Warsh clears Senate Banking Committee

• Key insight: Sen. Thom Tillis, R-N.C., officially dropped his opposition to Warsh’s nomination with an aye vote, despite ongoing parts of the DOJ investigation against current Fed Chairman Jerome Powell. 
• What’s at stake: Fed independence has been the theme of Warsh’s nomination, with outstanding questions about Warsh’s willingness to lower rates at President Donald Trump’s behest. 
• Forward look: His path to confirmation by the full Senate should be assured, with full Republican support expected on a floor vote. 

WASHINGTON — Kevin Warsh’s nomination for Federal Reserve chairman passed through the Senate Banking Committee on a party-line 13-11 vote. 

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Warsh’s confirmation process should be smooth sailing from here. His nomination will now go before the full Senate, where he’s expected to also receive uniform Republican support. 

The vote also marks the end of Sen. Thom Tillis’, R-N.C., against the Trump administration over Warsh’s nomination. Tillis previously withheld his support over an investigation into current Federal Reserve Chairman Jerome Powell concerning comments Powell made in sworn testimony to Congress regarding ongoing renovations to the central bank’s headquarters in Washington. Tillis said he believes the investigation is unnecessary, while Democratic lawmakers described it as an intrusion on the Fed’s independence and a pretense to remove Powell from his job because he would not support lowering interest rates — a stance that President Donald Trump has repeatedly espoused. 

The DOJ said it would move to drop its investigation last week, although it will continue on with an appeal into a D.C. court’s quashing of the DOJ’s subpoenas. 

“It’s no secret that the reason that Mr. Warsh’s nomination could have been held up is because of my concern with the investigation,” Tillis said ahead of the committee vote Wednesday. “I’ve got confidence that this investigation is over.”

Committee Democrats, meanwhile, signaled continued uniform opposition to Warsh’s nomination, saying that the DOJ case is not likely done. 

“I understand wanting to believe that there is finally an end to the President’s demands to take over the Fed, but no one is fooled,” said Senate Banking Committee ranking member Elizabeth Warren of Massachusetts. “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.” 

Sen. Raphael Warnock, D-Ga., said that the central bank’s independence is and continues to be eroded by the administration’s efforts to remove Fed Gov. Lisa Cook and Trump’s aggressive push for lower rates, even as inflation appears to be on the rise. 

“It is a nomination that has been tainted by the real and persistent threats that President Trump has made to members of the Federal Reserve Board of Governors, the independence of the Fed is foundational to our system,” Warnock said. “This is not normal. In any effort to characterize it as such, is blatantly false. We are not dealing with business as usual.”

Warsh has promised to usher in a more retrained Fed as chairman, limiting forward guidance from Fed governors and shrinking the central bank’s balance sheet. While he didn’t promise to lower interest rates, he suggested at his confirmation hearing that he’d be open to revisiting the way that the Fed considers data, and would consider artificial intelligence as a disinflationary trend.