As you read this, Kevin Warsh is appearing (or preparing to) in front of the Senate Banking Committee as part of his audition to run the Federal Reserve. That would be the same Federal Reserve whose chair is being hounded out of office by the man who nominated Kevin Warsh.
Former Fed governor, Stanford economist, Hoover Institution fellow, husband of an Estée Lauder heiress, and, as of this morning, the most elaborately compromised champion of central bank independence in American history. We say your name, Kevin Warsh (is it a hard “Sch” though or less of a soft “Shh?”).
His opening statement is, genuinely, good. Disciplined, historically literate, and carefully engineered to thread about six needles at once. He invokes Milton Friedman. He praises Ben Bernanke. He name-checks Stan Druckenmiller (the legendary macro investor who mentored him for 15 years) as a man who never got a PhD and remains one of the best economic thinkers alive (cross your legs, Jim Cramer). In central banking circles, where a peer-reviewed paper is the price of admission and intellectual pedigree is everything, leaning into your hedge fund education is either fecklessly reckless or a beautiful read of Trump’s White House. Warsh frames it as a virtue, let him have it.
The key passage for us is Warsh writing “Fed independence is largely up to the Fed.” Clean, coherent, genuinely defensible. Also extraordinarily convenient to say in front of the committee deciding whether to confirm you. It essentially tells Dems and irked GOP senators that “Trump can yell about rates all he wants, because a strong Fed chair just absorbs it.”
But… alsoooo? It’s also carefully calibrated for West Wing staff to soothsay to POTUS that Warsh is leaving himself room to go with the plan on lowering rates despite, like, the economy.
Here’s the problem nobody can argue around. Sen. Thom Tillis of North Carolina, who happens to be the senior Republican on the Banking Committee, has said he won’t vote for any Fed nominee until the DOJ drops its criminal probe into Jay Powell. Republicans have a razor-thin majority on the committee. They need Tillis. Powell’s term expires in three and a half weeks. Tillis, to his credit, isn’t blocking Warsh because he thinks Warsh is unqualified. He’s blocking him because he thinks investigating your outgoing Fed chair into submission is bad for the country and the incoming Fed chair. We’re going out on a limb and saying that he’s right about that.
The punchline writes itself. Trump is blocking the confirmation of his own nominee by refusing to stop harassing the guy his nominee is supposed to replace. Tillis is a Republican in good standing who has decided that this particular piece of institutional vandalism is a bridge too far. And Warsh, who will deliver a composed, historically literate opening statement about the sanctity of Fed independence, is sitting in the middle of it, waiting to find out whether the president he works for will bother to save his own nomination.
Leave a Reply