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The Situation Room

Nomination Hearing for Trump's Pick as Fed Chairman; Warsh: Fed Needs "Regime Change in the Conduct of Policy"; Warsh: "Independence has to be Earned". Aired 10:30-11a ET

Aired April 21, 2026 - 10:30   ET

THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.

[10:30:00]

KEVIN WARSH, FEDERAL RESERVE CHAIR NOMINEE: And we benefited enormously from the credibility that our predecessors had built up and passed down to us, governors of the Fed at the time. In these unusual and exigent circumstances, I saw the Fed and its people at their very best. But I also witnessed an institution that was tempted to play a larger role in the economy and society.

So, let me be very clear, monetary policy independence is essential. Monetary policymakers must act in the nation's interest. Their decision is the product of rigor, deliberation, and unclouded decision-making. And as Senator Warren said, I do not believe that independence of monetary policy is threatened when elected officials state their views on rates. Fed independence is up to the Fed. That has three implications.

First, Congress is tasked with the mission to ensure price stability. Inflation is the Fed's choice. Second, Fed independence is at its peak in the conduct of monetary policy. And third, as the Chairman said, the Fed must stay in its lane. I'm committed to ensuring that the conduct of monetary policy remains strictly independent. Equally committed to work with the administration and Congress on non-monetary matters that are the Fed's remit. And I commit myself to accountability.

Finally, I'll just say this, Mr. Chairman. Milton Friedman had a phrase that always stayed with me. He always worried about government officials that lured and hung around with what he called the tyranny of the status quo. Status quo practices and policies are especially harmful when the world is changing this fast. If confirmed as Chairman, I will be faithful to the Constitution, to the Federal Reserve Act, and to the very best of the Fed's traditions.

I believe a reform-oriented Fed can make a real difference to the American people. And if confirmed, I will seek to create an environment in which the best people do their best work. Candor and goodwill will go a long way in pursuing those objectives. And I suspect this hearing, Mr. Chairman, will put us to the test. It's a real privilege to be here.

SEN. TIM SCOTT (R-SC), CHAIRMAN, BANKING, HOUSING AND URBAN AFFAIRS COMMITTEE: Thank you, sir. I will say that we typically stick to a five-minute opening comments. I would encourage all of us to stick with our five minutes as it relates to our questions and answers. We have full attendance today, and it's going to be really important for us to stick as closely to the five minutes as possible. If we go over by much, you'll hear me, which is an indication that you're already over. And I'll do my very best to keep us on time.

Kevin, there are so many questions to talk to you about, to ask you about, to be honest with you. And I just want to name a couple of them. And we'll look forward to hearing more on these topics. I will not have enough time to delve into some of the most important issues facing our country. I'll take two of those issues and focus my time. I'm sure my colleagues on either side will have a conversation with you and ask questions about A.I.

The A.I. future is going to have massive impact on where we go as a nation. It's got a massive impact on your dual mandate as it relates to full employment. Our production may go up while our employment stays flat. So, this is a really important question that at some point we should delve into.

I also think that someone should spend some time talking about our balance sheet. We have nearly a $7 trillion balance sheet at the Federal Reserve. Too much attention has been paid to your balance sheet, and not enough attention has been paid to the nation's balance sheet. And it's really important for us to dig into that issue as well. Digital assets, the future of finance in the world seems to have a major component of being artificial, being digital assets, the market structure legislation we don't want your comment on. But the important role of the blockchain in the future is another really important part of the future of our economy.

I will spend some time talking about affordability and the importance of the independence of the Fed. One of the things I've appreciated about your previous comments is the importance that you have placed on the dual mandate, stable prices, which typically comes through the form of interest rate changes, as well as promoting maximum employment. I think those two will become more challenging in the current environment. One, obviously, the second one being the A.I. and the future of full employment.

You've criticized the Federal Reserve for getting too big, mismanaging inflation. I'm sure you know the definition of transitory, so I won't ask you, but I've got a feeling you know it. Some of your predecessors did not. Compromising the independence of the Fed, I think we should spend more time on finance, less time on climate change, on politics, on who is or who's not in charge. I think you would agree on those issues, though I will not ask you.

[10:35:00]

I will ask you, however, that under your leadership, how will you steer the Federal Reserve to address the real-life issues of affordability is my first question. And my second question will be, how do you make sure that the Federal Reserve stays out of the lane of external influences?

WARSH: Well, thank you, Mr. Chairman. There's probably no more pressing question than the cost of living. We know at the Federal Reserve that price stability was an objective that you and your colleagues gave to the Fed. So, when over the course of the last several years, especially after COVID, when prices went up to the tune of 25 to 35 percent for virtually all deciles of the American people, that's an indication that the Fed missed its mark. And 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. And so, the fatal policy error going back four or five years is still a legacy that we're dealing with. We need, in my judgment, fundamental policy reforms to fix it.

And while it's true that inflation is less problematic, meaning the rate of change in prices is less severe than it was some years ago, hardworking Americans are no doubt feeling it. I think that means a regime change in the conduct of policy. I think that means a different, new inflation framework.

I look forward to working with my colleagues at the Fed, if confirmed, to achieve that. I think it means, as you suggested, using tools differently. The Fed has an interest rate tool and a balance sheet tool. My view is the interest rate tool gets in the cracks. It's fairer. The balance sheet tool disproportionately helps those with financial assets. The interest rate tool hits the entire economy. So, we need a new framework, new tools, and I'd also say, Mr. Chairman, new communications.

I think part of the reason why, after making a mistake in 2021 and 2022, the mistake was compounded, is the Fed gives its forward guidance. The Fed tells the whole world what their dots are going to be, what their forecasts are going to be. Well, the Fed's human. Then they hold on to those forecasts longer than they should. I think if the Fed were to wait until it gets into a meeting before making a decision, that incremental deliberation can keep the central bank from compounding its errors. I think these are big changes that are needed, and if confirmed, I look forward to doing it.

SCOTT: Thank you very much. Ranking Member Warren.

SEN. ELIZABETH WARREN (D-MA), RANKING MEMBER, BANKING, HOUSING AND URBAN AFFAIRS COMMITTEE: Thank you, Mr. Chairman. So, the Fed has been plagued by deeply disturbing ethics scandals in recent years, involving at least six Fed officials. So, it's critical that the next chair have no financial conflicts, none.

You have more than a hundred million dollars in investments that you have refused to disclose to ethics officials and to the public. So, let me ask, do the juggernaut fund or the THSDFS LLC invest in any companies affiliated with President Trump or his family, companies that have facilitated money laundering, Chinese controlled companies, or financing vehicles established by Jeffrey Epstein?

WARSH: Senator Warren, thank you. So, let me first share a point of agreement with you. The Fed has two tools. One is its monetary policy, and the second is its credibility. And the scandals that you talked about, the ethics problems you talked about --

WARREN: I appreciate that. But --

WARSH: -- went to the core of the credibility that has hurt the Fed.

WARREN: Could you answer my question, please? I ask. You have a hundred million dollars 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.

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

WARREN: Yes. And you have not --

WARSH: Come to an ethics agreement with them and have agreed, Senator, to sell all of my financial assets --

WARREN: That's not my question.

WARSH: -- including the Duquesne assets.

WARREN: Mr. Warsh, are you refusing to tell us if you have investments, for example, in vehicles set up to advance Jeffrey Epstein? Is that what you're telling us? You just won't tell us?

WARSH: Senator, what I'm telling you is that those assets that you represent at Juggernaut will be sold, if I'm confirmed, before I take office and sign the oath of office.

WARREN: OK. Let me follow up on that. Will you at least disclose how you plan to disclose and divest these secret assets?

[10:40:00]

I'm sure you understand that the public might question your motives if, for example, billionaire Stanley Druckenmiller, who you honored in your opening statement, and who makes a living guessing what the Fed will do next, cuts you a massive check for $100 million as you take the oath of office to become the new Federal Reserve Chair.

WARSH: Senator, as you know, it sounds like your fight might not be with me but the Office of Government Ethics. I have come to full agreement with them and have agreed to divest all of those assets --

WARREN: I'm asking you a very straightforward question, Mr. Warsh.

WARSH: -- especially those that you represent, before I take the oath of office.

WARREN: And that is, will you disclose how you divest those assets or will you just collect a check for $100 million from someone whose whole business is betting on what the Fed will do?

WARSH: As I said to the ethics officials at the Federal Reserve and the Office of Government Ethics and they agreed --

WARREN: I'll take that as a no as well.

WARSH: I would be redeeming my assets --

WARREN: So, Donald Trump has --

WARSH: -- before I take office.

WARREN: -- made clear that he does not want an independent Fed. In fact, he has said, and I quote, "Anybody that disagrees with me will never be Fed chairman." And he's made clear that you are his sock puppet, saying last week that interest rates will drop, quote, "when Kevin gets in. Yes, I think they do." Not when economic conditions change, we'll get lower rates. Not when the needs it. Nope. He said, when my guy, Kevin Warsh, is in there, we'll get the interest rates that I, Donald Trump, want.

So, independence takes courage. Let's check out your independence and your courage. We'll start easy. Mr. Warsh, did Donald Trump lose the 2020 election?

WARSH: We try to keep politics, if I'm confirmed, out of the Federal Reserve.

WARREN: I'm just asking a factual question. I need to know. I need to measure your independence and your courage.

WARSH: Senator, I believe that this body certified that election many years ago.

WARREN: That's not the question I'm asking. I'm asking, did Donald Trump lose in 2020?

WARSH: And I'm suggesting you in 2020 --

WARREN: I'm suggesting you can't answer that.

WARSH: -- the Fed made a huge inflation problem and you certified the election.

WARREN: So, let me ask another question.

WARSH: (INAUDIBLE) out of monetary policy.

WARREN: In our meeting, you said you would be independent because you're, quote, "a tough guy." Those were your words. Tough guy. And you will be able to stand up to President Trump. So, let's try it again. Name one aspect of President Trump's economic agenda with which you disagree.

WARSH: Well, Senator, the Federal Reserve in recent years has wandered outside of its remit, wandered into other areas.

WARREN: I'm asking for something you --

WARSH: That's not something I'm prepared to do.

WARREN: -- disagree with Donald Trump on.

WARSH: If I'm confirmed --

WARREN: Just one economic --

WARSH: -- the Federal Reserve should stay in its lane.

WARREN: Just one. Just one little place where you disagree with Donald.

WARSH: Well, I do have a disagreement, actually, Senator, with the president. I think even this morning he said that he thought I was out of central casting. I think central casting, I'd look older, grayer, maybe show up here with a cigar of sorts.

WARREN: Quite adorable. But, you know, we need a Fed chair who is independent. That's the only way we preserve the independence of the Federal Reserve. If you can't answer these questions, you don't have the courage and you don't have the independence.

WARSH: I agree with you on independence, Senator.

SCOTT: Senator Rounds.

WOLF BLITZER, CNN ANCHOR: All right. We're going to continue to monitor this really explosive hearing that's just getting started right now. We're going to take a quick break, resume our special coverage right after this. Lots at stake. Stay with us.

(COMMERCIAL BREAK)

[10:45:00]

BLITZER: The nominee to become the next chair of the Federal Reserve, Kevin Warsh, is now answering questions from senators, right now answering questions from Senator Mike Rounds, Republican of South Dakota. Among other things, he just said he repeated that he will divest all of his investments if, in fact, he becomes the next chair of the Federal Reserve. He says the Federal Reserve has a lot of work to do to reestablish its credibility. Let's listen in.

WARSH: -- cause inflation be persistent to undermine hardworking American standard of living, and when those mistakes go on. Thank you.

SEN. MIKE ROUNDS (R-SD): Thank you, Mr. Chairman.

SCOTT: Yes, sir. Senator Reed.

WARREN: Mr. Chairman, before we start the next question, I ask that we have entered into the record the U.S. Office of Government Ethics Certification, which requires that all nominees disclose all of their assets and showing that Mr. Warsh is out of compliance and that he has not met the ethics requirements. SCOTT: Without objection, I will note, however, that what has been clearly articulated is that he will, according to his agreement with OGE, do what many others have done as well within 90 days, be not only in compliance, but to have divested himself from any assets that are in question.

WARREN: Mr. Chairman, can I ask? I don't think we've had other nominees who are out of compliance and not disclosing at the time they come before the hearing.

SCOTT: Not in this committee, that's correct.

WARREN: Not in this committee.

SCOTT: Before we -- here's what we're not going to do.

WARREN: Fair enough.

SCOTT: We're not going to have two chairmen, for sure.

WARREN: Just asking.

SCOTT: Number one. Number two, what we're also not going to do is debate what we're putting into the record. And finally, what we are going to do is have a conversation about America's economy. And frankly, we all deserve the opportunity to ask our questions. We don't get to figure out the answers, but we do get to ask our questions. And I hope that we are able to continue in that direction.

[10:50:00]

As long as we are, we're going to have a very good hearing. If we're not, then I will find a way to help us expedite getting back on track. Senator Reed.

SEN. JACK REED (D-RI): Thank you very much, Mr. Chairman, Mr. Warsh. Until you dispose of all the assets you've identified to the Office of Government Ethics, you will not be in compliance. Is that correct?

WARSH: My understanding is that a signed ethics agreement provides duties and responsibilities on me and duties and responsibilities on the government. And that's what the nature of the ethics agreement is.

REED: You have an agreement that within 90 days you will dispose of all your assets, all your assets. Is that correct?

WARSH: Senator, I have an agreement within 90 days so that there is no appearance of anything inappropriate that I would divest all of my assets, the majority of which before sworn in. What I've disclosed, Senator, is all the information that is mine to disclose. I've shared all information about assets that I control and that I can share, which I did much to the satisfaction of the Government Ethics Office.

REED: Excuse me. What you've said is that you will take the oath, if confirmed as chairman, with assets that have already been identified as presenting potential conflicts of interest. Will you agree to not take the oath until you have fully disposed all the assets that you've been identified?

WARSH: Senator, I'll agree to take the oath pursuant to the terms of the ethics agreement that I struck with the Office of Government Ethics. I don't think anyone could do more than that. Other than me, I've agreed to divest even more assets that I will have virtually no financial assets.

REED: The divestiture is totally up to you. You can select what assets you're disposing of, what assets you're keeping. Is that correct? And then still be sworn in as chairman.

WARSH: The divestiture is up to the agreement that I struck with the Office of Government Ethics.

REED: Who makes the decision as to what assets are divested, you or the Office of Government Ethics?

WARSH: Both of us. That's why it's an agreement.

REED: Excuse me. I must commend you on the way you can circularly go around questions and not answer them. It's a skill. Fortunately, it's not a good skill for the chairman of the Federal Reserve Board. We typically ask questions and expect to get direct, faithful answers. You haven't given them to the ranking member, and you're not giving them to me.

So, again, you feel you will be compliant if after 90 days you still have a significant number of assets that have been identified as presenting conflicts of interest. Is that your view?

WARSH: No, Senator. If I were to violate the ethics agreement, I would not be in compliance. If I follow the agreement, I will be.

REED: Well, that's your position. I think others would differ. The -- when you sell all your assets, where are you going to place the proceeds of those sales? I believe that Chairman Powell has placed them in funds which are very difficult to individually influence. Do you propose to do that?

WARSH: Yes, I propose to put them in permissible assets that are as close to cash or treasury bills as I possibly can. I haven't selected anything, but it will be as plain vanilla as possible so that there would be no appearance or reality of having any influence. We'll be sitting in something like cash.

REED: OK. Now, the question of independence is just one that I think will dominate these proceedings. This morning, President Trump was asked on CNBC, will you be disappointed if your new Fed chair doesn't cut rates right away? And President Trump answered, I would. It's very hard to separate President Trump's obsession with rate cuts, his attacks on the Federal Reserve, on Chairman Powell particularly, and your nomination.

So, this independence thing seems to have evaporated quite quickly between President Trump's statements and your positions. Again, you maintain you'll be independent of President Trump? WARSH: Yes, Senator, I do.

REED: Well, President Trump constantly maintains that nobody's independent of him, that it's his morality that guides the whole United States government, including the Federal Reserve, and that you will be someone who will carry out his wishes.

[10:55:00]

Frankly, do you suspect that he chose you because you indicated to him that you want to cut rates?

WARSH: Senator, I don't know the reason for the president's choice, but I can tell you what I've been writing about for 15 years and what I said to the president, which is --

REED: Which is you're going to cut -- I'll cut rates if you give me the job?

WARSH: No, that's not what I said, Senator. Now, the President, as you might know --

PAMELA BROWN, CNN ANCHOR: All right. You've been listening to the exchange between Democratic Senator Jack Reed of Rhode Island and President Trump's pick for Fed Chair, Kevin Warsh. He just said there that he will be independent from Trump. Under questioning there from Senator Reed, he had said earlier that he does not believe monetary policy independence should be threatened by officials, that he would not be threatened or pressured to do anything with interest rates if there is a tweet, for example, from the President. We're going to continue to monitor this hearing and we'll be right back.

(COMMERCIAL BREAK)

BLITZER: Republican Senator Thom Tillis of North Carolina is continuing the questioning of the Federal Reserve Chair nominee, Kevin Warsh, and I want to listen in.

SCOTT: -- government ethics has entered into an agreement with Kevin Warsh that he has, up until 90 days after confirmed, to divest of his assets.

SEN. THOM TILLIS (R-NC): So, to non-attorneys here, I heard someone say he's before us out of compliance, and that's why I checked with the staff to be absolutely certain he is properly before us. He will be in compliance if he executes agreement that addresses the concerns that have been presented by some of my colleagues on the other side of the aisle. I just want to confirm for the record that that is in fact accurate.

WARREN: So, if we're doing a matter here of, is this parliamentary inquiry? Is that what this is?

TILLIS: I've made a parliamentary inquiry. So, I'm not burning my time on something that I thought felt like a cheap shot to say he's out of compliance when in fact he's not. WARREN: Then I'd like to ask the other question, and that is, have we seen this agreement? Do we have any way to verify that, in fact, these sales will occur if we have no idea what's in them and no one has told? And let's do remember the law for a minute. The Fed, unlike other parts of government, do not have a 90-day, you can be out of compliance. Fed law is explicit that you cannot own any portion of a financial interest in a bank --

UNIDENTIFIED MALE: Mr. President -- Mr. Chairman, excuse me for interrupting.

TILLIS: I'm going to let the attorneys take over.

UNIDENTIFIED MALE: Are we going to all get extra time here?

SCOTT: No.

UNIDENTIFIED MALE: I'd like an extra three minutes.

SCOTT: All right.

UNIDENTIFIED MALE: OK.

TILLIS: Mr. Chair, I just -- for the record, and the only reason I said that --

UNIDENTIFIED MALE: That was a parliamentary inquiry, so it doesn't count.

TILLIS: Yes.

UNIDENTIFIED MALE: OK.

TILLIS: Mr. Chair, the reason I mentioned that is because you had stipulated it. I don't think you meant it this way, but you as a chair said that this is the first of a kind of someone being out of compliance. I don't think you meant that. I wanted to make sure it was clear for the record.

SCOTT: Well, let me just be very clear again. The career ethics professionals were the ones that sent Mr. Warsh's signed paperwork to this committee's chief clerk. They would not have done so if they did not come to an ethics agreement with Mr. Warsh.

Mr. Kennedy -- Senator Kennedy does raise a good point. We are going to stick to our timeline and I appreciate you raising the point of how long an inquiry can go on, and that does not buy you more time, unless, of course we all decide we want more time. And then I would rule on that and I would rule against it.

TILLIS: Thank you, Mr. Chair. Mr. Warsh, congratulations. You can't count this as a date with Jane, particularly this one. I think probably the first hearing was a little less acrimonious. I'm not going to ask you anything. You can take a break and get ready for the bludgeoning on the other side. They're going to beat you until you bleed, and then they're going to beat you for bleeding. I'm going to talk about what's preventing me from being in a possession to vote for you.

[11:00:00]