Republicans and Democrats on the Senate Banking Committee appear poised to question Kevin Warsh, the nominee to be the next chairman of the Federal Reserve, on the central bank’s independence — but from different angles — during a hearing scheduled for Tuesday. Ranking member Elizabeth Warren is also expected to question Warsh’s financial disclosures and ties to the late sex offender and financier Jeffrey Epstein. President Donald Trump tapped Warsh, a former Fed governor, earlier this year to succeed Jerome Powell, whose term as chair ends on May 15. Whether the Fed operates free of political interference is likely to be a central issue. Senate Banking Chairman Tim Scott, R-S.C., will frame the hearing around the Fed’s role in “affordability” as it makes decisions on monetary policy, said a source familiar with his approach. He’ll stress that the Fed must not be buffeted by political agendas as it focuses on price stability and maximum employment. “He is expected to raise concerns about politicization at the Fed in recent years, including involvement in climate-focused initiatives that many viewed as outside the institution’s traditional mandate,” the source said. Trump has often pressured Powell and the Fed to lower interest rates. The administration launched an investigation into Powell and cost overruns on a construction project that Powell has said was part of the pressure campaign. Sen. Thom Tillis of North Carolina, a Republican swing vote on the panel, has vowed to block Warsh’s nomination and that of any other Fed board member as long as the Department of Justice continues to investigate Powell's handling of the renovation project. Tillis is expected to bring up Fed independence at Warsh’s hearing. Tillis says he supports Warsh’s nomination to succeed Powell after the DOJ investigation concludes. He calls the probe an attempt by Trump to intimidate Powell into lowering interest rates. “I will vote for Kevin Warsh simultaneously with the conclusion of that statement coming out of the DOJ, and not for the remaining … 264 days in my tenure in the U.S. Senate,” Tillis said last week in an interview with NBC News. Tillis is retiring at the end of the current Congress. Republicans have a two-vote majority on the committee. If Tillis votes “no” and all the Democrats oppose Warsh, the tie vote would leave the nominee stuck. But the committee also has several options that could test Tillis’ determination to block Warsh. Democrats also are expected to zero in on Fed independence but from a different viewpoint. The panel’s Democrats reiterated last week that they want Scott to postpone the Warsh hearing while the DOJ investigates Powell and Fed Governor Lisa Cook on a separate matter involving mortgage applications. In an April 16 letter to Scott, they referred to a federal judge’s decision to quash subpoenas of Powell and other Fed officials over the renovation. “It would also be inappropriate to move forward with Mr. Warsh’s nomination as the President publicly threatens the federal judge who found the DOJ’s probe to lack merit,” the Democrats wrote. “Furthermore, it would be unreasonable to take the President at his word and assume – despite all of his thinly veiled assertions to the contrary – that he is uninvolved in the prosecution of Chair Powell.” The letter was led by Warren, D-Mass., and signed by Sens. Jack Reed, D-R.I.; Mark Warner, D-Va.; Chris Van Hollen, D-Md.; Catherine Cortez Masto, D-Nev.; Tina Smith, D-Minn.; Raphael Warnock, D-Ga.; Andy Kim, D-N.J.; Ruben Gallego, D-Ariz.; Lisa Blunt Rochester, D-Del.; and Angela Alsobrooks, D-Md. “I still have deep concerns that if [Warsh] is confirmed, he will be Donald Trump's sock puppet,” Warren told reporters on April 16, according to a transcript from her office after she met the nominee that day. “But following this meeting, I have additional concerns.” She added: “The first is that Mr. Warsh has not disclosed more than $100 million in assets, so that it's not possible to know his financial entanglements and how complex they are, and as to when he gets rid of them. The second concern that I have is that his name appears in the Epstein files, and yet, he claims to have zero knowledge of anything related to this.” Warsh is married to an heir of the Estee Lauder fortune. Niels Lesniewski contributed to this report.
