Warsh on the hot seat

President Trump may finally be one step closer to kicking Jerome Powell out of the hallowed halls of the Federal Reserve and replacing him with his own pick, Kevin Warsh.

The TLDR on Warsh: He’s a Wall Street veteran who previously served as a Fed governor from 2006 to 2011. Since then, his net worth has skyrocketed to over $100 million, sparking concerns about his conflict of interests if he leads the central bank.

Today, members of the Senate Banking Committee grilled Warsh during his confirmation hearing. They asked about his approach to monetary policy, fealty to President Trump, and of course, picked his brain about the Alix Earle vs Alex Cooper fued AI. Here’s a highlight reel of the juiciest moments:

• Warsh told skeptical Democrats that Trump never “asked me to predetermine, commit, fix, decide on any interest rate decision in any of our discussions, nor would I ever agree to do so.” The senators didn’t look convinced, to put it mildly.
• Senator John Kennedy of Louisiana questioned Warsh about a Wall Street Journal op-ed he penned on AI being a disinflationary force. “That is not how I would characterize the story on AI,” he said. “What I have said is that this is the most disruptive moment in modern economic history in the US and the world.”
• When questioned about his personal fortune, Warsh said he’ll convert his assets into “something like cash.”

Can Warsh take the heat?

Today is just the beginning of what will likely be a chaotic confirmation process. Keep in mind, Senator Thom Tillis (a Republican) has vowed to block Warsh’s confirmation until the Justice Department’s investigation into Powell is dropped. And Powell himself has said that he’ll remain in charge if Warsh isn’t approved as interim Chair, which is sure to garner some commentary from the White House.

No matter who’s in charge, Wall Street still expects rates to be cut as the inflationary pressures of the war in Iran seem set to recede. “Despite the uncertainty surrounding the Fed leadership transition, we believe the US central bank remains on track for further easing later this year,” explained UBS Global Head of Equities Ulrike Hoffmann-Burchardi in a note today.

Senator Kevin Cramer of North Dakota best summarized the confirmation hearing when he told Warsh, “I’m curious as to why you even wanted to do this.” Given all the pressure and perils Warsh will face if confirmed, we were wondering the same thing.—LB