The U.S. Senate confirmed Kevin Warsh as a member of the Federal Reserve Board of Governors with a 51-45 vote, bringing him one step closer to replacing Jerome Powell as chair. The final vote for the Fed chair position is expected later this week.
Key Takeaways
The U.S. Senate confirmed Kevin Warsh to the Federal Reserve Board of Governors with a 51-45 vote. This move brings him closer to replacing Jerome Powell as Fed chair, with a final vote expected later this week.
- Senate confirms Warsh for a 14-year term on the Fed board
- Final vote for Fed chair position expected soon
- Warsh's confirmation follows months of uncertainty due to a criminal probe involving outgoing Chair Jerome Powell
- Critics raise concerns about Warsh's ties to Wall Street and potential conflicts of interest
Warsh's confirmation follows months of uncertainty due to a criminal probe involving outgoing Chair Jerome Powell. The Justice Department investigation delayed the confirmation process, although it was dropped in late April and could be restarted if new facts emerge.
Warsh served on the Fed's board from 2006 to 2011 and has developed a reputation as an 'inflation hawk.' He has publicly aligned himself with President Donald Trump's stance that current interest rates are too high. If confirmed as chair, Warsh will replace Jerome Powell, whose term ends Friday.
Critics have raised concerns about Warsh's deep ties to the financial sector and potential conflicts of interest posed by his undisclosed assets. While these assets will reportedly be divested if he becomes chair, some lawmakers question whether this is sufficient to ensure his independence from Wall Street influences. Additionally, there are questions about how Warsh will navigate political pressure from the White House given Trump's history of publicly criticizing and threatening Fed officials who do not align with his policy preferences.
Warsh has promised to safeguard the Fed's power to set interest rates independently. He stated that President Trump 'never asked me to predetermine, fix or decide on any interest rate decision, nor would I ever do so.' The Federal Open-Market committee, which sets rates, will meet again in mid-June.
According to Al Jazeera and CBS News, a single Democrat, John Fetterman of Pennsylvania, cast his vote with the Republican majority to confirm Warsh for a 14-year term. Senator Elizabeth Warren accused Warsh of being a 'sock puppet' for Trump during the Senate Banking Committee confirmation hearings, an assertion he has denied.
Warsh's confirmation comes amid efforts by the Trump administration to exert control over the Fed, including attempting to fire Fed Governor Lisa Cook and supporting a Department of Justice investigation into Powell's management of a building renovation. The DOJ dropped its investigation but could reopen it if new facts emerge. Powell plans to stay on as governor after his term as chair ends in response to legal attacks on the Fed.
According to Reuters, Warsh has indicated plans for 'regime change' at the Fed, including tightening coordination with the Treasury Department and setting a course for a smaller balance sheet. A surge in oil prices since the start of the US-Israel war on Iran has pushed up inflation and pared investor expectations for an interest-rate cut this year.
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