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The Situation Room

Status of Iran Negotiations Unclear; Federal Reserve Chair Nominee Faces Confirmation Hearing. Aired 11-11:30a ET

Aired April 21, 2026 - 11:00   ET

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

[11:00:01]

SEN. THOM TILLIS (R-NC): 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 position to vote for you until -- we've spent time together in my office. You have extraordinary credentials. They're impeccable. I think the way you're dealing with the ethics issue is strong.

Problem I have is how we -- where we are right now. And we start -- I start by saying I love your opening statement. I love your focus on the independence of the Fed. I love the idea of Fed independence with respect to achieving the dual mandate, Fed transparency, on so many other things that the Fed does that frankly we're all frustrated with, bank examination supervision being some among them that I think we should have more insight into.

Mr. Chair, I'd like to submit for the record two executive orders under President Trump, one in 2020 and one in 2025, talking about making federal architecture beautiful again and focusing on trying to preserve the integrity of old buildings.

SEN. TIM SCOTT (R-SC): Without objection.

TILLIS: Thank you.

And, Mr. Chair, I will be submitting an analysis, but if we can go to slide two and turn it up right, much has been made about the building project that has Senator -- or that has Chair Powell under investigation.

I'm not going to get into the details, except to say that I used to work for a firm that did audit and compliance. So I'm naturally wired to go back from the ground up and figure out what the deal is. Here's what I know.

The Martin Building has been conflated into this project to make it a $4 billion building. Even if you put the Martin Building in, it's a $3 billion building. The reality is, what we're talking about is the Eccles Building and the East Building, for which -- bring that up higher, Jack. You're a tall guy. So people can see it.

These are the overruns. And these overruns occurred in part because the cost of inputs went up 69 percent since the original estimate. Asbestos was identified. Remediation was required. Pylons had to be built underneath the building because it turns out they used it as a landfill and they had a water table issue.

There were a variety of reasons why this building went over budget. As a matter of fact, if we put everybody in prison in federal government that had had a budget go over, we'd have to reserve an area roughly the size of Texas for a penal colony because of the way government projects work.

And the reality is the overage inflation-adjusted was about $730 million, the majority of which seems to be legitimate. Next slide. Not acceptable, unfortunate, but legitimate.

Now, what I've really got a problem with, and we're talking about Fed independence -- by the way, I think you're going to be independent. You have to be. You've got to convince 11 other people to vote with you, at least the majority. It's a consensus organization. You try to get the majority to.

Most of these votes are 11-1. So, if anybody thinks the president can appoint somebody and you unilaterally can control things, you're going to be an unsuccessful chair, if history is any guide. And you've served under some of the best. So I know you're going to do it right.

The problem that I have here is that we had some U.S. attorney with a dream or assistant U.S. attorney thinking it would be cute to bring Chair Powell under an investigation just a few months before the position was going to be open. This happened this year.

Normal course and speed, here's how it works at the Fed. February, -- or March -- May the 15th, the term would have expired. We'd be having this hearing. You'd be getting confirmed. Custom also suggests that the sitting chair, even though he has two years left on his term, would have exited.

But, instead, we have somebody who thinks a building project that went over by about $700 million with a lot of what seemed to be justifications for it are holding up this whole process. It sounds like to me somebody over in the DOJ didn't even check with the boss.

The boss said on the same night that I said I can't go forward until this bogus investigation is done with, said he didn't know anything about it. So we've got people in DOJ over in the D.C. Circuit or the D.C. district doing these investigations. 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.

Mr. Warsh, the only thing I've found the least bit odd about you is you've never watched an episode of "Seinfeld." You've spent so much time at being a rock-solid economist that you're not even taking time away for a little laugh like that. I look forward to supporting your nomination and I look forward to

this investigation being taken down. If the chair wants to have all of our subcommittees start looking at capital expenditure projects for the agencies that we're overseeing, I think that's a great idea.

[11:05:09]

And I'd like to be on a committee specifically drilling down on this analysis. If somebody can prove me wrong, I'd be happy to make a criminal referral. But I don't have the D.C. Circuit tell me a crime was committed when seven members on this committee said it wasn't, including the chair.

Thank you, Mr. Chair.

SCOTT: You're welcome. Only one question. What is "Seinfeld"?

(LAUGHTER)

SCOTT: Senator Van Hollen.

SEN. CHRIS VAN HOLLEN (D-MD): Mr. Chairman, thank you.

Mr. Warsh, good to see you.

Reviewing your record, I am concerned that your position on interest rates seems to shift with what's politically convenient, rather than based on sound economic judgment. In the aftermath of the 2008 financial crisis, the worst recession since the Great Depression with some of the worst unemployment in our lifetimes, you were a hawkish voice, expressing concern that the Fed might wait too long to raise rates.

I think you got it wrong then. But now you seem to have swung 180 degrees in the opposite direction to embrace lower rates, a view that conveniently aligns with the president who nominated you.

You've made this pivot even as today prices are too high. I think we all know that. Our economy works for families when prices are affordable and unemployment is low. That's why price stability is an important part of the Fed's mandate, right?

KEVIN WARSH, FEDERAL RESERVE CHAIR NOMINEE: Senator, yes.

VAN HOLLEN: And the Fed uses its monetary policy tools for price stability and full employment. That's the job Congress gave to the Fed.

Here's how Ben Bernanke described how the Fed uses those tools. He said -- and I'm quoting -- "Generally, if economic weakness is the primary concern, the Fed acts to reduce interest rates, which supports the economy. If the economy is overheating, the Fed can raise interest rates to constrain inflationary pressures" -- end of quote.

So that's a textbook model of the Fed. Cutting rates supports the economy, but can lead to higher inflation, while raising rates helps to fight inflation, but can limit growth.

Do you agree with Chairman Bernanke that that's generally how the Fed can use monetary policy to affect the economy?

WARSH: Senator, I do agree generally with that proposition, but I will note, at a moment like this, the supply side of the economy is changing dramatically. So the core of what Chairman Bernanke said is a question about, what's the economy's potential?

As I said in my opening remarks, I think the economy's potential is growing quite quickly. And that makes the decision that you tee up to be a difficult one and one that the Fed's going to have to dig deep in, in evaluating what's the right policy choice in the upcoming meetings.

VAN HOLLEN: Well, I want to push you a little bit on that in a moment.

But, right now, the Fed has set its main interest rate at 3.5 to 3.7 percent. Last December, President Trump told "The Wall Street Journal" that he wanted to cut rates to 1 percent and maybe lower than that by the end of this year.

So, just to better understand how you think about economics, in the economic model Bernanke laid out, let's say there's an economy with decent growth and no recession. If the Central Bank were to cut rates from 3.5 to 1 percent or lower, a massive cut, that would typically push prices up, right?

WARSH: Senator, unlike many of my colleagues past and present, I don't believe in forward guidance. I don't believe that I should be previewing for you what a future decision might be.

I think it's essential that the Fed make decisions in the room.

(CROSSTALK)

VAN HOLLEN: Mr. Warsh, I'm not asking you what decision you would make. Obviously, that's going to be up to you. I'm asking you for the framework in which you think about these things.

And it seems a pretty straightforward question about what would happen if we reduced interest rates by the end of this year to 1 percent or less. And under the Bernanke model -- and I think almost every economist or most economists would say that that will drive up prices.

(CROSSTALK)

VAN HOLLEN: And so that's what I'm asking you. Would you agree that that would likely drive up prices?

WARSH: So, Senator, the Fed has two important monetary policy tools. One is interest rates and the other is a balance sheet, a balance sheet that we created in the 2008 financial crisis.

Those tools should be working in concert, not at cross-purposes. So it's hard for me to isolate one variable when we'd have to have a discussion on the other.

VAN HOLLEN: All right. Let me...

(CROSSTALK)

WARSH: But, generally -- oh, sorry.

VAN HOLLEN: Well, let me just say this was a pretty clear question about the framework in which these decisions are made.

[11:10:07]

I have heard you talk about how A.I. may change that calculation. I will just say, and I think you know this -- I mean, I have this -- "The Financial Times" pointed out: "The economists reject Kevin Warsh's claim that A.I. -- the A.I. boom will enable rate cuts."

And I think -- find it just implausible to suggest that, by the end of this year, A.I. would produce such increases in productivity that it could reduce in -- a rate cut to below 1 percent, and you can't tell me that would very likely increase prices.

WARSH: So, Senator, can I say two things? First...

SCOTT: Just, Senator...

WARSH: Oh, sorry.

SCOTT: Quickly. Sorry.

WARSH: Monetary policy, Senator, works with long and variable lags, quite famously. If the Fed were to make a decision today about the conduct of policy, it's likely to find its way to the real economy six, nine, or 12 months later.

So it's difficult to judge policy today for an immediate result. And that would be my only concern about the framing of your question.

VAN HOLLEN: Thank you.

Mr. Chairman, I just -- in closing, this is what concerns me, is that your views now have sort of -- to conform with where the president of the United States is. And that's been a concern many of us have.

Thank you, Mr. Chairman.

SCOTT: Senator Kennedy.

SEN. JOHN KENNEDY (R-LA): I want extra time, Mr. President -- Mr. Chairman.

(LAUGHTER)

SCOTT: I know, sir. I know.

KENNEDY: Consider these five minutes a parliamentary inquiry. (LAUGHTER)

KENNEDY: Professor, what's a sock puppet?

WARSH: I heard the reference from Senator Warren.

KENNEDY: Yes, what is it?

WARSH: I'm not sure I know. I think it's that thing you stick your hand in.

(CROSSTALK)

KENNEDY: Yes, kind of like this?

WARSH: Yes.

KENNEDY: What's a human sock puppet? Isn't a human sock puppet somebody who'll do what somebody else tells them to do?

WARSH: I think that's what the senator was trying to suggest. I think that was the innuendo.

KENNEDY: Are you going to be the -- are you going to be the president's human sock puppet?

WARSH: Senator, absolutely not.

KENNEDY: Are you going to be anybody's human sock puppet?

WARSH: No, I'm honored the president nominated me for the position, and I will be an independent actor if confirmed as chairman of the Federal Reserve.

KENNEDY: My friend Senator Warren -- and she is my friend -- suggested that -- I wrote it down -- you will use your power, you might use your power to bail out your friends if they get in trouble, kind of like President Biden did with Silicon Valley Bank and the Signature Bank. She didn't say the last part. I just did.

Are you going to do that?

WARSH: No, Senator.

KENNEDY: OK.

The ethics folks, they have cleared you, but they said you got to sell some assets. Is that right?

WARSH: Yes, sir.

KENNEDY: OK.

And these assets that you have, you can't just hold a yard sale, can you?

WARSH: No, not for most of them, Senator.

KENNEDY: OK. So it takes a period -- a reasonable period of time, right?

WARSH: Yes, sir.

KENNEDY: And you're going to -- you have promised to sell them, right?

WARSH: I did.

KENNEDY: And if you don't sell them, we will know and the ethics folks will know, right?

WARSH: Yes. I'd be in violation of the ethics agreement if I refuse to sell them.

KENNEDY: But you're going to sell them, right?

WARSH: Yes, Senator, I will.

KENNEDY: OK.

Can we agree -- can we agree that politicians have the right to offer you advice about what to do with interest rates?

WARSH: Senator, we can agree, and it's not something that I would shy away from. I have heard many senators from this very committee in years past express strong views on interest rates.

KENNEDY: OK.

WARSH: Humble central bankers should be listening and then making their own decisions.

KENNEDY: Some -- but some politicians matter more than others. And, generally speaking, presidents matter. Their opinion matters more than, say, a senator.

President Trump has offered his opinion about what you ought to do with interest rates. Is that right?

WARSH: Senator, he has not made his opinion on that a secret to anybody.

KENNEDY: Yes.

And every president has that you're aware of have an...

WARSH: Yes, they -- and they all tend to be in the same direction, Senator Kennedy.

KENNEDY: OK.

Now, the problem is, can we agree that your credibility as Fed chairman is the most important thing you have? WARSH: It's the most important thing to me. It's the most important

thing to the institution. And it's the most important thing to the successful conduct of policy.

KENNEDY: OK.

WARSH: If the markets...

(CROSSTALK)

KENNEDY: That's a yes, right?

WARSH: Yes, Senator.

KENNEDY: OK.

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?

[11:15:00]

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.

KENNEDY: So, the president has never sat you down, looked you in the eye, and said, here's the deal, Scooter, I'm going to appoint you, but you got to agree to lower interest rates? That didn't happen or it did happen?

WARSH: The president never once asked me to commit to any particular interest rate decision, period, and nor would I ever agree to do so if he had. But he never did. I was honored he nominated me.

Like everyone else in the committee and the world, I've heard his view on interest rates. It sounded very similar to me to every other president in economic history that I've studied.

KENNEDY: OK.

I have got one more question because I'm about to run out of my parliamentary inquiry time. I have heard your argument the last few months about artificial intelligence has made us so productive, labor so productive, that companies don't have to raise prices.

Therefore, inflation isn't a problem. Therefore, rates can be cut. Do you really believe that right now?

WARSH: No, that is not how I would characterize the story on A.I.

KENNEDY: OK. But you have said what I just said, haven't you?

WARSH: I have said that this is the most disruptive moment in modern economic history in the U.S. and the world. I have said that artificial intelligence, A.I.... KENNEDY: OK, let me stop you.

WARSH: ... short for American ingenuity, is going to have a big effect.

KENNEDY: Because the chair is going to cut me off.

WARSH: Oh, sorry.

KENNEDY: Here's my worry, that a lot of this stuff about artificial intelligence making us more productive is a bunch of hype by people who want to sell stock in an IPO. OK, I would be careful there.

WARSH: Yes.

KENNEDY: Thank you, Mr. Chairman. I will get to my five minutes in a little bit.

(LAUGHTER)

SCOTT: OK.

PAMELA BROWN, CNN HOST: Listening there to Republican Senator Kennedy questioning President Trump's pick for Fed chair, asking him directly whether he ever committed to President Trump to lower interest rates or whether the president asked him that directly.

He said, no, he would never do that. But, as we know, the president has made it very clear that's what he wants from his Fed chair. He has threatened Jerome Powell, the current Fed chair, on this issue for not lowering interest rates.

And he just said this morning in an interview that he would be disappointed if Kevin Warsh, if confirmed, does not lower interest rates. So, you just heard that exchange. We're going to continue to monitor this hearing.

And we will be right back.

(COMMERCIAL BREAK)

[11:22:22]

BROWN: All right, let's bring in CNN business senior reporter David Goldman.

David, what stands out to you so far about Kevin Warsh's hearing?

DAVID GOLDMAN, CNN BUSINESS SENIOR REPORTER: Yes, there's really three things I think that stood out in particular.

The first thing is that he declined to answer some pretty tough questions, namely, from Senator Elizabeth Warren, but from other Democrats, about these $100 million in assets that he had that he didn't put on his disclosure forms. Now, there was a big back-and-forth about whether or not he was in

compliance with ethics standards, but he didn't put that on his disclosure. That raised a big kerfuffle, certainly.

He also didn't answer whether or not Trump won the 2020 election, saying, well, I can confirm that Congress certified that election. That's a tactic that a number of Trump nominees have used to kind of deflect from that question. But he did say that he would remain independent and independent from...

WOLF BLITZER, CNN HOST: Which senator is asking questions?

GOLDMAN: ... from President Trump.

And so the other thing that really stood out was about these plans that he had to overhaul the Fed. He called for regime change at the Fed, a curious choice of words there. And he said that the Fed shouldn't be looking ahead to the future and telegraphing what it's going to do.

Instead, the Fed should just stick to the current plan and then it should be able to adjust those plans going forward as the economy changes. He said that he thinks that it's too much -- well, the Fed members stick to their guns too much and that can be to the detriment of the economy.

BROWN: All right, David Goldman, thank you so much.

GOLDMAN: Thank you.

BLITZER: All right, I want to go back to the hearing.

Republican Senator Bill Hagerty of Tennessee has started asking some questions. Let's listen in.

SEN. BILL HAGERTY (R-TN): ... with the last administration. I think this committee will recall that President Biden nominated a prospective federal bank regulator, frankly, a graduate of Moscow State University in Russia, who advocated for replacing private bank deposits with retail accounts held at the Central Bank.

Those who might criticize Kevin for his private sector success miss the point. Kevin's experience is not a liability. It's an asset. It brings a practical understanding in terms of how markets function to bear, how capital is allocated, and how policy decisions shape the real economy.

Mr. Warsh, how will your experiences in both the public and the private sector shape your governance of the Fed should you be confirmed?

[11:25:01]

WARSH: Senator, thank you very much. And thanks for the kind introduction.

For your colleagues on this panel. Senator Hagerty and I shared a desk '91 and '92. So I have known him for a very long time.

I think the -- my prior experience at the Fed, which some of your colleagues made reference to, are going to allow me to hit the ground running. This is as consequential a moment for the U.S. economy and, frankly, for the institution as at any point since the late 1970s.

And so my experience at the Fed, my understanding of the people, the culture, the governance, and of the things that are ripe for reform are going to give me a leg up. We don't have a long time to do new studies and contemplate what reform should be.

We have a short window to try to bring inflation back down to where it should be to ensure price stability. And because A.I. that Senator Kennedy referenced is so consequential and A.I. is quickly becoming at something like escape velocity, it's important to revisit the Fed's models and see whether this innovation cycle, while it could have over time improvements in the price level and make the Fed's job on inflation easier, there's a question about what that means for employment, which is another part of the Fed's mandate.

So I think that's part and parcel of what my background suggests and history would suggest. But if I can make one other point, what the Fed needs is a reform to its frameworks and reforms to its communications. I have seen what the Fed's done well. And, often, I will give them one cheer or two, but now, more than ever, the Federal Reserve needs three cheers, and that's what I hope to deliver.

HAGERTY: Let's stay on this point, particularly -- and you have mentioned this in your commentary -- the point of the Fed's mission creep over the years.

If you think about what the Fed has done, they strayed into what I would call politically contentious areas. They have gone well beyond their core mandate. And we have seen this across the Federal Reserve system. And what the Fed has done is eroded its credibility as what it should be, which is an apolitical and independent Central Bank.

In bank regulation and supervision, the Fed is focused on nonmaterial and often politically charged areas. I'm thinking about climate change policy here. Elsewhere in the Federal Reserve system, we have seen regional reserve banks use its platform for promoting very divisive partisan policies.

There, I'm thinking about DEI, climate policy, even racial reparations. The Minneapolis Fed even went so far as to publicly lobby for an amendment to a state constitution on education policy. How far beyond the remit can they get?

In the 2020 monetary policy review, the Fed even sought to redefine its legislative mandate of maximum employment as a broad -- quote -- "broad and -- broad-based and inclusive goal" -- close quote.

That's tacitly understood to mean that the Fed should accept higher inflation to privilege select groups of Americans. And while the Fed undertook this social engineering, it also financially engineered a massive footprint in our market. Q.E. provided near unlimited bid for government debt, which, of

course, made it easy for us to subsidize more government debt here, subsidize government financing, and it encouraged, frankly, what I view as very reckless federal spending.

In each of these examples, we see a clear pattern. The Fed has strayed beyond its core mandate to encroach upon policy decisions that ought to be left to those of us that are democratically accountable.

Mr. Warsh, the Fed's own actions have eroded its credibility. What do you think should be done to regain public trust?

WARSH: Senator, robust reform.

The Fed can deliver on the mandate that you gave it if it sticks to its knitting. As it wanders into areas upon which it has neither authority or expertise, it loses its focus. And I will just give one example. In 2020, as you reference...

BLITZER: All right, we're going to continue to monitor the Senate Banking Committee confirmation hearing of Kevin Warsh to become the next chair of the Federal Reserve, certainly one of the most important economic jobs in the world, not just here in the United States.

But there's some major breaking news coming into CNN right now. We're getting some new reporting casting doubts on whether or not the vice president, J.D. Vance, will actually leave Washington, D.C., for peace talks in Islamabad, Pakistan.

I want to go to our White House correspondent, Alayna Treene.

Alayna, this is all your reporting. What are you learning?

ALAYNA TREENE, CNN WHITE HOUSE CORRESPONDENT: Yes, look, so what we knew as of this morning was that the vice president was preparing to leave earlier today to head to Pakistan for the second round of talks in person with Iranian officials.

However, I have been talking with my sources, who told me it is now unclear whether or not that trip is actually moving forward, and the timing of it continues to be fluid. What I am told, Wolf and Pamela, is that there are going to be further policy meetings on this today here at the White House to figure out the path forward, and that the vice president is expected to participate in those meetings.

So, clearly, if he's coming to the White House, very much unclear when he could be actually leaving for Pakistan, if he does at all.