Amna Nawaz:

President Trump's pick to lead the Federal Reserve, Kevin Warsh, was on Capitol Hill today facing a slew of lawmakers questions on his monetary policy and independence from Trump, all that as the president's pressure campaign against current Fed Chair Jerome Powell threatens to freeze Warsh's nomination indefinitely.

Sen. Tim Scott (R-SC):

I will now swear in the nominee.

Amna Nawaz:

At his confirmation hearing for the Fed's top job, Kevin Warsh promised to protect the Central Bank's independence while pledging what he called regime change.

Kevin Warsh, Federal Reserve Chair Nominee:

The sooner that we can reform the institution with my colleagues, if confirmed, the sooner we can ensure price stability, and we can have a new set of leaders atop the institution with high, credible ethical standards to return the Fed to what it should be.

Amna Nawaz:

The former Fed governor criticized monetary policy errors he argued allowed inflation to soar.

Kevin Warsh:

We are still dealing with the legacy of the policy errors in 2021 and 2022. Once you let inflation take hold in the economy, it's more expensive and harder to bring it down.

Amna Nawaz:

But among his biggest challenges today, addressing senators' concerns he could withstand presidential pressure.

Democratic Senator Ruben Gallego,

Sen. Ruben Gallego (D-AZ):

Mr. Warsh, I think you're incredibly qualified. Well, a lot of us are actually worried about the integrity of the Federal Reserve. We're worried about what this means for the economic markets and we're worried about what this means for inflation. We're worried about your independence.

Kevin Warsh:

I take my responsibility to be an independent leader of the Federal Reserve very seriously, if confirmed by this body. I take the integrity of the office and my personal integrity very seriously.

Amna Nawaz:

Warsh's nomination follows a relentless campaign of criticism and threats of firing from President Trump aimed at current Fed Chair Jerome Powell, all while pushing for him to lower interest rates.

Republican Senator John Kennedy,

Sen. John Kennedy (R-LA):

The problem is that President Trump has said he's not going to appoint anybody who wouldn't agree to lower interest rates. Have you agreed with the president that you're going to lower interest rates?

Kevin Warsh:

Senator, I'm glad you framed it that way. The president 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.

Amna Nawaz:

Warsh found support among some Republicans on the panel, like Senator Tim Scott, who argued his previous Fed service during the Great Recession left him battle-tested.

Sen. Tim Scott:

He helped our economy through the crisis and restored faith in the economy. He has seen the economy in its darkest days and understands how economic decisions affect job growth, our economy, and the opportunities that we have come to love as Americans.

Amna Nawaz:

But the president's pick, a former banker and investor whose wife, Jane Lauder, is heir to the Estee Lauder cosmetics fortune, also faced questions about his own personal wealth, reportedly well over $100 million, according to financial disclosure forms, likely making him the wealthiest nominee in Fed history.

Sen. Elizabeth Warren (D-MA):

It's critical that the next chair have no financial conflicts, none.

Amna Nawaz:

Democratic Senator Elizabeth Warren pushed Warsh for more disclosure and an asset divestiture plan.

Sen. Elizabeth Warren:

You have $100 million in undisclosed assets. And what I'm asking is, are any of those with this outfit that invests in companies affiliated with President Trump or his family, companies that have facilitated money laundering, Chinese-controlled companies, or financing vehicles set up by Jeffrey Epstein?

It's a yes-or-no question.

Kevin Warsh:

Senator, I have worked tirelessly with the ethics officials at the Office of Government Ethics.

Sen. Elizabeth Warren:

Yes, and you have not revealed $100 million in assets.

Kevin Warsh:

I'm doing an ethics with them and have agreed, Senator, to sell all of my financial assets.

Sen. Elizabeth Warren:

That's my not my question.

Amna Nawaz:

Complicating Warsh's path, a Department of Justice criminal probe opened under Trump's second term into Jerome Powell's handling of renovations at Fed headquarters. Republican Senator Thom Tillis has said he will block Warsh's confirmation until that investigation is dropped.

Sen. Thom Tillis (R-NC):

We have got to end this investigation. Big DOJ didn't know about it. The president didn't know about it. Let's get rid of this investigation so I can support your confirmation.

Amna Nawaz:

For now, a standoff over Warsh's full Senate confirmation and an uncertain future for the nation's Central Bank.

For more perspective on the Fed and Warsh, I'm joined now by David Wessel. He's director at the Hutchins Center on Fiscal and Monetary Policy at the Brookings Institution.

David, always great to see you.

David Wessel, Brookings Institution:

Good to be here.

Amna Nawaz:

So you watched the hearings. What stood out to you today?

David Wessel, Brookings Institution:

A couple things.

One is, Kevin Warsh did not, despite the president's demands, seem like the guy who's really ready to cut interest rates any time soon. He came off very much as an inflation hawk. He didn't even mention the Fed's mandate to maximum employment in his opening statement.

And the second thing was, he seemed to be performing for an audience of one, Donald Trump. He would not agree that tariffs raised inflation. He would not agree that the president's flippant demand that we cut interest rates to 1 percent would lead to higher prices. He wouldn't comment on the president's persecution of Jay Powell.

He just was determined not to put any space between him and the president.

Amna Nawaz:

I mean, he also said that he'd never heard from the president about pressure to lower interest rates, never committed to doing that. We know that's a big issue for the president, though. If he's confirmed, how do you see him navigating that?

David Wessel:

I think you're right.

I think there are two -- he has two challenges. One is, he has to figure out what's the right thing to do with interest rates. It's a pretty tricky time. If you tell me what's going to happen in the Middle East, it might be clearer.

But I think his real challenge is going to come when the president realizes that Kevin Warsh cannot get the Fed to cut interest rates any time soon, and certainly not to the degree that the president would like. And then, when the president goes after him, as I expect he will, Kevin Warsh will be judged by the Powell standard.

Will he be as resolute and firm in defending the Fed from presidential pressure as Jay Powell was? And that's going to be a very tough test for him to meet.

Amna Nawaz:

He delivered some very blunt messages about regime change, criticizing the policy at the past and decisions made by his potential predecessors. What did you take away from the way he was talking about that?

David Wessel:

Well, this is echoing what he's been saying as he campaigned for the job. It's almost like he's been saying everything's gone to hell at the Fed since I stepped down 15 years ago.

I think he's going to...

Amna Nawaz:

As Fed governor, we should say.

David Wessel:

As Fed governor, yes.

He's going to have to find a way to explain to the staff and the other members of the Fed Policy Committee, like, I think you did a lot of wrong things, but I want you to work with me.

So I think it's all part of the same pattern. Some of it, I don't quite understand the logic of, but he's going to be -- I think he's going to have a hard time demonstrating regime change or a radical shift on an institution which has a lot of inertia and where he's one vote of 12 on the committee.

Amna Nawaz:

We often see these confirmation hearings devolved into clear partisan lines, but there was bipartisan concern and questions about the Fed's independence, how he would maintain that. Did that surprise you?

David Wessel:

No, I think that members of Congress understand that an independent Fed that makes monetary policy decisions based on its own judgments is better for the economy than one that bends to what the White House wants, which is almost always lower interest rates.

I think it was still a pretty partisan hearing. The Democrats said you're a terrible choice and the Republican says you're a great choice. And even Thom Tillis says, as long as the president would drop his investigation of Jay Powell, I would vote for your confirmation.

Amna Nawaz:

On that point, if that DOJ probe is not dropped against Jay Powell, how do you see this process playing out?

David Wessel:

I think that Jay Powell's made clear that he's not leaving until they drop the investigation with finality. So I expect that he's going to be there for a while. It's going to be really interesting to see what happens on May 15, when his term is chairman up.

Jay Powell and the Fed say, Jay Powell becomes the temporary chairman, but the White House has been suggesting that maybe there's some legal opinions that say that they could designate another governor. So I worry that there will be some kind of fight over that, more litigation. And I think that would be unsettling to the public and to the markets.

Amna Nawaz:

We will wait and see what happens next, have you back then to talk about it some more.

David Wessel:

OK.

Amna Nawaz:

David Wessel of the Brookings Institution, thank you so much.

David Wessel:

You're welcome.