [32:13] also say, Mr. Chairman, new communications. I think part of the reason why, after making a mistake in 2021 [32:21] and 22, the mistake was compounded, is the Fed gives its forward guidance. The Fed tells the whole world [32:28] what their dots are going to be, what their forecasts are going to be. Well, the Fed's human. Then they hold [32:34] on to those forecasts longer than they should. I think if the Fed were to wait until it gets into a meeting [32:40] before making a decision, that incremental deliberation can keep the central bank from [32:45] compounding its errors, I think these are big changes that are needed. And if confirmed, I look forward to [32:49] doing it. Thank you very much. Thank you. Member Warren. Thank you, Mr. Chairman. So the Fed has been [32:56] plagued by deeply disturbing ethics scandals in recent years, involving at least six Fed officials. So it's [33:04] critical that the next chair have no financial conflicts, none. You have more than a hundred million [33:11] dollars in investments that you have refused to disclose to ethics officials and to the public. [33:17] So let me ask, do the juggernaut fund or the THSDFS LLC invest in any companies affiliated with [33:28] President Trump or his family, companies that have facilitated money laundering, Chinese-controlled [33:35] companies, or financing vehicles established by Jeffrey Epstein? Senator Warren, thank you. So let me first [33:44] share a point of agreement with you. The Fed has two tools. One is its monetary policy, and the second is [33:52] its credibility. And the scandals that you talked about, the ethics problems you talked about, went to the core [33:58] of the credibility that has hurt the Fed. Could you answer my question, please? I ask. You have a hundred [34:03] million dollars in undisclosed assets. And what I'm asking is, are any of those with this outfit that [34:11] invests in companies affiliated with President Trump or his family, companies that have facilitated [34:19] money laundering, Chinese-controlled companies, or financing vehicles set up by Jeffrey Epstein? It's a [34:24] yes or no question. Senator, I have worked tirelessly with the ethics officials at the Office of [34:29] Government Ethics. Yes, and you have not revealed a hundred million dollars in assets. And have agreed, [34:34] Senator, to sell all of my financial assets, including the Duquesne assets. Are you refusing to tell us [34:42] if you have investments, for example, in vehicles set up to advance Jeffrey Epstein? Is that what you're [34:50] telling us? Senator, what I'm telling you is that those assets that you represent as juggernaut will [34:56] be sold if I'm confirmed before I take office and sign the oath of office. Let me follow up on that. [35:02] Will you at least disclose how you plan to disclose and divest these secret assets? I'm sure you [35:11] understand that the public might question your motives if, for example, billionaire Stanley Druckenmiller, [35:17] who you honored in your opening statement, and who makes a living guessing what the Fed will do next, [35:24] cuts you a massive check for a hundred million dollars as you take the oath of office to become [35:31] the new Federal Reserve Chair. Senator, as you know, it sounds like your fight might not be with me, [35:38] but the Office of Government Ethics. I have come to full agreement with them and have agreed to divest [35:44] all of those assets, especially those that you referenced before I take the oath of office, [35:50] and that is, will you disclose how you divest those assets, or will you just collect a check for [35:57] a hundred million dollars from someone whose whole business is betting on what the Fed will do? [36:03] As I said to the ethics officials at the Federal Reserve and the Office of Government Ethics, [36:07] I'll take that as it always will. So, Donald Trump has made clear that he does not want an independent [36:14] Fed. In fact, he has said, and I quote, anybody that disagrees with me will never be Fed Chairman. [36:21] And he's made clear that you are his sock puppet, saying last week that interest rates will drop, [36:27] quote, when Kevin gets in. Yeah, I think they do. Not when economic conditions change will get lower [36:34] rates. Not when the economy needs it. Nope. He said, when my guy, Kevin Warsh, is in there, [36:40] we'll get the interest rates that I, Donald Trump, wants. So, independence takes courage. Let's check [36:47] out your independence and your courage. We'll start easy. Mr. Warsh, did Donald Trump lose the 2020 [36:53] election? We try to keep politics, if I'm confirmed, out of the Federal Reserve. I'm just asking you a [37:00] factual question. I need to know, I need to measure your independence and your courage. [37:05] Senator, I believe that this body certified that election many years ago. [37:09] That's not the question I'm asking. I'm asking, did Donald Trump lose in 2020? [37:14] And I'm suggesting you in 2020, the Fed made a huge inflation problem and you certified the election. [37:21] So, let me ask you another question. You need to keep politics out of monetary policy. [37:24] In our meeting, you said you would be independent because you're, quote, a tough guy. Those were your [37:29] words. Tough guy. And you will be able to stand up to President Trump. So, let's try it again. [37:35] Name one aspect of President Trump's economic agenda with which you disagree. [37:42] Well, Senator, the Federal Reserve in recent years has wandered outside of its remit, [37:47] wandered into other areas. I'm asking for something you disagree with Donald Trump on. [37:51] If I'm confirmed, the Federal Reserve should stay in its lane. [37:55] Just one. Just one little place where you disagree with Donald Trump. [37:58] Well, I do have a disagreement, actually, Senator, with the President. I think even this morning, [38:04] he said that he thought I was out of central casting. I think central casting, I'd look older, [38:10] gray, or maybe show up here with a cigar of sorts. Quite adorable. But, you know, we need a Fed chair [38:19] who is independent. That's the only way we preserve the independence of the Federal Reserve. If you can't [38:25] answer these questions, you don't have the courage and you don't have the independence. I agree with [38:30] you on independence, Senator. Senator Reynolds. Thank you. Thank you, Mr. Chairman. [38:40] Mr. Warsh, first of all, welcome. And I appreciated the opportunity to visit with you personally [38:46] and in the office. I agree with you. And I think Fed independence is critical. And I think that's an [38:54] item that you and I agree on wholeheartedly. I want to take an opportunity just to kind of perhaps give [39:00] you an opportunity to respond. I know that the ranking member had a number of items that she expressed [39:06] concerns with. I'd like to give you an opportunity to just kind of work this way through. And let me just [39:11] ask you a few questions and I'll allow you to take the time to fully answer the questions. [39:18] As I understand, Mr. Warsh, you worked with the career ethics professionals at the office of [39:24] government ethics and at the Fed to come to an agreement in terms of your dissolution of some [39:31] of the assets that you as a businessman have. Is that correct? [39:35] Yes, Senator, that is correct. I worked with the Fed ethics officials first, answered all of their [39:42] questions. Then with the career professionals, the office of government ethics, answered all of their [39:48] questions. And then they drafted, wrote up an ethics agreement, which is part of the public record. But [39:53] because I agree with Senator Warren on the ethical questions that have been raised over the last [39:59] several years by several people that were members of the FOMC, so that there's no question about my [40:06] independence, no question about the clarity of my financial record. I agreed to divest virtually all of [40:13] my financial assets, the large majority of which will be divested before I raise my right hand and [40:20] sworn into office if confirmed by this body. So I've gone above and beyond, not for any other special [40:27] reason other than the Fed needs to reestablish its credibility because the conduct of policy depends on [40:34] it. So let me just for the record, the agreement which you have signed clearly states that you have [40:43] agreed to divest your assets that are in question within 90 days of confirmation if you have not already [40:51] divested them. That is correct. Yes, Senator. And in fact, the large majority of those assets [40:57] will be divested before I am sworn into office if confirmed. Thank you. The career ethics professionals [41:08] were the ones that basically had sent your signed paperwork to this committee's chief clerk. I really [41:17] question whether or not they would have done that if they did not come to the ethics agreement with you. [41:23] in the first place, correct? Yes, I presume. I presume that's right. We had a very good working [41:28] relationship and I'm happy to be sitting after the divestiture and cash or T-bills or whatever is the [41:35] permitted asset so we can get back to the business of fixing the Fed, reforming an institution that has [41:42] lost its way a bit, that has missed the mark. As Chairman Scott said at the outset, this inflation risk is [41:50] still something that's being talked about around kitchen tables and board rooms. My preferred [41:55] definition of stable prices is a little different than most academics. I believe that price stability [42:02] should be a change in prices such that no one's talking about it. That's an old-fashioned definition, [42:07] but I think it's still valid. The sooner that we can reform the institution with my colleagues, [42:13] if confirmed, the sooner we can ensure price stability and we can have a new set of leaders [42:19] atop the institution with high credible ethical standards to return the Fed to what it should be. [42:28] The independence that both Chairman Scott and Senator Warren mentioned, critically important, [42:33] but independence has to be earned and it's earned by delivering on the promises, the commitments that the [42:39] Fed has made. And as the Fed hasn't delivered on those promises, we shouldn't be surprised that we [42:45] hear politics that are entering the room at the Fed and you get the politics out of it so the Fed can [42:50] focus on its day job, deliver on full employment and stable prices. It's true that people want to see [42:57] stability within the Fed, but is it okay for a Fed governor or a chairman to change their mind on a [43:04] particular policy? It's more than okay. It's essential. Economics is not physics. It's not math. [43:12] Frankly, most of us that ended up in the economics business, we started like I did as a math major. [43:17] It was too hard. So we ended up in economics. In economics, what we need to do is focus the left of [43:24] the decimal point, not to the right of the decimal point. We need to focus on the big things and if [43:29] mistakes are made, central bankers, economic policy makers need to correct them fast. The real [43:35] mistakes, the mistakes that cause inflation be persistent to undermine hardworking Americans [43:41] standard of living and when those mistakes go on. Thank you. Thank you, Mr. Chairman. Yes, [43:46] sir. Senator Reed. Mr. Chairman, before we start the next question, I ask that we have entered into the [43:53] record the U.S. Office of Government Ethics certification, which requires that all nominees [44:01] disclose all of their assets and showing that Mr. Warsh is out of compliance and that he has not met [44:12] the ethics requirements. Without objection, I will note, however, that what has been clearly [44:21] articulated is that he will, according to his agreement with OGE, do what many others have done [44:28] as well within 90 days, be not only in compliance, but to have divested himself from any assets that [44:34] are in question. Mr. Chairman, can I ask, I don't think we've had other nominees who are out of [44:40] compliance and not disclosing at the time they come before the hearing. Not in this committee, that's [44:44] correct. Not in this committee. Before we, here's what we're not going to do. Fair enough. We're not going [44:51] to have two chairmen, for sure. Just asking. Number one. Number two, what we're also not going to do [44:56] is debate what we're putting into the record. Finally, what we are going to do is have a [45:02] conversation about America's economy. Frankly, we all deserve the opportunity to ask our questions. [45:10] We don't get to figure out the answers, but we do get to ask our questions. I hope that we are able [45:17] to continue in that direction. As long as we are, we're going to have a very good hearing. If we're not, [45:21] then I will find a way to help us to expedite getting back on track. Senator Reid. [45:29] Thank you very much, Mr. Chairman, Mr. Walsh. Until you dispose of all the assets you've identified [45:39] to the Office of Government Ethics, you will not be in compliance. Is that correct? [45:48] My understanding is that a signed ethics agreement provides duties and responsibilities on me and duties [45:54] and responsibilities on the government, and that's what the nature of the ethics agreement is. [45:59] You have an agreement that within 90 days you will dispose of all your assets, all your assets. Is [46:06] that correct? Senator, I have an agreement within 90 days so that there is no appearance of anything [46:12] inappropriate, that I would divest all of my assets, the majority of which before sworn in. [46:17] What I've disclosed, Senator, is all the information that is mine to disclose. I've shared all information [46:23] about assets that I control and that I can share, which I did much to the satisfaction of the [46:28] government ethics office. Excuse me. What you've said is that you will take the oath if confirmed [46:33] as chairman with assets that have already been identified as presenting potential conflicts of [46:40] interest. Will you agree to not take the oath until you have fully disposed all the assets that you've [46:48] been identified? Senator, I'll agree to take the oath pursuant to the terms of the ethics agreement that I [46:54] struck with the Office of Government Ethics. I don't think anyone could do more than that other than me. [46:59] I've agreed to divest even more assets that I will have virtually no financial assets. The divestiture [47:07] is totally up to you. You can select what assets you're disposing of, what assets you keep, is that [47:13] correct? And then still be sworn in as chairman. The divestiture is up to the agreement that I struck with the Office of [47:19] Government Ethics. Who makes the decision as to what assets are divested? You or the Office of Government [47:24] assets? Both of us. That's why it's an agreement. Excuse me. I must commend you on the way you can [47:34] circularly go around questions and not answer them. It's a skill. Unfortunately, it's not a good skill for [47:40] the chairman or the Federal Reserve Board. We typically ask questions in respect to get direct, [47:47] faithful answers. You haven't given them to the ranking member and you're not giving it to me. [47:53] So again, you feel you will be compliant if after 90 days you still have a significant number of assets [48:05] that have been identified as presenting conflicts of interest. Is that your view? No, Senator. If I were [48:10] to violate the ethics agreement, I would not be in compliance. If I follow the agreement, I will be. [48:20] Well, that's your position. I think others would differ. When you sell all your assets, [48:33] where are you going to place the proceeds of those sales? I believe that Chairman Powell has placed them [48:40] in sort of funds which are very difficult to individually influence it. Do you propose to do that? [48:48] Yeah, I propose to put them in permissible assets that are as close to cash or treasury bills as [48:54] I possibly can. I haven't selected anything, but it will be as plain vanilla as possible, [48:59] so that there would be no appearance or reality of having any influence. It will be sitting in [49:04] something like cash. Okay. Now, the question of independence is just one that I think will [49:12] dominate these proceedings. This morning, President Trump was asked on CNBC, [49:19] will you be disappointed if your new Fed chair doesn't cut rates right away? And President Trump [49:24] answered, I would. It's very hard to separate President Trump's obsession with rate cuts, his [49:34] attacks on the Federal Reserve, on Chairman Powell particularly, and your nomination. [49:41] So this independence thing seems to have evaporated quite quickly between President Trump's statements [49:48] and your positions. Again, you maintain you'll be independent of President Trump? [49:59] Yes, Senator, I do. Well, President Trump constantly maintains that nobody's independent of him, [50:05] that it's his morality that guides the whole United States government, including the Federal Reserve, [50:10] and that you will be someone who will carry out his wishes. Frankly, do you suspect that he chose [50:18] you because you indicated to him that you want to cut rates? Senator, I don't know the reason for [50:25] the President's choice, but I can tell you what I've been writing about for 15 years and what I said to [50:32] the President, which is... You're going to cut, I'll cut rates if you give me the job. [50:37] No, that's not what I said, Senator. Now, the President, as you might know, much like virtually [50:42] all Presidents I've either known or studied, Presidents tend to be for cutting rates. I think [50:48] the difference is President Trump expresses it quite publicly, without surrogates or subterfuge, [50:53] but Presidents want lower rates. But Fed independence is up to the Fed. Fed leadership [50:59] has to make a decision about what's the right thing to do. No, you're a leader, you're the leader. [51:04] You establish the moral and ethical standards and economic principles of the Fed. And you just [51:13] pass it off to, well, you know, it's not my job, it's everybody's job. That means it's nobody's job. [51:19] Thank you. Senator Tillis. Mr. Chair, before my time starts, [51:26] can I make a parliamentary inquiry? Certainly. I want to make sure that we get this right, [51:31] because I'm not an attorney, but I think it's pretty important to suggest that according to Mr. Warsh, [51:39] he has signed an agreement that is in compliance, provided that he executes the agreement. So we [51:44] should not have into the record that he is before us out of compliance, because you stipulated that what [51:51] Senator Warren said was a first of a kind here, but he is not out of compliance. He has agreement that if he [51:58] executes will be in compliance, that's why he's properly before us. And I just want to make sure [52:03] for the record that that is clear. Yeah, very clear. Let me just say it. I'm going to reiterate [52:08] what you just said, but I was writing it down myself. The Office of Government Ethics has entered [52:13] into an agreement with Kevin Warsh that he has up until 90 days after confirmed to divest of his assets. [52:23] So to non-attorneys here, I heard someone say he's before us out of compliance, and that's why I [52:30] checked with the staff to be absolutely certain he is properly before us. He will be in compliance if [52:36] he executes agreement that addresses the concerns that have been presented by some of my colleagues [52:41] on the other side of the aisle. I just want to confirm for the record that that is in fact accurate. [52:46] So if we're doing a matter here of, is this parliamentary inquiry? Is that what this is? [52:51] I've made a parliamentary inquiry, so I'm not burning my time on something. [52:55] I understand. But I felt like a cheap shot to say [52:57] he's out of compliance when in fact he's not. Then I'd like to ask the other question, and that is, [53:02] have we seen this agreement? Do we have any way to verify that in fact these sales will occur if we [53:10] have no idea what's in them and no one has told? And let's do remember the law for a minute. The Fed, [53:20] unlike other parts of government, do not have a 90-day, you can be out of compliance. [53:27] Fed law is explicit that you cannot own any portion of a financial interest in a bank. [53:36] Mr. President, Mr. Chairman, excuse me if you're interrupting, Senator. [53:40] Now I'm going to let the attorneys take over. [53:42] Are we going to all get extra time here? [53:44] Mr. Chairman, I'd like an extra three minutes. [53:47] All right. [53:48] Mr. Chairman, I just, for the record, and the only reason I say that. [53:52] That was a parliamentary inquiry, so it doesn't count. [53:55] Yeah. [53:55] Okay. [53:56] Mr. Chairman, the reason I mentioned that is because you had stipulated it. I don't think you meant it [54:02] this way, but you as a chair said that this is the first of a kind of someone being out of compliance. [54:08] I don't think you meant that. I wanted to make sure it was clear for the record. [54:11] Well, let me just be very clear again. The career ethics professionals were the ones [54:17] that sent Mr. Warsh's signed paperwork to this committee's chief clerk. They would not have done [54:22] so if they did not come to an ethics agreement with Mr. Warsh. [54:27] Mr. Kennedy, Senator Kennedy does raise a good point. We are going to stick to our timeline, [54:33] and I appreciate you raising the point of how long an inquiry can go on, and that does not buy you [54:40] more time unless, of course, we all decide we want more time, and then I would rule on that, [54:47] and I would rule against it. [54:48] Thank you, Mr. Chair. Mr. Warsh, congratulations. You can't count this as a date with Jane, [54:57] particularly this one. I think probably the first hearing was a little less acrimonious. [55:03] I'm not going to ask you anything. You can take a break and get ready for the bludgeoning on the [55:06] other side. They're going to beat you until you bleed, and then they're going to beat you for bleeding. [55:10] I'm going to talk about what's preventing me from being in a position to vote for you [55:15] until we've spent time together in my office. You have extraordinary credentials. They're [55:21] impeccable. I think the way you're dealing with the the ethics issue is strong. Problem I have is how [55:27] we where we are right now, and we start I start by saying I love your opening statement. I love your [55:34] focus on the independent Fed independence of the Fed. I love the idea of Fed independence with respect to [55:42] achieving the dual mandate, but Fed transparency on so many other things that the Fed does that, [55:46] frankly, we're all frustrated with bank examination supervision being some among them that I think we [55:52] should have more insight into. Mr. Chair, I'd like to submit for the record two executive orders [56:00] under President Trump and one in 2020 and one in 2025 talking about making federal architecture [56:06] beautiful again and focusing on trying to preserve the integrity of old buildings. [56:13] Thank you. Mr. Chair, I will be submitting an analysis, but if we can go to slide two [56:20] and turn it up right. Much has been made about the building project that has Senator or that has [56:29] Chair Powell under investigation. I'm not going to get into the details except to say that I used to work for a [56:36] firm that did audit and compliance. So I'm naturally wired to go back from the ground up and figure out [56:42] what the deal is. Here's what I know. The Martin building has been conflated into this project to [56:48] make it a $4 billion building. Even if you put the Martin building in, it's a $3 billion building. [56:54] The reality is what we're talking about is the Eccles building and the East building for which, [56:59] bring that up higher, Jack. You're a tall guy so people can see it. These are the overruns, [57:04] and these overruns occurred in part because the cost of inputs went up 69 percent since the original [57:10] estimate. Asbestos was identified. Remediation was required. Pylons had to be built underneath the [57:18] building because it turns out they used it as a landfill and they had a water table issue. There [57:24] were a variety of reasons why this building went over budget. As a matter of fact, if we put everybody [57:30] in prison in federal government that had had a budget go over, we'd have to reserve an area roughly [57:36] the size of Texas for a penal colony because of the way government projects work. And the reality [57:43] is the overage of inflation adjusted was about $730 million, the majority of which seems to be [57:49] legitimate. Next slide. Not acceptable, unfortunate, but legitimate. Now, what I've really got a problem [57:59] with and we're talking about Fed independence. By the way, I think you're going to be independent. [58:03] You have to be. You got to convince 11 other people to vote with you, at least the majority. [58:07] It's a consensus organization you try to get the majority to. Most of these votes are 11 to 1. [58:12] So if anybody thinks the president can appoint somebody and you unilaterally can control things, [58:16] you're going to be an unsuccessful chair if history is any guide and you've served under some of the best. [58:22] So I know you're going to do it right. The problem that I have here is that we had some U.S. attorney [58:30] with a dream or assistant U.S. attorney thinking it would be cute to bring Chair Powell under an [58:36] investigation just a few months before the position was going to be open. This happened this year. [58:44] Normal course and speed. Here's how it works at the Fed. February or March, May the 15th, [58:49] the term would have expired. We'd be having this hearing. You'd be getting confirmed. Custom also [58:55] suggests that the sitting chair, even though he has two years left on his term, would have exited. [59:00] But instead we have somebody who thinks a building project that went over by about 700 million dollars [59:07] with a lot of what seemed to be justifications for it, are holding up this whole process. It sounds [59:13] like to me somebody over in the DOJ didn't even check with the boss. The boss said on the same [59:20] night that I said, I can't go forward until this bogus investigation is done. We've said he didn't [59:25] know anything about it. So we've got people in DOJ over in the DC circuit or the DC district doing [59:32] these investigations. We have got to end this investigation. Big DOJ didn't know about it. [59:37] The president didn't know about it. Let's get rid of this investigation. [59:41] So I can support your confirmation. Mr. Warsh, the only thing I've found the least [59:45] bit odd about you is you've never watched an episode of Seinfeld. [59:49] You've spent so much time at being a rock solid economist that you're not even taking time away [59:56] for a little laugh like that. I look forward to supporting your nomination and I look forward [1:00:01] to this investigation being taken down. If the chair wants to have all of our subcommittees start [1:00:07] capital expenditure projects for the agencies that we're overseeing, I think that's a great idea. [1:00:13] And I'd like to be on a committee specifically drilling down on this analysis. If somebody can [1:00:18] prove me wrong, I'd be happy to make a criminal referral. But I don't have the DC circuit tell me [1:00:24] a crime was committed when seven members on this committee said it wasn't, including the chair. [1:00:29] Thank you, Mr. Chair. You're welcome. Only one question. What is Seinfeld? [1:00:36] Senator Van Hollen. Mr. Chairman, thank you. Mr. Warsh, good to see you. Reviewing your record, [1:00:45] I am concerned that your position on interest rates seems to shift with what's politically convenient, [1:00:52] rather than based on sound economic judgment. In the aftermath of the 2008 financial crisis, [1:00:58] the worst recession since the Great Depression, with some of the worst unemployment in our lifetimes, [1:01:05] you are a hawkish voice, expressing concern that the Fed might wait too long to raise rates. [1:01:12] I think you got it wrong then. But now you seem to have swung 180 degrees in the opposite direction [1:01:19] to embrace lower rates, a view that conveniently aligns with the president who nominated you. [1:01:25] You've made this pivot even as today. Prices are too high. I think we all know that. Our economy works [1:01:32] for families when prices are affordable and unemployment is low. That's why price stability [1:01:38] is an important part of the Fed's mandate, right? Senator, yes. And the Fed uses its monetary policy [1:01:46] tools for price stability and full employment. That's the job Congress gave to the Fed. Here's how Ben [1:01:53] Bernanke described how the Fed uses those tools. He said, and I'm quoting, generally, if economic weakness [1:02:02] is the primary concern, the Fed acts to reduce interest rates, which supports the economy. If the economy [1:02:09] is overheating, the Fed can raise interest rates to constrain inflationary pressures, end of quote. So that's a [1:02:18] textbook model of the Fed. Cutting rates supports the economy, but can lead to higher inflation, while [1:02:25] raising rates helps to fight inflation, but can limit growth. Do you agree with Chairman Bernanke that [1:02:32] that's generally how the Fed can use monetary policy to affect the economy? Senator, I do agree [1:02:39] generally with that proposition. But I'll note at a moment like this, the supply side of the economy is [1:02:45] changing dramatically. So the core of what Chairman Bernanke said is a question about what's the [1:02:50] economy's potential. As I said in my opening remarks, I think the economy's potential is growing quite [1:02:55] quickly. And that makes the decision that you tee up to be a difficult one, and one that the Fed's going [1:03:02] to have to dig deep in, in evaluating what's the right policy choice in the upcoming meetings. Well, I want [1:03:08] to I want to push you a little bit on that in a moment. But right now, the Fed has set its main interest [1:03:12] rate at 3.5 to 3.7%. Last December, President Trump told the Wall Street Journal he wanted to cut rates [1:03:21] to 1% and maybe lower than that by the end of this year. So just to better understand how you think [1:03:30] about economics, in the economic model Bernanke laid out, let's say there's an economy with decent [1:03:37] growth and no recession. If the central bank were to cut rates from 3.5 to 1% or lower, a massive cut, [1:03:44] that would typically push prices up, right? Senator, unlike many of my colleagues past and present, [1:03:54] I don't believe in forward guidance. I don't believe that I should be previewing for you what [1:03:59] a future decision might be. I think it's essential that the Fed makes decisions in the room. Mr. Warsh, [1:04:04] I'm not asking you what decision you would make. Obviously, that's going to be up to you. I'm asking [1:04:09] you for the framework in which you think about these things. And it seems a pretty straightforward [1:04:15] question about what would happen if we reduced interest rates by the end of this year to 1% or [1:04:23] less. And under the Bernanke model, and I think almost every economist or most economists would say [1:04:31] that that will drive up prices. And so that's what I'm asking you. Would you agree that that would [1:04:35] likely drive up prices? So, Senator, the Fed has two important monetary policy tools. One is interest [1:04:43] rates and the other is a balance sheet, a balance sheet that we created in the 2008 financial crisis. [1:04:50] Those tools should be working in concert, not across purposes. So it's hard for me to isolate one [1:04:56] variable when we'd have to have a discussion on the other. All right. Let me generally, sorry. [1:05:01] Well, let me let me just say this was a pretty clear question about the framework in which these [1:05:10] decisions are made. I have heard you talk about how AI may change that calculations. I will just say, [1:05:20] and I think you know this, I mean, I have this, you know, the Financial Times pointed out the economists [1:05:25] reject Kevin Warsh's claim that AI, the AI boom will enable rate cuts. And I think find it just [1:05:33] implausible to suggest that by the end of this year, AI would produce such increases in productivity [1:05:43] that it could reduce in a rate cut to below 1%. And you can't tell me that that would very likely [1:05:51] increase prices. So Senator, can I say two things first? Oh, sorry, quickly. Sorry. Monetary policy [1:06:02] center works with long and variable lags, quite famously, if the Fed were to make a decision today [1:06:09] about the conduct of policy, it's likely to find its way to the real economy six, nine or 12 months later. [1:06:15] So it's difficult to judge policy today for an immediate result. And that would be my only concern [1:06:22] about the framing of your question. Thank you, Mr. Chairman. I just in closing, this is what concerns [1:06:28] me is that your views now have sort of flipped to conform with where the president of the United [1:06:34] States is. And that's been a concern many of us have. Thank you, Mr. Chairman. Senator Kennedy. [1:06:38] I want extra time, Mr. Chairman. I know. Consider these five minutes of parliamentary inquiry. [1:06:47] Professor, what's the sock puppet? I heard the reference from Senator Warren. Yeah, what is it? [1:06:54] I'm not sure I know. I think it's that thing you stick your hand in. Yeah, kind of like this. Yes. [1:07:00] What's a human sock puppet? Getting a human sock puppet, somebody will do what somebody else tells [1:07:07] them to do? I think that's what the senator was trying to suggest. I think that was the innuendo. [1:07:12] Are you going to be the president's human sock puppet? Senator, absolutely not. Are you going to be [1:07:18] anybody's human sock puppet? No, I'm honored the president nominated me for the position and I'll [1:07:23] be an independent actor if confirmed as chairman of the Federal Reserve. My friend, Senator Warren, [1:07:30] and she has my friend suggested that, I wrote it down, you will use your power. You might use your power [1:07:37] to bail out your friends if they get in trouble, kind of like President Biden did with Silicon Valley [1:07:44] bank and the signature bank. She didn't say the last part, I just did. Are you going to do that? [1:07:50] No, Senator. Okay. The ethics folks, they've cleared you, but they said you've got to sell some assets. [1:07:59] Is that right? Yes, sir. Okay. And these assets that you have, you can't just hold a yard sale, [1:08:07] can you? No, not for most of them. Okay. So it takes a fair, a reasonable period of time, [1:08:14] right? Yes, sir. And you've promised to sell them, right? I did. And if you don't sell them, [1:08:22] we'll know and the ethics folks will know, right? Yes, I'd be in violation of the ethics agreement if [1:08:27] I refuse to sell them. But you're going to sell them, right? Yes, Senator, I will. Okay. Can we agree [1:08:36] can we agree that politicians have the right to offer you advice about what to do with interest rates? [1:08:43] Senator, we can agree. And it's not something that I would shy away from. I've heard many senators [1:08:50] from this very committee in years past express strong views on interest rates. Okay. Humble central [1:08:55] bankers should be listening and then making their own decisions. Some, but some politicians matter more [1:09:00] than others. And generally speaking, presidents matter, their opinion matter, matters more than say, [1:09:08] a senator. President Trump has offered his opinion about what you ought to do with interest rates. Is [1:09:15] that right? Senator, he has not made his opinion on that a secret to anybody. Yeah. And [1:09:24] every president has that you're aware of. Yes. And they all tend to be in the same direction, [1:09:29] Senator Kennedy. Okay. Now, the problem is, can we agree that your credibility as Fed chairman is the [1:09:37] most important thing you have? It's the most important thing to me. It's the most important [1:09:42] thing to the institution. And it's the most important thing to the successful conduct of policy. [1:09:46] Okay. That's a yes, right? Yes. Okay. The problem is that President Trump has said [1:09:53] he's not going to appoint anybody who wouldn't agree to lower interest rates. Have you agreed with the [1:10:01] president that you're going to lower interest rates? Senator, I'm glad you framed it that way. The [1:10:06] president never asked me to predetermine, commit, fix, decide on any interest rate decision [1:10:15] in any of our discussions, nor would I ever agree to do so. So the president has never sat you down, [1:10:22] looked you in the eye and said, here's the deal, Scooter. I'm going to appoint you, [1:10:28] but you got to agree to lower interest rates. That didn't happen or did happen? The president never [1:10:34] once asked me to commit to any particular interest rate decision, period. And nor would I ever agree [1:10:42] to do so if he had, but he never did. I was honored he nominated me like everyone else in the committee [1:10:48] in the world. I've heard his view on interest rates. It sounded very similar to me to every other [1:10:53] president in economic history that I've studied. Okay. I've got one more question because I'm about [1:11:00] to run out of my parliamentary inquiry time. I've heard your argument the last few months about [1:11:08] artificial intelligence has made us so productive labor, labor so productive that that companies [1:11:18] don't have to raise prices. Therefore, uh, inflation isn't, isn't a problem. Therefore, [1:11:25] rates can be cut. Do you really believe that right now? No, I, that is not how I would characterize the [1:11:31] story on AI. Okay. But you've said what I just said, haven't you? Uh, I have said that this is [1:11:37] the most, uh, disruptive moment in modern economic history in the U S and the world. I've said that [1:11:45] artificial intelligence, AI. Okay. Let me stop you because the chair is going to cut me off. [1:11:51] Here's my worry that a lot, a lot of this stuff about artificial intelligence making us more [1:11:56] productive is a bunch of hype by people who want to sell stock in an IPO. Okay. I'd be careful there. [1:12:03] Thank you, Mr. Chairman. I'll get to my five minutes in a little bit. [1:12:10] You come back about midnight, sir. We'll go ahead and start it all over again. Brand new day, [1:12:15] sir. Brand new day. Thank you for your patience. Senator. Thank you. Cortez. Thank you. Uh, Mr. Warsh, [1:12:22] thank you, uh, for taking the time with me. I appreciate meeting with you. Congratulations on [1:12:27] this nomination and, uh, welcome to all your family, friends who are here. Um, let, let me, um, [1:12:34] talk to you about a couple of things on, it's really around economic theory. And we have talked [1:12:39] a little bit about this when, when we were meeting inflation has been, um, above the Fed's target [1:12:46] for five years. Would you agree with that? Uh, yes, Senator. Yeah. And core PCE inflation has been [1:12:52] running at about 3%, a full point above that Fed target, correct? Yes. And so some Federal Reserve [1:12:58] officials have said that this excess is due to tariffs. Do you agree with that? Uh, Senator, [1:13:06] I don't, I, if I can make two points, um, uh, much as we discussed in your office, I think the data [1:13:13] that's being used to judge inflation is quite imperfect data. And among the projects that the [1:13:20] economics profession, and if I'm confirmed as chairman of the Fed, the Fed needs to do [1:13:25] is to try to use our new understanding and new data sources to see what's really the inflation rate [1:13:31] in the economy. We used to use core PCE core measures. So we'd exclude food and energy [1:13:38] because it was sort of a rough swag as to what was going on. We don't have to do a rough swag anymore. [1:13:43] What I'm most interested in is what's the underlying inflation rate. Not what's the one-time change in [1:13:49] prices because of a change in geopolitics or a change in beef, but what's the underlying [1:13:56] generalized change in prices in the economy. And my broad sense is that these inflation, uh, [1:14:03] risks and the inflation damage the last several years is improving somewhat. It has improved [1:14:08] somewhat in the last year. The measures I prefer are looking at things that are called trimmed averages, [1:14:14] where we take out all of the tail risks, all of the one-off items. And we ask ourselves whether the [1:14:19] generalized change in prices is having second order effects on the economy. Again, they're not where [1:14:24] they should be, but I think that the trend is quite favorable. And these trend averages in the data [1:14:29] that you're looking at now, it's not traditionally the norm that economists would use in this position. [1:14:34] Is that correct? Uh, some of some in economics profession are increasingly looking to these [1:14:39] median type measures, but among the projects I would hope to undertake as one of the first reforms [1:14:45] at the Fed is a data project where we would go off and we would evaluate with the public sector and [1:14:51] the private sector, including the Bureau of Labor Statistics, a survey of a billion prices. And what [1:14:57] I'm really most interested, Senator, is what's the change of that 500 millionth and one price? [1:15:03] Because that's inflation. That's a change in the generalized level. In a market economy, [1:15:08] prices change all the time. And I don't want to be confused by that. I want to know what inflation [1:15:13] really is. And I still think there's some work to do. And, and I respect, listen, I'm listening to you [1:15:18] today and talking with you. I, I respect you truly believe as an, as a economist and a theorist [1:15:23] in this theory and, and, and, and what you are talking to us today about, which is traditionally [1:15:28] not the norm. And many are disagreeing with you on that and publicly disagreeing. And so I understand [1:15:34] that. Um, but I guess the position I have is I hope you're right. But at the end of the day, [1:15:43] my concern is people are suffering right now with high costs and, and we need to address it. And I don't [1:15:48] know how long it's going to take for your economic theory, um, to gain traction or to be proven [1:15:53] that it's going to benefit so many people in this country right now. And here's, here's one other [1:15:58] thing, cause I don't have that much time. And, and this is what is also a concern of mine. So I want [1:16:02] you to address it. Um, earlier you've been on the federal reserve board and you were there during the [1:16:08] financial crisis of 2008. We and I, you and I talked about this. I was the attorney general then it hit [1:16:12] Nevada so hard. Here's what I do know. And, um, at that time, um, in 2006, you attended numerous [1:16:23] meetings where housing experts pleaded with you to stop predatory mortgages. In fact, Gail Burks, [1:16:30] who was the CEO of Nevada's fair housing at that time, who I worked with repeatedly warned fed leadership, [1:16:36] including you about predatory lending practices, such as flipping loans or misinforming seniors about [1:16:42] reverse mortgages. And in 2007, you said, and I quote, subprime mortgages have gotten a bad name [1:16:48] in this environment. And in some cases that's not just, you also said that you don't see any immediate [1:16:54] systemic risk issues among big banks. And you said that at that time. And then just recently, [1:16:59] and this is what I want you to address, uh, Senator Warren has said that you told her you had no regrets [1:17:04] during this tenure. How can we trust that your economic theory when you were wrong then is going to be [1:17:11] the accurate theory we need now to help so many families and businesses that are struggling with [1:17:16] the policies that we're dealing with now? Senator, uh, let me address a few things. The chairman is [1:17:22] going to cut me off, uh, when he must, but I would say this, um, for many years before the global financial [1:17:28] crisis, I warned about the very real risks of Fannie Mae and Freddie Mac blowing up, which they did. [1:17:35] I think that part of the housing market was vulnerable for many years, [1:17:38] and not enough was done about it. Even in spite of my protestations and my urging about GSE reform, [1:17:45] it wasn't done. I think that compounded the financial crisis. Secondly, I think subprime [1:17:51] mortgages then subprime assets then were indicative of prices of almost every financial asset that were [1:17:57] mispriced. What I suggested then, and what I believe now is that some prime mortgages were just [1:18:03] indicative of a set of prices that were incorrect and they all repriced. Just to give one fine [1:18:10] example before I turn to the chairman. Perhaps, perhaps no examples right now. Okay, sorry. Let's [1:18:14] go to Senator. Thank you. I want to give you an opportunity to finish that exchange. Thank you, [1:18:19] Mr. Chairman and, um, Mr. Warsh. I want to welcome you and your family. Um, and I want the committee to [1:18:25] know that I have known Kevin Warsh for 30 years. We first crossed paths back in 1992, shortly after [1:18:33] Kevin graduated from Stanford. We both worked on the White House staff at that point in time. And I [1:18:38] just want to say this, that the man testifying before us today is the same man that I got to know [1:18:44] then. Serious, disciplined, with a true heart for public service. And I want to say this, I've said it [1:18:52] before. Kevin Warsh is the man for the moment. His background, his experience and his discipline are [1:18:59] precisely what we need to bring our economy into its full potential. I'm delighted to see him here [1:19:05] today as we both reinforce competence here at home and do the same thing abroad. And if I think about [1:19:12] Kevin's qualifications, think about the contrast with the nominations that we saw with the last [1:19:19] administration. I think this committee will recall that President Biden nominated a perspective, [1:19:25] federal bank regulator, frankly, a graduate of Moscow State University in Russia, who advocated for [1:19:31] replacing private bank deposits with retail accounts held at the central bank. Those who might [1:19:38] criticize Kevin for his private sector success missed the point. Kevin's experience is not a liability. [1:19:45] It's an asset. It brings a practical understanding in terms of how markets function to bear, [1:19:52] how capital is allocated, and how policy decisions shape the real economy. Mr. Warsh, [1:19:59] how will your experiences in both the public and the private sector shape your governance of the [1:20:04] Fed should you be confirmed? Senator, thank you very much. And thanks for the the kind introduction [1:20:11] for your colleagues on on this panel. Senator Hager and I shared a desk, 91 and 92. So I've known [1:20:18] him for a very long time. I think the my prior experience at the Fed, which some of your colleagues made [1:20:25] reference to, are going to allow me to hit the ground running. This is as consequential a moment [1:20:31] for the U.S. economy and frankly for the institution as at any point since the late 1970s. And so my [1:20:38] experience at the Fed, my understanding of the people, the culture, the governance, and of the things [1:20:44] that are ripe for reform are going to give me a leg up. We don't have a long time to do new studies and [1:20:51] contemplate what reform should be. We have a short window to try to bring inflation back down to where [1:20:58] it should be to ensure price stability. And because AI that Senator Kennedy referenced is so consequential [1:21:06] and AI is quickly becoming at something like escape velocity, it's important to revisit the Fed's [1:21:12] models and see whether this innovation cycle, while it could have over time improvements in the price [1:21:20] level and make the Fed's job on inflation easier. There's a question about what that means for [1:21:25] employment, which is another part of the Fed's mandate. So I think that's part and parcel of what [1:21:30] what my background suggestion and history would suggest. But if I can make one other point, [1:21:38] what the Fed needs is a reform to its frameworks and reforms to its communications. I've seen what the [1:21:45] Fed's done well, and often I'll give them one cheer or two. But now more than ever, [1:21:50] the Federal Reserve needs three cheers. And that's what I hope to deliver. Well, let's stay on this [1:21:54] point, particularly, and you've mentioned this in your commentary, the point of the Fed's mission [1:22:00] creep over the years. If you think about what the Fed has done, they straight into what I would call [1:22:08] politically contentious areas have gone well beyond their core mandate. And we've seen this across the [1:22:12] Federal Reserve System. And what the Fed has done is eroded its credibility as what it should be, [1:22:19] which is an apolitical and independent central bank. In bank regulation and supervision, the Fed's [1:22:24] focused on non-material and often politically charged areas. I'm thinking about climate change policy here. [1:22:29] Elsewhere in the Federal Reserve System, we've seen regional reserve banks use this platform for [1:22:33] promoting very divisive partisan policies. There I'm thinking about DEI, climate policy, even racial [1:22:39] reparations. The Minneapolis Fed even went so far as to publicly lobby for an amendment to a state [1:22:45] constitution on education policy. How far beyond the remit can they get? In the 2020 monetary policy [1:22:52] review, the Fed even sought to redefine its legislative mandate of maximum employment as a broad, quote, [1:22:57] broad and broad-based and inclusive goal, close quote. That's tacitly understood to mean that the [1:23:03] Fed should accept higher inflation to privilege select groups of Americans. And while the Fed undertook this [1:23:09] social engineering, it also financially engineered a massive footprint in our market. [1:23:13] QE provided near unlimited bid for government debt, which, of course, made it easy for us to subsidize more [1:23:20] government debt here, subsidize government financing, and encourage, frankly, what I view as very reckless [1:23:26] federal spending. In each of these examples, we see a clear pattern. The Fed has strayed beyond its core mandate [1:23:32] to encroach upon policy decisions that ought to be left to those of us that are democratically accountable. [1:23:38] Mr. Warsh, the Fed's own actions have eroded its credibility. What do you think should be done to [1:23:43] regain public trust? Senator, robust reform. The Fed can deliver on the mandate that you gave it [1:23:53] if it sticks to its knitting. As it wanders into areas upon which it has neither authority or expertise, [1:23:59] it loses its focus. And I'll just give one example. In 2020, as you reference, when the Federal [1:24:06] Reserve changed its inflation framework in August of 2020, inflation was running at around 1.72%. [1:24:13] And the Fed changed its framework, rewrote in some sense, the remit you gave it, [1:24:19] and they asked for a little more inflation. They ended up with a lot more. And that was the foundation [1:24:25] for the inflation surge that happened in the subsequent years, which we're still living with. [1:24:30] Okay. Thank you, Mr. Warsh. Thank you, Mr. Chairman. Senator Smith. Thank you, Mr. Chair. [1:24:38] Good morning, Mr. Warsh. It's still morning. So let me start with this. I think you have said that you [1:24:45] have confidence that this economy has potential. I think that's fair to say. And you've also said [1:24:51] that this is a time of great consequence for the nation's economy, perhaps one of the most significant [1:24:56] hinge points in a couple of generations. Is that fair to say? Yes, Senator. Thank you. And so I agree [1:25:02] with that. And I actually want to go a bit further, because I think that it seems to me that this [1:25:07] economy is amazing for rich people, people who have a lot of capital. And in fact, we can see in 2025, [1:25:16] billionaire wealth grew three times faster than the average rate of the previous five years. [1:25:22] And wealthy households hold a massive portion of the nation's wealth. And this, I think, is the [1:25:29] tipping point that our economy actually faces right now. And I can tell you that in Minnesota, [1:25:34] a lot of people are telling me that it is harder and harder for them to afford the basics. They [1:25:39] aren't rich. They don't have enough money to pay their bills, to pay their doctor's bills. So I want to [1:25:44] look at this with you for a few minutes. And I want to I want to start with inflation. So last week, [1:25:50] President Trump said that gas prices are, quote, not very high, and quote, we're having some fake [1:25:57] inflation because of the fuel. So understanding what you've been saying about data and measurement [1:26:02] and all of that, let me just ask you, do you think that gas prices going up 20% is fake inflation? [1:26:11] Senator, the gas prices like beef prices, eggs, milk, and the rest, they move. And when they move in the [1:26:17] wrong direction, American people are hurting by it. There's no question about it. That's right. [1:26:21] American people feel it. It doesn't it's not fake to them. It's money that they don't have in their [1:26:25] pocket because gas is up 20%. I think my constituents would say that that inflation is real and not [1:26:32] fake. Okay, so let's look at unemployment. At the State of the Union, the president said, quote, [1:26:38] the economy is the roaring economy, excuse me, this is the quote, the roaring economy is roaring like [1:26:44] never before. So do you agree with that statement? Is that how you see the economy that is roaring like [1:26:51] never roaring before? So, so Senator, if I can clarify two things, one, there's a difference between [1:26:57] the change in prices and inflation, the change in prices happen in a market economy. When inflation moves [1:27:03] up, that's because the Fed had something to do with it. Now on the state of the economy, [1:27:08] I would say that the broad contours of the economy are improving. The potential of the economy, [1:27:13] the real results of the economy are improving, but I think it can improve more. And I think [1:27:18] in the years ahead, I think the economy's potential is strengthening. So, you know, [1:27:23] the reality is that the economic data, understanding what you're saying about economic data being not [1:27:28] imperfect, there was almost zero job growth in 2025. And so that looks to me like not a roaring economy, [1:27:36] it looks like a weak economy, which is what my constituents are telling me back in Minnesota. [1:27:40] Let me go to one last, one last look at this. Around the country, the average cost of home [1:27:48] insurance rose 12% last year. Now in my home state of Minnesota, not a coastal state, premiums rose 34% in 2025. [1:27:58] This is, of course, caused by extreme weather events, hail, floods, tornadoes, hurricanes, climate change. [1:28:05] So is that inflationary? And from in your perspective, is that increase in home insurance, [1:28:11] property and casualty insurance? Isn't that inflation? So Sarah, if I can answer two questions [1:28:16] that I think I heard, and we talked about both of these in your office, we look at the payroll numbers [1:28:22] every month, and we ask ourselves whether it's good or bad. The job you gave to the Federal Reserve [1:28:27] is to ensure we're at maximum sustainable employment. I think broadly speaking, the economy is running [1:28:33] about close to full employment that we never know what the right number is. So if Americans that want [1:28:38] a job can find a job, then by the Fed's metric, we're at full employment. On the question of insurance [1:28:45] premiums and the rest, when I look broadly across the economy, I would say when we look at health care, [1:28:52] when we look at education, we look at housing, those prices have tended to go up more in the less [1:28:59] regulated parts of the economy. We've seen a downward structure, downward change in prices, [1:29:04] and we try to aggregate them the best we can. But so I'm not exactly sure what your point is there, [1:29:10] but I would just say that my point here is that rising home insurance rates caused by increasing [1:29:17] extreme weather events, climate change is another inflationary pressure that people in my state are [1:29:22] dealing with. And this, of course, the reason I'm focusing on this is because I'm worried that [1:29:31] because of the pressure that you are going to be under from the President to lower interest rates, [1:29:38] that this inflationary pressure that my constituents are feeling is going to get worse and not better. [1:29:44] And so I don't have time to ask my last question, but it is literally this. The President has said that [1:29:50] he demands that the next Fed chair will lower interest rates. And I take him at his word at [1:29:57] that. And that is what causes me such grave concern here. Thank you, Mr. Chair. Yes, ma'am. Senator [1:30:03] Lummis. Thank you, Mr. Chairman. Welcome, Mr. Worsen. Congratulations on your nomination. And thanks for [1:30:10] appearing before this committee, both and taking both the positive questions and some of the hostility. I [1:30:18] apologize for my colleagues' behavior when it strays outside of decorum. My first question is [1:30:28] about the balance sheet of the Fed. What is your view about the size of the balance sheet currently? [1:30:37] Thank you, Senator. As we talked about in your office, the Fed balance sheet has played a particularly, [1:30:44] I think, unhelpful role in helping the Fed achieve its dual mandate. The Senator had just mentioned what [1:30:52] she described as the increase for financial assets relative to real assets. Well, part of that is the [1:30:58] Federal Reserve. The Fed is not blameless in that as it's grown the Fed's balance sheet, grown its [1:31:06] imprimatur on the economy, those with financial assets have benefited from it. The reason why I prefer [1:31:13] monetary policy to use interest rates as the dominant force is interest rates affect a far broader cross [1:31:19] section of the economy. Interest rates get in the cracks. If we were to cut rates, then broader number [1:31:25] of people will benefit from it versus quantitative easing, which tends to move through financial assets [1:31:31] first. Half of our fellow Americans don't own any financial assets, so they're wondering what's in it for [1:31:36] them. Broadly speaking, Senator, on the balance sheet, I was involved in 2008 and 2009 in response to the [1:31:44] global financial crisis that Senator Warren referenced, and we used extraordinary measures and created a [1:31:50] bigger balance sheet. But we agreed to do that only in the times of emergencies, only when interest rates [1:31:56] were pinned to zero. The big balance sheet has become an ordinary recurring force and I think has been [1:32:02] quite unhelpful and is part of the reason why the Fed is in the business of politics. Slowly and [1:32:09] deliberatively, I believe we need a smaller central bank balance sheet. It took us 18 years to create [1:32:17] this big balance sheet that's done quite a bit of harm, it strikes me, to the Fed's credibility. Working with [1:32:24] the Treasury Secretary, we're going to have to find our way in which we can take the balance sheet and make [1:32:30] it smaller because a large balance sheet where the Fed owns more outstanding debt than many parts [1:32:37] of the financial markets, that's fiscal policy in disguise. The Fed needs to get out of the fiscal [1:32:42] business, focus on the monetary business, so the Fed can deliver on the remit you gave us. Thanks for [1:32:49] that response because some of us don't appreciate the connection between the size of the Fed's balance [1:32:55] sheet and interest rates. With regard to interest rates, can you tell us a little bit about your [1:33:02] conversations with President Trump about interest rates? Yeah, I don't want to put words in the [1:33:09] President's mouth but I think he has said loudly and clearly his view on interest rates. I don't think [1:33:14] I'm breaking any news here but I can tell you what what I said and what I said the President is what I've [1:33:22] said to this committee and what I've frankly been writing about for more than a decade. Interest rates [1:33:28] are the much better way to be using monetary policy than buying bonds and mortgages, some of which are [1:33:35] issued from the United States Treasury Department. That is a confusion of roles that leads to a set of [1:33:41] mission creep, so interest rates are the dominant tool and interest rates, as I mentioned, get in the cracks. [1:33:47] My broad view on the conduct of policy from here is that too many Fed officials, past and present, [1:33:55] opine in advance about where they think interest rates should be next meeting, next quarter, next year. [1:34:01] I think that's quite unhelpful. As we've heard today from many of your colleagues, we don't know the state [1:34:09] of AI. We can't be certain about the state of geopolitics. The economy is going to change. You need central [1:34:15] bankers that are humble, that are nimble, that are open-minded, that can react when we have good data, [1:34:21] when events strike us. My broad view is that interest rates need to be forward-looking, need to be based [1:34:28] on better data, and we should have a big robust deliberation inside the FOMC. I tend to favor messier [1:34:37] meetings than some where people don't show up with rehearsed scripts, but we can have a good family fight. [1:34:42] If the central bank has that good family fight, I think that they're going to make better decisions. [1:34:48] And if they happen to make mistakes, they'll correct them sooner. So I'm not one for pre-deciding [1:34:54] what interest rates should be. I never said to the president where I think rates should be. [1:35:00] I never committed any such thing, and I wouldn't have even thought about doing so. [1:35:04] Quick yes or no. Do you believe that digital assets should be incorporated into our financial industry [1:35:13] so Americans have new investment opportunities and consumer protections? Senator, digital assets are [1:35:19] already part of the fabric of our financial services industry in the United States. Yes. [1:35:24] Thanks, Mr. Walsh. Senator Warnock. Thank you, Brother Chair. Mr. Walsh, congratulations [1:35:33] on your nomination, and I appreciated our time together in my office a few weeks ago. If confirmed, [1:35:42] you will serve as chair of one of the most powerful economic institutions in the world. Decisions you [1:35:52] make would move markets, affect Americans' retirement savings and ability to buy homes. It would influence the [1:36:01] global economy. You currently serve as a lecturer at Stanford University. If you were to assign, [1:36:13] if Professor Walsh were to assign a letter grade to the American economy today for the average working [1:36:20] family, what grade would you assign? Senator, it was good to meet with you in your office. [1:36:28] You know, in modern academic institutions, they give everybody A's, so it's not a fair comparison. [1:36:36] Especially at elite universities, I know everyone gets perfect grades. Well, what grade would you give [1:36:43] the economy? Well, if I gave a student anything other than an A, the dean would summon me to his office [1:36:48] because I would have hurt his self-image. Well, the Americans that I talk to, particularly in the state of [1:36:54] Georgia, who haven't had the benefit of attending some of these elite institutions, are trying to make their [1:37:05] lives work. They're sitting around their kitchen tables trying to figure out how to put their kids [1:37:13] through school. And regardless of how the markets are doing, consumer confidence is at a record low. [1:37:21] So that's their grade on the economy. Working families are struggling and things are getting worse. [1:37:27] The inflation rate has remained elevated above the Fed's 2% target rate throughout President Trump's [1:37:35] term, despite his promise to lower inflation. The President's war in Iran has spiked energy prices by [1:37:43] 11%. And Americans are paying, on average, nearly $4 a gallon for gas because of the war. We've lost [1:37:54] nearly 90,000 manufacturing jobs since President Trump took office. He promised us a manufacturing boom. [1:38:02] We've lost 90,000 manufacturing jobs. And Americans, already dealing with high prices, paid $1,000 more per [1:38:15] household in 2025 as a direct result of President Trump's illegal tariffs, which he remains committed to [1:38:25] in spite of the Supreme Court decision. He does even better than this practice of, you know, [1:38:36] these institutions. When asked what grade he would give the economy, he said an A. And then he thought [1:38:43] about it and said, no, actually, A plus plus plus. And as I as I thought about his answer, I was wondering, [1:38:50] who was he talking about? Who is it an A plus for? Certainly not the ordinary working class Georgians [1:39:00] that I'm fighting for every single day, maybe the people closest to him. But I'm hard pressed to think [1:39:07] that folks across the state of Georgia who are looking at their grocery bill, looking at their gas bill, [1:39:13] looking at the thousand $1,000 that they've had to pay would would would give the economy [1:39:20] an A plus plus. What are your thoughts? Senator, thank you. If the Fed were to [1:39:29] execute on a series of policy reforms, then I believe the economy can be stronger. I believe [1:39:38] inflation can be lower and I believe real take home pay can be higher. I think the Fed is not blameless [1:39:45] for the divergence you described between those that have financial assets and those that don't. [1:39:51] Had the balance sheet not been brought from the $800 billion level when I showed up at the Fed in 2006, [1:39:58] to an order of magnitude higher, if the Fed had kept a smaller balance sheet the way the Senator I just [1:40:04] talked about a few moments ago. I think interest rates could be lower, inflation could be better, [1:40:11] and the economy could be stronger. You discussed your theory of the case with me in that regard. [1:40:18] But I think you would agree that the recognition, I think implicit in your testimony is the recognition [1:40:25] that this is not a plus plus economy. In your economy, in your testimony, you note the importance of [1:40:31] price stability, and correctly note that inflation means people lose purchasing power, particularly [1:40:37] harming low income folks. But I also noticed your testimony did not really discuss the Fed's other [1:40:43] mandate, and that's to maximize employment. Inflation is critically important, but if you don't have a job, [1:40:51] you're in trouble. Do you view the Fed's mandate for maximizing employment as equally important to its [1:40:57] price stability mandate? And are you concerned about weak job growth numbers? Before the nominee answers [1:41:06] the question, the Senator from the elite university, Morehouse, is out of time. So I appreciate the [1:41:14] question, but we will have the answer submitted for the record. I know you wanted to attend Morehouse [1:41:19] College. I'm sorry. Everybody wants to attend Morehouse, by the way, but I am a Charleston Southern [1:41:24] Buck. I appreciate it. Very happy about that. He couldn't get in to Charleston Southern. It's good [1:41:30] you got in somewhere. This is good. If you can't get into Morehouse, go to Stanford. [1:41:36] Everybody's got jokes up here, so we'll go to Senator Britt. Thank you, Mr. Chairman. Before I get [1:41:42] started, I want to emphasize that transparency and accountability at the Fed are absolutely vital. [1:41:48] The American people need to have trust in our government. We need to have trust in our government [1:41:52] agencies, and that includes transparency and accountability at the Fed. So when we're talking [1:41:57] about billions of dollars being spent on renovations, it's absolutely appropriate for Congress to ask [1:42:05] questions, and it is absolutely appropriate for Congress to get answers. We need to understand where [1:42:11] this substantial amount of money has gone, and we need to ensure that every institution, including the [1:42:18] Fed, is always making decisions that are in the best interest of the American people, and so I urge [1:42:23] everyone involved to make sure that any outstanding questions on this matter come to fruition so that [1:42:29] we can get answers and move on and have a smooth and timely transition and a confirmation process, of [1:42:37] which I want to say congratulations on both your nomination, your willingness to be here today, and I [1:42:43] also want to say that to your family. I think a lot of people miss the fact that when any of us step up to [1:42:49] serve, that it's not just you, you know, it's your family that goes through so much, and so we just want [1:42:55] to say that sacrifice is often overlooked, and we certainly appreciate your family being with you today, [1:43:03] and all of you, and what you're willing to do here. I had a chance to get to know you over the years, [1:43:09] and as many of my Republican colleagues have, and other colleagues, and I think we would all say [1:43:14] you are absolutely the right man for the job at the right time in our country's history, and I am [1:43:20] excited about your leadership at the Fed. We have had an opportunity to talk about a number of issues, [1:43:28] but I know that your integrity and that your commitment to the American people are going to help [1:43:33] restore confidence at the Fed, and it will also ultimately serve our country incredibly well, [1:43:40] so it's not going to be any easy task to return that confidence. We have spoken about needed reforms [1:43:47] at the Fed on the monetary policy side, and also the operational and internal standpoint as well, [1:43:54] and of course your calls for reform aren't baseless. You served at the Fed during one of the most [1:44:01] challenging times. You just referenced it in your previous answer to a question from my colleague [1:44:06] across the aisle. I believe you said there was a balance sheet, $800 billion, when you showed up in [1:44:11] 2006. So talk to me a little bit, speak to me about that, about what you have seen during your time and [1:44:19] tenure at the Fed already, and then what other life experiences you have that you will bring as you [1:44:24] tackle this role. Yeah, so Senator, great to see you again. So the chairman knows, I work with the [1:44:31] center when she was a staffer on this very committee, and I was a young staffer myself. So it's an honor to [1:44:37] be here. And center, as you know, this is a serious responsibility. I'm honored the president nominated [1:44:45] me for it. This is a time of consequence, not just for the country, but for the central bank. [1:44:51] I think the central bank can go back to first principles and improve itself. I see most of the [1:44:57] actions of the Fed come from good intentions. But when you gave the Fed a remit, it wasn't [1:45:04] a general roving remit to do what it thought was right. It was a particular remit to focus on [1:45:09] particular issues and to not wander. And that's the trade off on independence, independence about [1:45:15] the conduct of monetary policy, where we can hear criticisms from others in economics profession, [1:45:21] elected officials, and we should be open minded to them. Listen, I think there's been a considerable [1:45:26] amount of groupthink in the economics profession. And so being open minded to it is important. [1:45:31] But outside of monetary policy, it's important that the central bank [1:45:37] work with the government on areas of overlap. And so I think that's likely to happen going forward. [1:45:42] If you ask Senator Britt about my biggest lessons, my biggest lessons are about how a central bank [1:45:48] should be acting in crisis times versus in normal times. In the crisis of 2008 and the pandemic of the [1:45:55] crisis of 2020. That's when the Fed needs to take extraordinary measures. Going back to the founding [1:46:00] of the Fed in 1913, it was created to respond to shocks. And so there, I think central bankers often [1:46:07] should get the benefit of the doubt. When the world is racing away from it, the real economy is suffering [1:46:13] fast. The central bank should show up with liquidity support. But the job of the central bank is to try to [1:46:19] mitigate those risks in advance, to buy insurance so that we don't go from shock to shock, from boom to [1:46:26] bust. And so my criticism is more about the conduct of monetary policy and regulatory policy in normal [1:46:33] times. And that's the area that our need of reform. We have a window where the economy is improving, but I [1:46:40] would say more improvement is still possible. And it's during this policy that we need to look [1:46:46] introspectively, look fundamentally at reform. So when there is another risk, there is another shock, [1:46:53] the central bank is prepared to address it with less harm to the real economy. Thank you so much. [1:46:58] I am out of time. I look forward to your service to our nation. And I know that we will be in great hands. [1:47:04] Thank you. Thanks, Senator Britt. Senator Kim. Thank you, Chairman. Mr. Warsh, good to see you. [1:47:09] I guess I just wanted to start off by talking about just the state of American families right now. [1:47:16] Nearly 60% of people surveyed say that they're worried about affording the very basics, rent, gas, [1:47:23] groceries, the bills. 60% of Americans say that they cannot handle a $1,000 emergency. 40% of Americans [1:47:31] saying that they can't handle a $400 emergency. I want to ask, do you agree that the American families [1:47:37] are struggling right now with affordability? Senator, as we discussed in your office, [1:47:46] central bankers should not be second guessing what people feel and see in their own lives. [1:47:52] People's experience, lived experiences matter to them. What I can say is the central bank has [1:47:58] some responsibility for the things that you've described and that the legacy of inflation, what [1:48:04] I think is the biggest economic policy error in 40 or 50 years happened just a few years ago. And [1:48:10] we're still living with the with the remnants of it. I think inflation is less problematic than it was [1:48:16] a couple of years ago. But I would not. The problem of affordability continues, though. That sounds right. [1:48:22] I'll be honest with you. When I hear, you know, I heard two months ago, President Trump say, he said, [1:48:27] quote, what word have you not heard over the last two weeks affordability? Because I've won. I've won [1:48:34] affordability. It sounds like you would disagree with that assessment that the fight for affordability [1:48:39] for American families is over. So I think the trend is is going in the right direction. We still have [1:48:45] more work to do. Well, the way I would describe it, Senator, is the cumulative increase in prices [1:48:51] starting in early 2020 till now is between 25 and 35 percent. So I understand what hardworking [1:48:59] Americans say. It's it's still a struggle. That's a legacy of a past policy error. One thing that you [1:49:05] talked about before is about just the real cost that families are facing right now. And I appreciate [1:49:11] that you were pushing back on that comment that the president had about calling the energy prices and [1:49:17] the fuel price increases that we're having fake inflation because right now Americans paid more [1:49:23] than eight point four billion dollars more in gas during the first year, first month of this war. [1:49:29] Fertilizer, 70 percent of respondents to the Farm Bureau survey said that fertilizer is unable to be [1:49:36] afforded right now just given the price increases. Are you concerned that there could be real long term [1:49:41] increase in long term effects of this war in Iran, you know, especially if we're [1:49:47] continuing to see these challenges when it comes to fuel and fertilizer? Senator, if my reform agenda, [1:49:53] if confirmed, stands for anything, it's for the central bank, especially the Fed chairman to stay [1:49:59] in its lane. I know that. But so I wouldn't want to wander outside of it. I'm happy. You're also you're [1:50:03] also charged with forecasting in terms of understanding where our economy is going. So does an impact of [1:50:10] that magnitude rise to something that the Fed should keep an eye on and be concerned about? The Fed should be [1:50:17] have an open mind towards all sorts of data. But the things that central banks can affect [1:50:22] are things that are not one off in nature, but are persistent and find their way into the generalized [1:50:26] price level. And that's something I wanted to I wanted to ask you about that because you talked [1:50:31] about a fundamental policy change when it comes to the Fed. And I guess I wanted to just get a little [1:50:35] bit more clarity on that. You know, Senator Lummis mentioned about the balance sheet and the concern you [1:50:41] have about that. What level do you think the balance should be at? You know, if it's 6.7 trillion now, [1:50:46] where do you think the goal is in your mind? So I haven't fixed a particular number, [1:50:52] but any changes, Senator, in the balance sheet would be part of a public discussion debated rigorously. [1:50:59] And if and when the central bank comes to a judgment about a new balance sheet policy, [1:51:04] which I hope the central bank would, it would be described well in advance. As I mentioned, [1:51:09] it took 18 years to create this balance sheet problem, and we won't be able to fix it in 18 [1:51:14] minutes. And so that's why I think deliberation here is important. But suffice it to say, [1:51:18] it should be smaller and at least as important. It should not be holding long term treasury assets [1:51:24] as if it's the fiscal authority. That's when it gets into politics. I appreciate you saying that [1:51:28] it's important to be able to have that public discussion. I mean, one thing that's come up as I've been [1:51:32] engaged with different experts is concern about rapid reduction. If you are moving in that speed, [1:51:39] it could generate a number of concerns, including upward pressure on long term interest rates. [1:51:43] So I guess I just wanted to check, do you share that concern? You know, as you are thinking about [1:51:48] how to reduce it, do you also understand, though, that there are concerns about rapid reduction and [1:51:53] the speed with which you're trying to go down? Yes, Senator, and that kind of regime change would have [1:51:58] to be deliberate, well orchestrated, well choreographed, and well described so that [1:52:05] unnecessary upset are not done to financial markets as we go to a policy regime change much [1:52:10] more focused on interest rates. With that, I'll yield back. Thank you, sir. Senator Ricketts. [1:52:16] Thank you, Mr. Chairman. Thank you, Mr. Waters. It was great to see you in my office. Thanks for coming by. [1:52:20] I want to continue to talk about inflation because it is something that is incredibly important. [1:52:25] I think you share the view that inflation is a silent tax on American households. Is that accurate? [1:52:33] Senator, it's accurate. It's the most regressive tax that anyone in Washington could come up with. [1:52:39] If you were trying to do the most harm, the least well off among us, inflation would be the way to do [1:52:44] it. Yeah. And my colleagues on the other side of the aisle have been talking about that. And I note, [1:52:50] at least I don't recall that they ever talked about that during the Biden administration, [1:52:55] because it was during the Biden administration that we saw this record inflation, this 40-year-old [1:52:59] high inflation. And yet my Democrat colleagues were silent about it back then. Now they want to talk [1:53:04] about it. But of course, American households were hurting back then as well. Inflation was caused by [1:53:11] President Biden's reckless policies and reckless spending. Let's look at ARPA, a partisan bill that [1:53:18] was passed by the Democrats, which cost taxpayers $1.9 trillion. When ARPA was passed in March of 2021, [1:53:26] inflation was at 2.6%. Inflation quickly accelerated by it was over 5% by May, June and July. And by the [1:53:34] end of the year, December, it was 7%. Does federal government spending have anything to do with [1:53:40] inflation, Mr. Warsh? Senator, as we talked about in your office, my view of inflation is a bit different [1:53:47] from some. I don't think inflation comes about when the economy grows too much or hardworking [1:53:52] Americans get increased in their wages. I think inflation comes about when the government prints [1:53:57] too much, by which I mean the central bank, and broadly speaking, the government spends too much. [1:54:02] And so we're spending too much money, and now we've been cleaning up their mess ever since. [1:54:07] I will also note the Republicans have been taking efforts to reduce the deficit. [1:54:11] I think year-to-day it's down about 10.6% from where it was last year. And this is why it's so [1:54:18] important we get our spending under control. I think you also talked about the balance sheet. [1:54:23] And one of the things about the balance sheet is that I think if I hear you're saying it's too big, [1:54:30] and it benefits people who have financial assets. But if you don't have financial assets, you haven't [1:54:37] seen the benefit of a large balance sheet at the Fed. Is that accurate? Senator, it's broadly accurate. [1:54:44] When the large balance sheet was created in the 2008 financial crisis, the agreement between my [1:54:50] colleagues and I was that we would only use this in an emergency scenario. Because the transmission [1:54:57] mechanism for a large balance sheet goes two ways, through signaling effects and through asset prices. [1:55:03] Now at the time of the financial crisis, financial asset prices were down 60 or 70 percent, [1:55:08] and so it was understandable. Interest rates were at zero. But in the ordinary course, [1:55:13] the central bank, an independent body, should not be adopting a set of policies that have that kind [1:55:19] of distributional consequence. That's why interest rates are a better way to be setting monetary policy. [1:55:24] So if I don't want to put words in your mouth, but just what I hear you saying is, [1:55:28] let's reduce the size of balance sheet because that benefits maybe half the American population. [1:55:34] And then let's focus on interest rates and inflation so we can benefit all Americans. That if we [1:55:40] take interest rates down, that benefits all Americans. You said it gets into the nooks and crannies. [1:55:44] That if we get inflation under control, that is how we benefit all Americans. And the size of the [1:55:48] balance sheet has only benefited some Americans. So what you're really about is trying to change a [1:55:52] policy at the Fed that has really benefited under the last administration, people who have lots of [1:55:58] money, actually not just the last administration, people, the previous administrations. But you also want [1:56:03] to make sure we get off of the inflation. I mean, during the Biden administration, we saw four years [1:56:08] in a row of declining real wages for American households. And what you want to do is get that [1:56:13] inflation under control so that all American households benefit. Is that fair? [1:56:18] That is fair. I'm going to paraphrase former chairman Paul Volcker, where he said something along [1:56:25] the following lines. You would need to have a PhD from an elite institution to believe that inflation [1:56:32] doesn't have something to do with money. Okay, great. Real briefly, I've only got a few seconds [1:56:36] left here, but I'm going to hit upon, switch topics on you real briefly. Chairman Powell, Secretary [1:56:42] Bissette met with leaders of our largest banks recently to talk about advanced AI models like [1:56:46] Mythos from Anthropic to identify banking vulnerabilities. That's apparently very good at [1:56:53] finding those vulnerabilities. When confirmed, what will you do to modernize the Federal Reserve's [1:56:57] internal risk assessments, tabletop, or scenario planning exercises to ensure that we can anticipate [1:57:03] and defend against the type of emerging risks that potentially models like Mythos could present [1:57:08] if used in the wrong hands? I have about 20 seconds to answer that. [1:57:11] 20 seconds. Senator, a lot is the short answer. The 15 second answer beyond that [1:57:18] is the pace of change in these technologies is accelerating. AI, which I think of really is [1:57:25] American ingenuity, gives America a huge head start relative to our competitors around the world. [1:57:31] But it's not without real risks and real challenges, and a forward-looking, reform-oriented central bank [1:57:37] needs to be on the front end of it. Great. Thank you very much. I look forward to your leadership. [1:57:41] Senator Gallego. Thank you, Mr. Chair. How are you? In a 2019 interview with Bloomberg, [1:57:47] you said monetary policy is important not for decision it makes, but for reasons it gives for [1:57:51] the explanations. Mr. Warsh, the Federal Open Market Committees or that the Fed sets U.S. monetary policy [1:57:58] through interest rate decisions at those meetings, do you commit to maintaining the current practice [1:58:03] of holding a meeting at least once every eight weeks, yes or no? Senator, by statute, as we talked [1:58:09] about in your office, I believe the statute requires a minimum of four meetings, but four is not enough, [1:58:15] so having more meetings than that is appropriate, but I have not even begun to look at the meeting [1:58:19] schedules for 2027 and beyond, of course, subject to confirmation. Okay. So then, do you commit to [1:58:25] holding a press conference, at least on the day of the FOMC meetings? Senator, right now, press [1:58:33] conferences are held periodically. If you ask me my true personal opinion, right now, Fed chairs and [1:58:41] other central bankers around the FOMC, they speak quite frequently. There is no lack of transparency, [1:58:47] but I would say this. I think truth-seeking is more important than repetition. Absolutely. If one has a [1:58:53] press conference, one wants to deliver some important news. Perfect. If you follow up on that, [1:58:58] then would you commit to taking questions at those press conferences? If a press conference were held, [1:59:04] I think it would be incumbent to hear what the reporters of the day had in mind. Thank you. I'm [1:59:09] glad, you know, our personal meeting regarding this was very enlightening. Earlier today, you said to [1:59:16] Senator Kennedy that President Trump never demanded you to cut interest rates in your job interview. Is that [1:59:21] your sworn testimony? That is Senator. Okay. Well, someone here is lying then, because it's either [1:59:28] you or President Trump. Because in an interview with the Wall Street Journal of December 12th, [1:59:33] President Trump confirmed that he pressed you on your commitment to support interest rates cuts. [1:59:39] And I quote, during a 45-minute meeting with Warsh on Wednesday at the White House, the President [1:59:45] pressed Warsh on whether he could trust him to support interest rate cuts if he were chosen to lead the [1:59:49] central bank. According to people familiar with the meeting, Trump in the general interview confirmed [1:59:54] that repeating, Mr. Chairman, I'd like to enter for the record, the Wall Street Journal article, December 12th, [2:00:00] Trump says he's leaning towards Warsh or has it to lead the Fed. So, you know, this brings up an issue of [2:00:06] credibility at this point. Who's lying here? Is it you or the President? Because the President confirmed that he did [2:00:11] ask you to cut interest rates? Senator, there's, of course, a third alternative. You cite a couple [2:00:19] of reporters for a leading financial newspaper. I recall reading that story at the time. Did you ask [2:00:25] a correction? I think those reporters either need better sources or better journalist standards. Did you [2:00:31] ask for a correction? There are things in the newspaper, Senator, I see all the time that don't [2:00:36] strike my ears correct. So is in your opinion that the President then is lying when he said he did not [2:00:43] ask you? I can only repeat to you, Senator, what I said to several of your colleagues. So you did not. [2:00:49] You right now are under sworn testimony are saying just to right now that the President of the United [2:00:55] States in that job interview did not ask you to cut interest rates. The President never asked me to [2:01:01] commit to interest rate cuts at any particular meeting over the period of my tenure at the Fed. [2:01:07] He didn't ask for it. He didn't demand it. He didn't require it. And nor would I have ever done so. [2:01:12] So if these reporters come back and say to do another follow up on this and they confirm what [2:01:17] they heard, what will your response be? Well, my response would be what I suggested you a few [2:01:22] moments ago. As I read that story in real time, I remember thinking they either need better journalistic [2:01:28] standards or better sources. So, you know, here's my problem, Mr. Chair and colleagues, you know, [2:01:35] and Mr. Warsh, I think you're incredibly qualified. A lot of us are actually worried about the integrity [2:01:40] of the Federal Reserve. We're worried about what this means for the economic markets. And we're [2:01:44] worried about what this means for inflation. We're worried about your independence. And now we're [2:01:49] hearing direct contradictions, whether or not you were directly asked by the President to cut interest [2:01:54] rates. And you're saying no. And he's saying yes. And I think for a lot of us, there's a question now of [2:02:00] credibility. And I think there's a real reason why many of us are not voting no. As a matter of fact, [2:02:06] until you verbally spoke to Mr. Kennedy and answered his question, he did not ask the President did not [2:02:12] ask you to cut interest rates, this was not going to be brought up. So there's definitely right now [2:02:19] a true question about who is lying here. It's either you or it's the President. I yield back. [2:02:24] Senator, if I might respond. Certainly. Thank you. I take my responsibility to be an independent [2:02:34] leader of the Federal Reserve very seriously, if confirmed by this body. I take the integrity of [2:02:41] the office and my personal integrity very seriously. And I stand by every word I said. The President never [2:02:51] asked me to commit to any such thing, nor would I ever do so. Mr. Banks. No, sir. [2:02:59] Thank you, Mr. Chairman. Governor Warsh, congrats on your nomination. As we spoke about during our [2:03:04] meeting in my office, I strongly support your nomination and look forward to voting for you to [2:03:10] be the next chairman of the Federal Reserve Reserve. And it can't happen soon enough. [2:03:15] One policy area that we strongly agree on is the threat that China poses to America's economy. [2:03:20] In fact, you've written publicly that China is deliberately positioning its financial system [2:03:25] to rival U.S. leadership and actively working to elevate its currency on the global stage. [2:03:31] Can you talk for a minute about how the Federal Reserve reinforces the strength of the U.S. dollar [2:03:37] as the world's reserve currency in the face of that challenge? [2:03:41] Sure. Senator, it's great to see you again. We talked about some of these issues of the G2 rivalry, [2:03:47] the rivalry between the U.S. and China in your office. If confirmed as Chairman of the Federal [2:03:53] Reserve, I will then have to say that it's the Treasury Secretary's business to talk about the dollar. [2:03:59] It's the Fed Chairman's business to talk about interest rates. But I think I can say this quite [2:04:04] comfortably. The dollar is the is the linchpin of the global economy. The United States and the Federal [2:04:13] Reserve is a beneficiary of the strength of the dollar. The U.S. financial system is the most [2:04:20] important financial system in the world. And the central bank's been charged with really important [2:04:25] responsibilities and overseeing it and supervising it. There are risks to the U.S. position in the world, [2:04:31] including economic. The economic statecraft agenda led by Secretary Besant and Secretary Rubio is an [2:04:38] important one. On that, the Fed will play a supporting role in ensuring that the financial [2:04:43] system is as safe as it can be and work with them because it's outside of the conduct of monetary policy [2:04:49] to ensure the U.S. is on its front foot and in a position of strength during this period of [2:04:55] rivalry between the U.S. and another nation around the world. What are some of those? I understand the [2:05:01] role of the Treasury Department versus the Fed. But what are the most important steps that the Fed can take to [2:05:06] reinforce confidence in the U.S. dollar? Deliver stable prices, Senator. Deliver an economy that [2:05:14] improves from here even further, where real take-home pay moves up, where inflation falls, [2:05:23] and the U.S. economic growth potential is the best in the world. I mentioned earlier, Senator, [2:05:28] something that I really do believe. AI is a testament to American ingenuity. The United States is the best [2:05:36] positioned country in the world to take advantage of it so that the U.S. economy, U.S. workers benefit from [2:05:43] it. The U.S. is in a better position than anyone else, but it's filled with challenges, geopolitical [2:05:50] challenges, technology challenges. So the sooner that we can hit the ground running on reform agenda, [2:05:55] the better. You wrote in an op-ed in 2021 in the Wall Street Journal that I recommend everyone reads. [2:06:01] It's one of the reasons that I wholeheartedly support you because it says a lot about you in this op-ed. [2:06:07] But you talked about how the PRC is actively promoting its digital yuan currency with the explicit [2:06:14] goal of creating an alternative payment system that sidesteps U.S. sanctions. You've been very clear that [2:06:21] China's not playing by the rules. China is buying over 80 percent of Iran's sanctioned oil in Chinese [2:06:27] currency through Chinese banks completely outside SWIFT. The Iranian government says it is charging [2:06:34] ships to transit the Strait of Hormuz and collects payments via crypto and Chinese currency. What tools [2:06:41] does the Federal Reserve have to defend the dollar's role as countries route payments through the Chinese [2:06:45] financial systems to do business with Iran and other adversaries? Yes, Senator, thank you. As we talked about [2:06:53] before, monetary policy is independent. But outside of monetary policy, the Federal Reserve can be working [2:07:02] hand in hand with the rest of the government. The Federal Reserve is independent inside of government, [2:07:07] not independent of government. What the U.S. can do with respect to the dollar is have a more robust [2:07:17] payment system. The Fed has a number of payment systems that most financial participants in the world use. [2:07:23] I would say they all are in need of substantial reform. There's a system called FedNow, which some [2:07:29] describe as Fed yesterday. There's a series of new technologies that the Fed needs to oversee and needs [2:07:35] to architect so that the payment system in the U.S. is the safest, most efficient, most capable in the world. [2:07:43] Otherwise, we'll be losing losing to adversaries around the world in being the linchpin of the global economy. [2:07:49] Thank you. Your leadership is so important, and it's important right now. We need you on the job [2:07:55] right now, not later right now. So I look forward to voting for you quickly and seeing you confirmed [2:08:02] and getting you on the job. With that, I yield back. Thank you, sir. Senator Blunt-Rochester. [2:08:06] Thank you, Mr. Chairman and Ranking Member Warren. Also, thank you, Mr. Worf, [2:08:11] for taking the time also to meet with me earlier this week. I share many of the concerns of different [2:08:20] committee members about us kind of putting the cart before the horse. And in one regard, it is the whole [2:08:29] issue of independence of the Fed. And I know you have made commitments both in your testimony and here [2:08:35] today. With us in the process of watching the president try to fire Chairman Powell as well [2:08:45] as Governor Lisa Cook, it really raises a lot of red flags for us. Even Justice Kavanaugh said that [2:08:53] no president has fired a sitting governor in the 112-year history of the Fed, which was structured [2:09:01] to be independent of day-to-day politics and that it would weaken, if not shatter, the independence [2:09:07] of the Federal Reserve. There are a lot of questions here today as well about both ethics and whether or [2:09:13] not all the paperwork is in and even Senator Warren's question about, you know, selling of the assets and [2:09:20] whether they will be transparent is something that's important again to ensure confidence. And so [2:09:26] I shared some of those concerns with you in person when we met, and I share them here for the record. [2:09:32] I did have a question. I want to focus on AI, but I did have a question beforehand that I wanted to [2:09:37] clarify. You mentioned your desire for reform as well as regime change at the Fed. Could you just clarify, [2:09:45] you didn't mean removing the regional bank presidents whose five-year terms were just [2:09:51] re-restated and re-upped in December? Senator, I meant policy regime change. Got it. So for the record, [2:09:58] we're not looking at regime change for those 12 board presidents. I want to jump to AI because it's [2:10:06] probably one of the number one issues that I hear about in my state. I'm former Secretary of Labor in [2:10:11] Delaware. This is something that I asked Chair Powell when he was here as well about. A lot has happened in a year [2:10:18] and one of the things you have characterized this as the most productivity enhancing wave of our [2:10:26] lifetimes past, present, and future. You have described it as structurally disinflationary and [2:10:34] that central bankers must make a bet. I'm in the camp with Senator Kennedy. I'm concerned about us making [2:10:44] a bet on something that we know. You've said it. Chairman Powell said it. We don't have the data [2:10:51] to even understand yet. And so my first question is, what happens for policy if that surge doesn't [2:10:59] materialize as expected? Senator, I enjoyed our discussion. I think the essential elements of a [2:11:10] new policy for the Federal Reserve is to get access to better data and to dig deeper into the [2:11:17] productivity possibilities that can come out of this new investment wave. Today, we call it [2:11:24] artificial intelligence. Two years from now, we're going to call it business capex. And three years from [2:11:29] now, we're going to call it ordinary business. I think it has two important effects on the conduct [2:11:35] of policy. I don't claim to have perfect knowledge of how any of these are going to go. But I do have [2:11:41] an intuition the pace of change is accelerating. I'm sorry, Senator. Go ahead. I was just going to ask, [2:11:47] how much of your view on interest rates depends on those productivity gains showing up quickly? [2:11:54] Yeah, so I think it has two elements. One is the increase in capital expenditures to build data [2:12:01] centers and the rest that will have an effect on demand that will increase demand. My guess is a few [2:12:07] tenths of 1%. But on the supply side of the economy to increase the potential output of the economy, [2:12:14] that could be considerably bigger. We don't know that we can't bank on that. But considerable work needs [2:12:20] to be done by the Federal Reserve in evaluating this productivity wave. As I said before, monetary [2:12:26] policy works with long and variable lags. So you have to make some informed judgments. And unlike other [2:12:32] people in office, if the judgments are wrong, you've got to call the flag on yourself and correct them. [2:12:36] Well, I think there's been a lot of conversation here about concerns that in your record, in your history, [2:12:44] you have been hawkish on inflation rates and keeping them low. And now we're looking at AI. What I don't [2:12:55] want to see is us use AI as an excuse for making good policy. Too much depends on it. Too many families' [2:13:02] lives depend on it. And in our conversation, I also talked about the fact that I know Wall Street is [2:13:07] going to be okay. But who we're concerned about as well is Main Street. Thank you. I yield back. [2:13:12] Thank you, Senator. Senator Kramer, you were recognized. [2:13:17] Thank you, Mr. Chairman. Thank you, Mr. Walsh, for being here. Thanks for stepping in the gap. [2:13:21] Thank you. In fact, I'm a little bit curious as to why you even want to do this. [2:13:28] I'm thinking, I don't know. I think, I don't know. Anyway, congratulations on the choice. [2:13:34] By the way, with regard to independence, real quickly, I find it curious. In fact, I've often [2:13:40] found curious that people expect somebody who's appointed by an elected official has to be confirmed [2:13:48] by a hundred other elected officials would somehow not have a philosophy. That's what I hear sometimes. [2:13:56] It's like, why don't we, speaking of AI, we should just have an AI Fed chairman. That way it'd be [2:14:01] completely neutral, right? Other than the people that put all the information in the algorithms. Anyway, [2:14:08] that said, I think we should not forget that it would be common for a president who believes that [2:14:16] interest rates should be lower to want to nominate somebody who has expressed that maybe interest [2:14:21] rates could be a little lower, as opposed to the quid pro quo that's being accused of today. So [2:14:29] I'm just grateful you're willing to do it. By the way, the other thing about independence that strikes me [2:14:32] with regard to the Fed, do you have any idea how often an interest rate decision by the Fed is a 12 [2:14:40] to 0 or a 10 to 0 vote? Do you have a sense of it? I do, Senator. I'd say over the last 15 years, [2:14:49] decisions have been unanimous or near unanimous. As I said to one of your colleagues earlier, I prefer [2:14:56] clean memos and messier meetings, and there's nothing wrong with the divergence of opinion. These are very [2:15:00] hard calls. Thank you. I don't know when diversity became a bad thing in a room of thinkers, particularly [2:15:09] with staggered terms. The other thing, none of this was in my mind that long ago, but the other thing [2:15:15] that strikes me is you do have a lot of experience. This is your 20th anniversary, or at least your [2:15:21] second anniversary. Have your thoughts changed much or evolved over those 20 years of experience in [2:15:30] various categories, areas, not to mention your research and your intellectual and academic [2:15:35] writings? I mean, have you evolved a little bit? Absolutely. I'll make three points if I can. One [2:15:40] is it is essential for the chair of this organization to be open-minded to new ideas. The world is moving [2:15:47] fast. The mistake that's common in the economics profession, which Secretary Schultz once described to [2:15:54] me when I was telling him that I was thinking about pursuing further studies, he said, it's fine to get a [2:16:00] PhD, but make sure that's not the last day you were learning. Too many people in the profession go [2:16:06] back to what they learned 30 or 40 years ago. We've got to be open-minded. The world's changing and the [2:16:11] facts are changing. To the characterization I heard from some of your colleagues about did my opinions [2:16:18] change? My opinions change when the facts change. When interest rates are at zero and the balance sheet is [2:16:25] growing and the economy is booming. Well, relative to that, I will say I sounded hawkish. In 2018, [2:16:32] when the Federal Reserve pushed to raise rates into a financial market meltdown and economic weakening, [2:16:39] I said that was a mistake. That was dovish. I expect to have a divergence of views based on the facts on [2:16:45] the ground. And if I could just answer one other question you asked about why I want to do this job, [2:16:49] I would say I've lived the American dream. I've been the luckiest, most blessed, fortunate person with [2:16:57] the greatest teachers. I was a kid from upstate New York in public schools and I had an opportunity to [2:17:02] serve after 9-11. I was walking with a friend of mine who happens to be in this room away from a [2:17:09] building near near the site of the tragedy. I was walking up Fifth Avenue and I thought to myself, [2:17:15] what am I doing? And so I committed myself to public service then. I did 10 and a half years of public [2:17:20] service. I've been grateful for 15 years in the private sector where I've been able to practice my [2:17:26] discipline, think anew about things. And the call to service struck again. I'm honored to serve if this [2:17:33] body will confirm me. Excellent. You know, I do find it curious that so many people seem to be hung up on the fact that [2:17:41] you you've been successful even while doing in between bouts of public service, probably a better [2:17:47] way to put it. I'm not wealthy, never have been wealthy, and I'm not sure I have much potential to [2:17:51] be wealthy, but I have nothing against people who are. That said, real quickly, I do want to talk a [2:17:56] little bit about debanking. That hasn't been talked about a whole lot. But speaking of institutions that [2:18:03] are dug in, I think there's a, you know, out of the 22,000 people, there are a lot of them that sort of [2:18:08] still believe that reputational risk should be a factor, that reputational risk could be based on [2:18:15] out of favor industries. Can you give me a sense of how you plan to attack that, if you will? [2:18:21] Politics have no place, not just in monetary policy, but in supervision and regulation. [2:18:26] If central bankers should stand for anything, it's to resist fads, resist trends, [2:18:30] call balls and strikes. That's exactly what I would intend to do. I lean hard. Yes, Mr. Chairman. [2:18:36] Thank you, sir. Senator Alsell Brooks. Thank you. Good afternoon, Mr. Warsh. [2:18:42] And thank you for meeting with me last week. In August of 2025, President Trump tried to fire [2:18:49] Fed Governor Lisa Cook for unsubstantiated allegations widely believed to be politically [2:18:56] motivated. Thankfully, both a federal district court and the district, the DC Circuit Court of Appeals ruled [2:19:02] in favor of Governor Cook, preventing her from being fired while the investigation proceeds. [2:19:08] This is a landmark test for independence. Now, Supreme Court Justice Brett Kavanaugh said, [2:19:15] allowing Cook's firing to go forward would weaken, if not shatter, the independence of the Federal Reserve. [2:19:21] So I would like to ask you, will you commit to defending Governor Cook's tenure as Chairman Powell has done? [2:19:29] Senator, it was a pleasure to meet you in your office and spend time with you. As I said to you then, [2:19:35] I'll repeat here to the broader committee. If I stand for anything, it's the Fed should stay in its lane. [2:19:42] As I understand that matter, it's pending before the United States Supreme Court. I think it's inappropriate [2:19:47] for me to weigh in on that, especially because in the event that I am confirmed, I could be a party to that matter. [2:19:54] Well, I disagree with Mr. Warsh. I disagree with you. This is your future colleague who was confirmed [2:19:59] by both this committee and this Senate to serve her country. Chairman Powell has defended her tenure, [2:20:06] and your answer to this is you will not defend her. Is that correct? [2:20:10] No, Senator. That's not my answer. My answer is there's a pending case before the Supreme Court, [2:20:15] the results of which I think we're going to hear about soon. If confirmed by this body, I will follow [2:20:20] the Constitution, the Supreme Court law, and the best of the Fed's tradition. [2:20:25] Well, let me ask you this then. Do you agree or disagree with Justice Kavanaugh on the Supreme Court, [2:20:31] who said that her firing would weaken, if not shatter, the Fed's independence? Do you agree with [2:20:36] Justice Kavanaugh? So, I took a constitutional law class, but I wouldn't say I'm worthy of being a [2:20:42] Supreme Court justice. What I can say is Fed independence means everything to me, and that's [2:20:49] exactly what I would try to do if I'm confirmed. Well, I'd like to move on to the criminal investigation [2:20:54] of Chairman Powell. The Trump administration could have taken many off-ramps to end what is a [2:21:00] ridiculous exercise. Instead, they have doubled down. U.S. Attorney for the District of Columbia, [2:21:05] Janine Pirro, sent prosecutors to the Fed last week to continue this circus, and they were turned away. [2:21:11] Chairman Powell has said that the administration's investigation is not about any testimony [2:21:16] or the renovations of a building, calling these arguments pretext, and he said that the threat of [2:21:22] criminal charges is a consequence of the Federal Reserve setting interest rates based on its best [2:21:28] assessment of what will serve the public, rather than following the preferences of the President. [2:21:32] So, do you dispute Chairman Powell's assertion that the investigations are pretext for policy [2:21:38] disagreements? Senator, as I said with respect to the other case, this is also pending before the courts. [2:21:44] I have a ton of confidence in the court's ability to make a final resolution. I'd abide by any [2:21:50] judgment of the courts. I want to follow that judgment in the best of the Fed's traditions. [2:21:54] It's difficult. Let me just ask you another question instead. Just a few days ago, [2:21:59] bless his heart, President Trump called Chairman Powell a stubborn, incompetent person who he said [2:22:05] suffers from Trump derangement syndrome. Now, can you say before this committee that you disagree with [2:22:11] this characterization? Yeah, my disagreements with Chairman Powell are about policy, not about [2:22:17] personality or personnel. Okay, let me ask you another question about the President. Now, my colleague [2:22:23] a moment ago said to you that the President, you said the President has never asked you about lowering [2:22:28] interest rates, and you said he never specifically, is the word you use, demanded that you decrease interest [2:22:36] rates. Well, did the President generally suggest this to you as well? You know, in my recitation to [2:22:42] your colleagues, I wasn't trying to be clever. The President never generally or specifically [2:22:48] instructed me, suggested I should commit to any interest rate path whatsoever. Okay, let me go to [2:22:55] another point. So, if the Senate does not confirm you by May 15th, the President may inject [2:23:00] more financial chaos into our economy by illegally attempting to remove Chairman Powell and installing [2:23:06] someone else into your confirmation. Now, the law is quite clear here. If there is a vacancy, [2:23:11] the current chairman continues to serve as chair pro tem until the Senate confirms a replacement. [2:23:18] But the Trump administration is gearing up to fight this assertion, and I expect every financial [2:23:23] leader and reporter is watching your words right now, which can move markets. So, I'd like to give you [2:23:29] an opportunity to reassure them. Do you agree that the law requires the current Fed chair to continue [2:23:35] serving as interim chair while this replacement is confirmed? So, I haven't been advised on that. I [2:23:41] will say this. I was a summer associate for eight weeks at a law firm, and that was the extent of my [2:23:46] legal career. I'm certainly not capable of defining whether the Vacancy Act applies to the Federal Reserve [2:23:52] or not. Thank you. Yes, ma'am. Senator Bernie Marino. Mr. Chairman, thank you for the honor of going last. I [2:24:01] know that's normally reserved for people with much more status than I have, so I appreciate that very [2:24:06] much. Mr. Chairman, I'm going to read something here for a second. Mr. Chairman, it's clear that [2:24:13] Mr. Walsh is tremendously accomplished. He has committed to strong capital standards, effective [2:24:21] supervision, and meaningful market discipline. He knows unequivocally that the Fed must be independent, [2:24:29] not ideological and nonpartisan. And for this reason, I am proud to support his nomination. I wish I had [2:24:36] said those words, but those are the words of Senator Chuck Schumer when he voted to confirm you, in fact, [2:24:43] introduced you. So, I would like to enter that into the record. As they say, there's nothing wrong with [2:24:49] that, but it looks like Democrats used to love you at one point. What changed? The Senator, I don't know. [2:24:55] You didn't catch the Seinfeld reference, so it's just proof that you did not watch the show. All [2:25:00] right. Let me ask you some quick rapid-fire questions. I know people have enjoyed being [2:25:06] here this long, but maybe not others. A lot has been said, and I think it's important, on the plight [2:25:13] of working Americans when it comes to being able to afford the basic elements of what it means to be [2:25:18] somebody here who's successful in the working class. Are working-class Americans better off or worse [2:25:23] off than they were three years ago? The aggregate statistics show improvement, but I do want to [2:25:31] suggest, with better Fed policy, I think the improvement can be stronger. No, no, clearly. [2:25:37] But we're not done, and we have a long way to go. But if you're somebody who's an average working [2:25:42] American today, in 2026, you're better off than you were three years ago, because three years ago, [2:25:49] you were getting demolished by generationally high inflation. Is that true? The trajectory on [2:25:55] inflation is improving, but there's more work to do. And one of the key parts of why I'm supporting you [2:26:01] is because of total and complete focus and understanding that the interest rate tool [2:26:06] is the tool that allows you to help working Americans much more than the balance sheet tool. [2:26:12] Would you agree? Yes, Samir, I do. All right, perfect. Let's move on to central bank digital currencies. [2:26:17] Do you agree that the Federal Reserve has no legal right to issue a central bank digital currency? [2:26:24] Senator, I agree that they don't have the right, and I think it would be a bad policy choice. [2:26:29] So let me just put an exclamation mark on that. Under your chairmanship of the Federal Reserve, [2:26:33] you will not have the Federal Reserve explore in any way move towards a central bank digital currency. [2:26:39] If it's within the power of the chairman of the Federal Reserve, I agree with that statement. [2:26:44] Perfect. That's shipped over to AI. A lot has been said about that. And I worry that some of my [2:26:50] colleagues don't feel that this is quote unquote real or happening as quick as it is. It is happening [2:26:57] insanely fast. In fact, would you agree that it could lead to an employment shock, especially for entry [2:27:05] level white collar jobs? Senator, I agree with you on the pace of the technology revolution. [2:27:12] I've had to update my own priors versus six or 12 months ago, as I've seen the rate of improvement [2:27:17] of the models. Senator, the way I describe it is this. I am more confident that there will be improved [2:27:25] output than I am certain about when the effects of that would be on the labor market. I basically [2:27:31] believe in the following good economic tenet, which is described as the lump of labor fallacy. [2:27:37] And we tend to think in economics, there's only a fixed number of jobs and we've got to fill them [2:27:43] every day possible. The labor force, the structure of the labor market changes. The jobs that will be [2:27:48] created two or three years from now, some of which are unimaginable to us today. But the lag between [2:27:53] the improvement and output and the effect on the labor markets, that's got to be central to the Fed's [2:27:58] thinking given the pace of innovation in this cycle. And this concept of price stability plus [2:28:06] maximum employment, that maximum employment piece is problematic when policymakers open our borders and [2:28:14] let tens of millions of people come into this country illegally. Is that not correct? No, I'm going to [2:28:18] I'm going to let you guys handle immigration policy. I'm going to have plenty on my plate if confirmed. [2:28:23] But adding 10 to 20, 30 million people into the country when you're trying to have make certain [2:28:28] that everybody here has a job is problematic, correct? The central bank takes the labor market [2:28:33] is as it is. And that's a function of policies you and the administration put in place. It's not [2:28:38] our place to be opining on that. Okay. And let me just add one last thing and more to your wife. [2:28:43] How did you get so lucky to have a guy that's so romantic that on Valentine's Day of 26, [2:28:49] at 2006, he brings you to a Senate hearing? I mean, you set a high bar for all of us. [2:28:54] Look, I'm going to ruin the suspense for everybody. You're going to be confirmed. [2:28:57] You're going to be the Federal Reserve Chairman. And most importantly, you're going to do an incredible [2:29:02] job. And I'm honored to be able to have been part of that process. And we'll vote for you resoundingly. [2:29:07] Thank you, Senator. Well, that concludes the question and answer portion of today's hearing. [2:29:13] I'd like to thank our nominee for testifying before the committee today. And thank you for your [2:29:17] willingness to serve our country. For senators, all follow-on questions for the record must be [2:29:23] submitted by tomorrow, April 22, at noon. And for you, the witness, please respond by Thursday, [2:29:32] April 23, 1 p.m., to the written questions you receive in order to facilitate this committee [2:29:38] promptly processing this nomination. When it comes with that, this hearing is adjourned. [2:29:42] Thank you. [2:29:43] Thank you, sir.