Senate Committee Advances Kevin Warsh Nomination as Fed Chair Amid Controversy

The Senate Banking Committee voted along party lines on Wednesday to advance President Trump’s nominee, Kevin Warsh, for chair of the Federal Reserve, moving him closer to succeeding Jerome Powell when his term ends next month. The committee approved Warsh’s nomination by a 13-11 vote, with all Republicans supporting and Democrats opposing. The nomination now heads to the full Senate, where a simple majority is needed for confirmation, with a vote expected the week of May 11.

Senator Tim Scott, chair of the committee, praised Warsh’s experience, saying, “Kevin Warsh’s leadership is absolutely essential now at the Federal Reserve than ever before. Frankly, his time as a former governor of the Federal Reserve during the crisis makes him battle-tested and ready to serve, and not only serve, but to lead.”

Warsh, who served as a Federal Reserve governor from 2006 to 2011, has been critical of the Fed’s large balance sheet and has advocated for changes in the central bank’s approach. During his confirmation hearing, he pledged to maintain independence in monetary policy decisions, stating, “The president never asked me to predetermine, fix or decide on any interest rate decision, nor would I ever do so.”

Despite the committee’s approval, the nomination process faced hurdles. Senator Thom Tillis, a Republican, initially blocked Warsh’s nomination pending the conclusion of a Justice Department investigation into Powell related to Federal Reserve building renovations. However, after the U.S. Attorney for the District of Columbia announced the probe would end, Tillis expressed readiness to advance Warsh’s nomination.

On the same day as the committee vote, current Fed Chair Jerome Powell announced he would remain on the Federal Reserve Board as a governor after his chairmanship ends on May 15. Powell made this decision following the Federal Open Market Committee meeting, where officials voted to hold interest rates steady. He cited ongoing investigations and recent political pressures as reasons for staying on the board, stating, “The things that have happened really in the last three months have, I think, left me no choice but to stay until I see them through at least that long.”

Powell’s decision to remain on the board is notable, as he is the first Fed Chair in 78 years to do so. Experts suggest his continued presence could influence the board’s dynamics, potentially diluting Warsh’s impact as chair. Richard C. Hockett, a Cornell Law professor, noted that Powell carries “immense ‘persuasive authority’ on the Board, much more than the new chair.”

Democrats and some economic experts have expressed concern that Warsh’s nomination and Trump’s attempts to influence the Fed threaten the institution’s independence. Senator Elizabeth Warren criticized what she called “Trump’s illegal attempt to take over the Fed through bogus criminal investigations via a politicized Justice Department,” and warned that “Trump is still going after control of the Fed and he is keeping the threat of bogus criminal charges alive until he gets what he wants.”

Warsh’s policy positions align with Trump’s calls for lower interest rates, though his past as a rate hawk has raised questions about potential shifts in stance. With 12 voting members on the Federal Reserve Board, most not appointed by Trump, Warsh would not have unilateral control over rate decisions. The Senate vote on his confirmation will determine whether he becomes the 17th chair of the Federal Reserve since its establishment in 1913.