At Kevin Warsh's Fed confirmation hearing today, Republicans will cast him as a change agent ready to shake up a tradition-bound institution.
Driving the news: In remarks introducing Warsh obtained by Axios, Sen. Dave McCormick (R-Pa.) will say the onetime Fed governor "brings a reformer's heart" and "will shake up a stagnant institution at a time when change is sorely needed."
- It echoes some of Warsh's own criticisms of the Fed, saying that the central bank "must not be ruled by pointy-headed economists poring over outdated models and reams of market data."
- Democrats on the Senate Banking Committee plan to focus on potential conflicts of interest stemming from Warsh's expansive portfolio, which includes some investments that could be affected by Fed policy. They also intend to question his independence from President Trump.
State of play: Warsh's nomination is broadly supported by Republicans and opposed by Democrats — putting his confirmation on track to be a more partisan affair than in the past.
- Just four years ago, Jerome Powell received 80 votes in favor of his confirmation. Alan Greenspan was confirmed five times by voice vote.
- Still, Republicans have the votes to confirm Warsh — or will, that is, if a Justice Department investigation into Powell that is ostensibly about the Fed's over-budget building renovation is resolved.
- Sen. Thom Tillis says the investigation is a pretext to pressure Powell over monetary policy — a view shared by a federal judge as well as Powell himself. Tillis has pledged to block Warsh's passage through the banking committee until the investigation is dropped.
Zoom out: Powell's term is up May 15 and the Trump administration is eager to get him out. McCormick's planned introduction shows the support he has among Republican senators.
What they're saying: "If confirmed, Kevin will inherit a Federal Reserve in need of repair and confronting serious uncertainty," McCormick will say, noting "an overextended balance sheet; a poor record on inflation; and a weak understanding of the profound opportunities offered in today's economy."
- Warsh "is uniquely suited to confront these challenges," McCormick will add.
The other side: Democrats are assailing Warsh for potential conflicts of interest tied to his investments — which would make him the wealthiest Fed chair on record even before accounting for the family fortune of his wife, cosmetics heir Jane Lauder. They also point out that his investments have not been fully disclosed.
- Warsh holds investments in dozens of private companies, with many details withheld due to "pre-existing confidentiality agreements." Several are financial technology startups whose prospects could hinge on the Fed's regulatory and payments systems policies.
- "Mr. Warsh has not disclosed the underlying assets of holdings worth more than $100 million," says a report from the Democratic staff of the committee.
- "Mr. Warsh's refusal to disclose his financial assets — even if he has committed to divesting them — risks the Senate's confirming a conflicted Chair of the Federal Reserve," the Democratic staff report says.
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