▶ 0:18:52>> this committee will come to order. Good morning to everyone. Mr. warsh, thank you for being with us today. This is really about the kitchen table.
▶ 0:19:20People across our country want to have confidence in our institutions that your nomination goes in the directions of why they should have confidence in the institutions. You have been nominated by the president to be the chairman of the federal reserve system. The federal reserve pays a powerful role in our economy. They can affect the american's ability to buy groceries.
▶ 0:19:51How far their paycheck does especially at the end of the month. How families are working hard, they are still feeling squeezed. Bidenomics have prices going up. They are just covering the bases.
▶ 0:20:18Too many workers are wondering when the economy is feeling stronger at their kitchen table not just on paper. Congress, president trump, and this administration are fixing the disastrous mistakes of bidenomics. Through efforts like the working families tax cut bill, we are helping americans keep more of their hard earned money. Compared to the average tax return under president biden.
▶ 0:20:53It is up 24% since then. The average tax return is around $3400 and an 11% increase. President trump and his leadership decided to focus on hard-working americans to make ends meet.
▶ 0:21:19Nearly half the country, half the returns filed in 2026 claimed either deduction for tipped income over time earnings, senior citizens, out of loan interest for major parts of the working families tax cut bill that every single person on this dais voted for. Under president trump's leadership americans are keeping more of their hard earned money.
▶ 0:21:48About $300 more they continue to put money back in the hands of everyday americans. That is why it is important. It is important that we conform kevin warsh to be the federal reserve chair. They have a dual mandate to promote stable prices and maximum employment.
▶ 0:22:19The policies of the fed with the cost of living and income. When the fed is successful in fulfilling its dual mandate, affordability improves. With the americans taking home more money and paying less for everyday necessities. Unfortunately in recent years the fed has faced real challenges.
▶ 0:22:46There have been questions about the decisions, its focus, and whether it is engaged in issues far outside of its jurisdiction. The federal reserve appears to move with a political whims raising real concerns about politics and weaponizing the most powerful weapons we have. For good, economically. The entire federal reserve system.
▶ 0:23:16Under the biden administration the fed pushed climate focus.
▶ 0:24:32C1 understands how economic decisions affect job growth, our economy, and the opportunities that we have come to love as americans. We want every citizen in this country to have a chance to live their version of the american dream.
▶ 0:24:56That means having our private sector economy running as strong as possible. Which means your focus has to be on everyday americans and not politicians. Everyday americans who desperately want to restore the confidence in our institutions. Today this committee will examine the plans Mr. warsh has.
▶ 0:25:28How he plans to leave the institution at a critical moment to deliver lower and real relief to working families. For folks back home and across the country, the goal is simple. They want lower costs and more opportunities. The federal reserve plays a key role in bringing prices down and helping wages go up.
▶ 0:25:56Confirming kevin warsh will make sure affordability is at the center of our economic agenda. Senator warren is now recognized.
▶ 0:26:06Sen. Warren: One of our members lost a child yesterday. I know our hearts go out to mark and his family. That is true on both sides of the aisle. We may disagree on policies and we may do so vigorously but when it comes to the safety and security in the health of our countries I know we are as one and we are praying for that.
▶ 0:26:35Chair Scott: I think would be appropriate for us to take a few seconds of silence. One thing you don't want to do as a parent. Thank you.
▶ 0:26:56Sen. Warren: Thank you and appreciate all you do. We should not be having this hearing today. Here's the context. First, over the past year, president trump has racked up one economic failure after another. Americans know that. Consumer sentiment just hit its lowest level on record, ever.
▶ 0:27:22Sen. Warren: Inflation is rising and families are paying more for groceries, health care, utilities, housing all thanks to the chaotic tariffs and the one big beautiful blu beautiful blill. The war is further driving of the cost of everything at home. Second, in your testimony.
▶ 0:29:47Sen. Warren: He said to me he has no regrets about anything he did. Let's take a deeper dive into Mr. warsh's record. In the years leading up to be 2008 financial crisis he was an enthusiastic cheerleader for credit default swaps and complex securities. He dismissed and repeatedly urgent concerns from housing advocates across the country regarding subprime mortgages.
▶ 0:30:16Sen. Warren: He refused to use the fed's authorities to address the risks in the financial system. When the crisis hit and the economy blew up, kevin warsh took on the job of wall street's personal liaison on the fed board.
▶ 0:30:35Sen. Warren: He was quick to respond to concerns from wall street ceos and worked tirelessly to arrange multibillion-dollar bailouts with nothing for american families. No regrets he says. After the crash, most people on the fed saw millions of americans unemployed.
▶ 0:30:59Sen. Warren: People said now might be a good time to lower rates and make the cost of borrowing cheaper for businesses to avoid more layoffs and make it cheaper for americans who are worried about paying mortgages for their credit cards. Not Mr. warsh, he wanted to keep interest rates high. He wanted to say the same song for more than a decade.
▶ 0:31:26Sen. Warren: When the job of the fed chair became available during his first term as president, wars held onto his high interest rate views. Trump passed him by. Regretful, he soon reversed course and called for the fed to pause interest rate hikes. Once trump left office, Mr.
▶ 0:31:51Sen. Warren: Warsh flipped again and was even criticizing the fed for cutting rates in the fall of 2024. As soon as donald trump became president the second time he reversed himself once more and began shouting from the rooftops about how the fed should cut interest rates. Evidently he learns his lesson. Mr.
▶ 0:32:19Sen. Warren: Chairman, last week every single democratic member of this committee asked that you postpone this hearing and instead conduct oversight on the president's role in directing bogus criminal probes into chair powell and governor cook. The senate should not be aiding and abetting donald trump's illegal takeover of the fed by installing his chosen sock puppet as chair.
▶ 0:32:47Sen. Warren: It's an invitation for corruption and economic catastrophe. We have the power to stop it and we should be using that power. Thank you.
▶ 0:33:00Chair Scott: There you have it. I will say it is interesting we are going to hear from senator david mccormick in his introduction of kevin warsh. Unanimously confirmed by the U.S. senate.
▶ 0:33:24Sen. Mccormick: Thank you Mr. chairman, ranking member warren, it is really a great honor to introduce my friend kevin warsh and welcome him here today. Kevin has been a friend for many years.
▶ 0:33:42Sen. Mccormick: Winston churchill observed that it is a special moment where they are figuratively tapped on the shoulder and offered the chance to do a very special thing. What a tragedy he warned. If that moment finds them unprepared for that, which would have been their finest hour.
▶ 0:34:09Sen. Mccormick: I'm here to assure you as someone who knows this institution that kevin warsh could not be more prepared for this. There is no one more fitting. No one more qualified to face this consequential moment as the 17th chair of the federal reserve.
▶ 0:34:34Sen. Mccormick: I'm not going to belabor kevins academic and professional record. They speak for themselves. I will tell you about a man who we worked with decades ago. Has been someone I have called a friend for almost 30 years. President george w. Bush appointed him when he was just 35. He was the youngest appointed board member in history.
▶ 0:35:03Sen. Mccormick: President bush saw in kevin what I believe you will see in him. Wisdom that belied his age now deepened by experience. A moral clarity, a moral clarity even in the most turbulent of times. A sharp and independent intellect immersed in unforgiving global financial markets.
▶ 0:35:36Sen. Mccormick: A deep, honest understanding of how the decision is made in the marble hallways of washington affecting the lives of hard-working americans. I, unlike many on this committee have seen these virtues on display across decades of friendship. I first met kevin in the late 1990's.
▶ 0:36:01Sen. Mccormick: A decade later we served together in the crucible of the global financial crisis. For nearly two years we work hand-in-hand to detain the damage and navigate the country through the crisis. I know then chairman ben bernanke relied heavily during those turbulent times.
▶ 0:36:32Sen. Mccormick: Kevin came to washington all those years ago as an outsider. An idealistic young man determined to serve his country. One who has succeeded beyond all expectations. He returns today is the ideal candidate to lead the fed at this most crucial juncture. If confirmed, kevin will inherit a federal reserve in need of repair in confronting serious uncertainty.
▶ 0:37:04Sen. Mccormick: An overextended balance sheet, poor record on inflation and a weak understanding of the profound opportunities offered in today's economy. He is uniquely suited to confront these challenges. He brings a reformers heart. He will shake up a institution at a time when change is sorely needed. He possesses a deep understanding of markets and is trusted by leaders.
▶ 0:37:40Sen. Mccormick: He equally understands the real economy. He knows from personal experience how the actions of a fed could change the lives of working families. It is no small thing. It is no fault -- small feet to know firsthand how increasing gas prices or an uptick in the unemployment affect everyday americans. The federal reserve must not be ruled by economists.
▶ 0:38:15Sen. Mccormick: It needs a leader. The stable prices and maximum employment serves a higher purpose. The preservation of the american dream. Kevin warsh has lived the american dream. I know in my heart he will always fight to keep that dream alive for all americans.
▶ 0:38:41Sen. Mccormick: He is the right man for this pivotal moment and I urge you not to get caught up in the politics of the moment and support his speedy confirmation. Thank you.
▶ 0:38:54Chair Scott: Thank you. I will now swear in the nominee. Oh you please stand and rise, raise your right hand? Do you swear the testimony you are about to give is the truth, the whole truth, nothing but the truth? You appeared to testify before any duly constituted committee of the senate? You may sit down.
▶ 0:39:18Chair Scott: Your statement will be made part of the record in its entirety, please give your oral comments to five minutes. You are now recognized.
▶ 0:39:27Mr. Warsh: I appreciate your consideration today. I certainly appreciate the many courtesies you have given me not just since the nomination but long before. With you, ranking member warren, with the entire committee. I'm deeply grateful to president trump for asking me to take on this public trust. That's what it is. The president believes that real economic growth in the U.S.
▶ 0:39:57Mr. Warsh: And real take-home pay will accelerate. The confidence of its country and its people, america's economic growth potential is rising as we sit here today. I'm also especially happy my wife is here. She has been with me for many of the most important moments in my life. I'm grateful for her love and her personal accomplishments.
▶ 0:40:25Mr. Warsh: I reciprocate that with some of my own love although I'm a little more stoic. Every 20 years I re-introduce her to this committee. She sat behind me 20 years ago. Let me offer today what I said then. Happy anniversary. I'm also thinking of my late mom and dad. They were paying great attention to this hearing 20 years ago. They are no longer with us.
▶ 0:40:58Mr. Warsh: I was always proud of them. We may have heard different narratives at the outset of this hearing. As a former fed governor, we have learned plenty of lessons.
▶ 0:41:29Mr. Warsh: The opportunities confronting the institution that I cherish, the federal reserve. To the president, congress, nation. Serving the mission that you and congress assigned to the federal reserve. Including full employment and stable prices.
▶ 0:41:56Mr. Warsh: The real highlight is not on my resume as senator mccormick said. They include the individuals with whom I work and who I learned. I graduated from high school in upstate new york. Some brilliant classmates. I have learned we are lucky in life if we start off with good influences in learning and in characters.
▶ 0:42:26Mr. Warsh: I am grateful. I made my way to stamford and found myself in the company of some of the highly accomplished policymakers. George schultz, former state of secretary and treasury was among the great patriots of the hoover institution who I came to know as a teacher, mentor, friend. He passed away right after covid at the age of 100.
▶ 0:42:51Mr. Warsh: I could not imagine a better formative experience than working and learning from folks like him. Maybe the most important I learned was to be around people completely devoted to the ideas and ideals of our country. Another fitting backdrop that we confront today. The U.S.
▶ 0:43:18Mr. Warsh: Was at the vanguard of a new era of technological leadership and I just looked out my door to see it. He never held a position in government but is no less a patriot. He never got a phd in economics but I don't know if I'm economic thinker.
▶ 0:43:41Mr. Warsh: Without their guidance, my friend and my boss at the hoover institution I doubt I would be sitting before you today as the president's fed chairman nominee. Absent their tutelage, example, I would not be prepared for the urgent mission critical task at hand.
▶ 0:44:05Mr. Warsh: In between these experiences at the birth, at the onset of the financial crisis, as senator warren said our central bank played an indispensable role 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.
▶ 0:44:34Mr. Warsh: In these unusual circumstances I saw the fed and these people at the very best. I witnessed an institution tempted to play a larger role in the economy and society. Let me be very clear, monetary policy independence is essential. Monetary policymakers must ask in the nation's interest. In that deliberation and unclouded decision-making.
▶ 0:45:03Mr. Warsh: As senator warren said I do not believe independence of monetary policy is threatened. Fed independence is up to the fed that has three implications. Congress's task with a mission for price stability, the fed choice, the second is the fed independence of monetary policy. As the chairman said the fed must stay in its lane.
▶ 0:45:35Mr. Warsh: I'm committed to ensuring the conduct of monetary policy remains strictly independent. A nonmonetary matter that is part of the fed's agreement. Finally, he always worried about government officials and hung around with the tyranny of the status quo.
▶ 0:46:04Mr. Warsh: The status quo practices and policies are especially harmful when the world is changing this fast. I will be faithful to the constitution to the federal reserve act and to the feds traditions. I believe a reform oriented fed and if confirmed I will seek to create an environment where people do their best work.
▶ 0:46:34Mr. Warsh: I suspect this hearing will put us to the test.
▶ 0:46:39Chair Scott: We typically stick to a five-minute opening statement. I encourage us to stick with that. We have full attendance today. It will be important for us to stick as closely to the five minutes as possible. If we go over by much you will hear me with an indication that you are already over. I will do my best to keep us on time.
▶ 0:47:11Chair Scott: There are so many questions to be honest with you. We will not have enough time. Some of my colleagues will have a conversation with you the ai will have massive impact on where we go as a nation.
▶ 0:47:42Chair Scott: Our production may go up while our employment stays flat. At some point we should delve into this. We should spend some time looking about our balance sheet. We have a nearly $7 trillion balance sheet at the federal reserve. Not enough has been paid to the nation's balance sheet. It is important for us to do this as well.
▶ 0:48:15Chair Scott: It has a major component of being a digital asset. The important role of the block chain in the future is an important part of the economy. I will spend some time talking about affordability and the importance of the fed.
▶ 0:48:39Chair Scott: One thing that I appreciate is the importance you have placed on the dual mandate. Those two will become more challenging. The second one being the ai and the future. You criticize the federal reserve for getting too big. I know you know the definition of transitory.
▶ 0:49:13Chair Scott: Compromising the independence of the fed, less time on climate change on politics, on who is not in charge. I will ask you how will you steer the federal reserve on affordability.
▶ 0:49:41Chair Scott: How do you make sure the stays out of our lane of external influences?
▶ 0:49:50Mr. Warsh: There is probably no more pressing question then living. We have learned that price stability was at -- objective. Over the course of the last several years after covid when prices went up to the tune of 25%-30%.
▶ 0:50:19Mr. Warsh: That is an indication that the fed missed its mark and we are dealing with the legacy of the policy errors in 2021 or 2022. It is more expensive and harder to bring it down. It is still a legacy that we are dealing with. We need fundamental policy reforms.
▶ 0:50:49Mr. Warsh: While it is less problematic meaning the rate of change in prices, hard-working americans are no doubt feeling it. That means a regime change. A different new inflation framework. I look forward to working with my colleagues. As you suggested using tools differently. My view is the interest rate tool gets in the cracks.
▶ 0:51:21Mr. Warsh: The balance she gets those with financial assets. The interest rate hits the entire economy. We need new tools and I would also say new communications. Part of the reason why after making a mistake, it was compounded. They give their forward guidance. What they are going to be. The fed is human.
▶ 0:51:52Mr. Warsh: They hold onto that longer than they should. If they got into a meeting before making a decision, they could keep the central bank from compounding its errors. I look forward to doing it.
▶ 0:52:09Sen. Warren: The fed has been plagued by deeply disturbing scandals involving at least six fed officials. You have more than $100 million in investments.
▶ 0:52:35Sen. Warren: Do the juggernaut llc invest in companies affiliated with president trump or his family? Companies that have facilitated money laundering, chinese controlled companies or financing vehicles established by jeffrey epstein?
▶ 0:52:58Mr. Warsh: Let me first share of point of agreement with you. The fed has two tools. The second is its credibility.
▶ 0:53:14Sen. Warren: Would you answer my question please? You have 100 million dollars in undisclosed assets. What I'm asking is our any of those with this outfit that invests in companies affiliated with president trump and the family, or financing vehicle set up by jeffrey epstein?
▶ 0:53:42Mr. Warsh: I have worked tirelessly. I have worked with them and agreed to sell all of my financial assets. You have investments in vehicles set up to advance jeffrey epstein?
▶ 0:54:08Mr. Warsh: What I'm telling you is those assets will be sold if confirmed before I sign the oath of office.
▶ 0:54:19Sen. Warren: Will you at least disclose how you plan to disclose assets. If for example billionaire stanley druck and miller who you wanted in your opening statement who makes a living guessing what the fed will do next cust -- cuts you a massive check for $100 million as you become the
▶ 0:54:50Sen. Warren: New federal reserve chair?
▶ 0:54:52Mr. Warsh: It sounds like your fight might not be with me but the office of government ethics. I have agreed to divest all of those assets.
▶ 0:55:08Sen. Warren: Will you discuss how you disclose those assets or will you just disclose the check from 100 million dollars for someone whose whole business is betting on what the fed will do? I will take that as a no as well. Donald trump has made clear he does not want the independent fed. He has said anybody that this made me will never be fed chair.
▶ 0:55:39Sen. Warren: He has made clear that you are his sock puppet. Saying interest rates will drop when kevin gets in. I think they do. Not when the economy needs it. He said when my guy is in their, we will get the interest rates that I want. Independence takes courage. We will start easy.
▶ 0:56:10Sen. Warren: Did donald trump lose the 2020 election?
▶ 0:56:12Mr. Warsh: We try to keep politics out of this.
▶ 0:56:19Sen. Warren: I need to measure your independence and courage.
▶ 0:56:28Mr. Warsh: I'm suggesting the fed mandate, your huge inflation problem and you certified the election. Out of monetary policy.
▶ 0:56:42Sen. Warren: You are a tough guy, those are your words. You will be able to stand up to president trump. Name one aspect of president's economic agenda with which you agree?
▶ 0:56:59Mr. Warsh: The federal reserve has wandered outside of its agreement. That is not something I'm prepared to do. The federal reserve should stay in its lane. I do have a disagreement with the president. Even this morning he said he thought I was out of central casting. I think I look older, gray.
▶ 0:57:30Sen. Warren: Quite adorable. We need a fed chair who is independent. That is the only way we preserve the independence of the federal reserve. If you can't answer these questions you don't have the courage.
▶ 0:57:47Mr. Warsh: I agree with you on independence.
▶ 0:57:50Chair Scott: Senator rounds.
▶ 0:57:55Sen. Rounds: . First of all welcome, I appreciate the opportunity I agree fed independence is critical. That is an item that you and I agree on, wholeheartedly. I want to take an opportunity to give you an opportunity to agree on. The ranking member hassan a number of items she concerns with.
▶ 0:58:26Sen. Rounds: I'd like to give you an opportunity to ask you a few questions. I will allow you to take the time to fully answer the questions. As I understand you worked with the career ethics professionals at the office of government ethics and at the fed to come to an agreement in terms of your dissolution of some of the assets that you as a businessman have. Is that correct?
▶ 0:58:53Mr. Warsh: Yes, that is correct. With the career professionals, the office of government ethics, answered all of their questions. They rode up and ethics agreement a part of the public record. Because I agree with senator warren on the ethical questions that have been raised by several people that were members of the fomc so that there is no question about my independence.
▶ 0:59:26Mr. Warsh: No question about my financial record. I agreed to divest all of my financial assets, the large majority of which will be divested before I am sworn into office. I am going above and beyond. Other than the fed needs to reestablish its credibility as the conduct of policy depends on it.
▶ 0:59:56Sen. Rounds: The agreement that you signed clearly states that you have agreed to divest your assets that are in question within 90 days of confirmation?
▶ 1:00:09Mr. Warsh: That is correct. A large majority of those assets will be divested before I am sworn into office if confirmed.
▶ 1:00:28Sen. Rounds: The career ethics professionals were the ones that set your --
▶ 1:00:40Mr. Warsh: I presume that is right. We had a very good working relationship. I'm happy to be sitting after the divestiture, whatever is the permitted asset. So we could get back to the business of fixing the fed. It has missed the mark.
▶ 1:01:03Mr. Warsh: As chairman scott said, this inflation risk is still something that is being talked about around kitchen tables and boardrooms. My preferred definition is a little different than most academics. I believe price stability should be a change in prices such as no one is talking about it.
▶ 1:01:26Mr. Warsh: The sooner that we could reform the institution, the sooner we could ensure prices and stability. With high credible ethical standards, return the fed to what it should be. The independence that senator scott and warren mentioned, it has to be earned.
▶ 1:01:54Mr. Warsh: It has to deliver on the promises, the commitments the fed has made. We shouldn't be surprised that we hear politics entering the room. You get the politics out of it so the fed could focus on delivering stable prices.
▶ 1:02:15Sen. Rounds: It's true people want to see stability within the fed, is it ok for a fed governor to change their mind on a particular policy?
▶ 1:02:23Mr. Warsh: It is more than ok, it is essential. Economics is not physics. Most of us started as we did as a math major. It was too hard. We wind up in economics. What we need to do is focus the left of the decimal point onto the right of the decimal point. If mistakes are made, central bankers, they need to correct them, fast.
▶ 1:02:53Mr. Warsh: The real mistakes that cause inflation to be persistent undermining hard-working american standard of living is when those mistakes go on.
▶ 1:03:04Sen. Reed: I ask that we have entered into the record the U.S. office of government ethics certification that requires all nominees disclose all of their assets in showing Mr. warsh is out of compliance and he has not met the ethics requirement.
▶ 1:03:32Chair Scott: Without objection. I will note what has been clearly articulated is that you will according to his agreement do what many others have done and be not only in compliance but to divest himself from any assets in question.
▶ 1:03:54Sen. Warren: I don't think we have other nominees who are out of compliance and not disclosing. Not in this committee. We will also not debate what we are putting into the record.
▶ 1:04:17Sen. Warren: What we are going to do is the 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 get to ask our questions. I hope we are able to continue in that direction. As long as we are we could continue our hearing. If we are not I will help us expedite.
▶ 1:04:44Sen. Reed: Thank you very much. Until you dispose of all of the assets you've identified, you will not be in compliance, is that correct?
▶ 1:05:03Mr. Warsh: My understanding is the signed ethics agreement provides duties and responsibilities on the government. That is the nature of the ethics agreement.
▶ 1:05:17Sen. Reed: You have an agreement that within 90 days you will dispose of all of your assets.
▶ 1:05:25Mr. Warsh: I have an agreement that there is appearance of nothing of -- no appearance of anything inappropriate. What I have disclosed is all of the information that is mine to disclose. I have shared all information about assets that I control and that I could share which I did much to the dissatisfaction of the government ethics office.
▶ 1:05:51Sen. Reed: What you have said is you will have assets already identified presenting potential conflicts of interest. Will you agree to not take the oath until you identify this?
▶ 1:06:08Mr. Warsh: I will agree to take the oath I struck with the government office of ethics. I don't think anybody could do more than that. I have agreed to divest even more assets.
▶ 1:06:24Sen. Reed: The divestiture is totally up to you. What assets you keep, and still be sworn in as chair.
▶ 1:06:32Mr. Warsh: The divestiture is up to the agreement I struck.
▶ 1:06:37Sen. Reed: Who makes the decision you or the office of government ethics?
▶ 1:06:42Mr. Warsh: Both of us, that is why it is an agreement.
▶ 1:06:52Sen. Reed: I must commend you on the way you go around questions. It is a skill but not a good skill for the chair of the federal reserve board. We typically ask questions to get direct, faithful answers.
▶ 1:07:14Sen. Reed: 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 you?
▶ 1:07:28Mr. Warsh: If I were to violate it I would not be in compliance.
▶ 1:07:39Sen. Reed: That is your position. When you sell all of your assets, where will you place the proceeds? Chairman powell has placed the funds that are very difficult.
▶ 1:08:05Mr. Warsh: I propose to put them in permissible assets as close to cash or treasury bills as I could possibly can. It will be sitting in something like cash. The question of independence is one that will dominate these proceedings.
▶ 1:08:31Mr. Warsh: This morning, president trump said would you be disappointed if your new fed chair doesn't cut rates right away? President trump I would. It is 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
▶ 1:09:03Mr. Warsh: Thing has gone quite quickly between president trump statements and your positions. Again, you maintain you will be independent with president trump?
▶ 1:09:18Mr. Warsh: Yes, I do.
▶ 1:09:23Sen. Reed: President trump maintains nobody is independent with him. The entire government including the federal reserve. You will be someone who carries this out. Frankly, do you suspect he chose you because you indicated to him that you want to cut rates?
▶ 1:09:39Mr. Warsh: I don't know the reason for the president's choice. I could tell you what I have been writing about for 15 years.
▶ 1:09:53Sen. Reed: I will cut rates if you give me the job.
▶ 1:09:55Mr. Warsh: That is not what I said. The president, virtually like all presidents they tend to be for cutting rates. President trump expresses it quite publicly without surrogates. Presidents want lower rates. That independence is up to the fed. Fed leadership has to make a decision about what is the right thing to do.
▶ 1:10:23Sen. Reed: You are a leader. You establish the moral and ethical standards. It is not my job. It is everybody's job. Thank you.
▶ 1:10:38Chair Scott: Senator tillis.
▶ 1:10:41Sen. Tillis: Could I make a parliamentary inquiry? I want to make sure we get this right. I am not an attorney but I think it's pretty important to suggest that according to Mr. warsh he has signed an agreement that is in compliance provided he executes the agreement. We should not enter into the record he has before us. You stipulated that what senator warren said was a first of a kind.
▶ 1:11:13Sen. Tillis: He is not out of compliance. He has agreements. I want to make sure for the record that this is clear.
▶ 1:11:22Chair Scott: I want to reiterate what you just said, the office of government ethics has entered into an agreement with kevin warsh that he has up until 90 days after confirmed to divest of his assets.
▶ 1:11:44Sen. Tillis: I heard somebody say he is before us out of compliance. That is why I checked. He is properly before us. You will be in compliance. That addresses the concerns that have been presented by my colleagues on the other side of the aisle. I want to confirm that is in fact accurate.
▶ 1:12:05Sen. Warren: Is this parliamentary inquiry?
▶ 1:12:12Sen. Tillis: I didn't want to burn my time on something I felt was a cheap shot.
▶ 1:12:15Sen. Warren: I would like to ask the other question, have we seen this agreement, do we have any way to verify that these sales will occur if we have no idea what is in them and no one has told. Let's do remember the law for a minute. The fed do not have a 90 day you could be out of compliance.
▶ 1:12:45Sen. Warren: Fed law is explicit that you cannot own any portion of a financial interest in a bank. >> are we going to all get extra time? I would like an extra three minutes. >> for the record. >> that was a parliamentary inquiry so it doesn't count.
▶ 1:13:13Sen. Warren: >> the reason I mentioned that is because the U.S. a chair said that this was a first of a kind of someone being out of compliance.
▶ 1:13:26Chair Scott: Let me just be very clear again the ethics professionals, the ones that said is signed paperwork would not have done so. Senator kennedy does raise a good point.
▶ 1:13:50Chair Scott: We will stick to our timeline and appreciate you raising the point of how long an inquiry could go on. Unless of course we all decide we want more time. I would rule against it.
▶ 1:14:07Sen. Tillis: Thank you, congratulations. , congratulations. You cannot count this as a date with jane, particularly this hearing. The first hearing was a little less acrimonious. I will not ask you anything. You can take a break and get ready for a bludgeoning on the other side. They will beat you until you bleed and then beat you for bleeding. I will talk about what is preventing me from being in a position to vote for you we spent time together in my office. You have extraordinary credentials.
▶ 1:14:38Sen. Tillis: They are impeccable. I think the way you are dealing with the ethics issue is strong. The problem I have is where we are right now. I start by saying I love your opening statement. I love your focus on the independence of the fed.
▶ 1:14:53Sen. Tillis: I love the idea of fed independence with respect to achieving the dual mandate, but fed transparency, so many other things the fed does that frankly we are all frustrated with, banking examination something among them that we should have more insight into. Mr.
▶ 1:15:11Sen. Tillis: Chair, I would like to submit to the record two executive orders under president trump, won in 2020 and one in 2025, talking about making federal architecture beautiful again and focusing on trying to preserve the integrity of old buildings.
▶ 1:15:28Chair Scott: Without objection.
▶ 1:15:29Sen. Tillis: Thank you. 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 chair powell under investigation. I am 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 am naturally wired to go back from the ground up and figure out what the deal is. Here is what I know.
▶ 1:16:01Sen. Tillis: The building has been completed under this project to make it a $4 billion project. Even if you put the building in, it is a $3 million building. The reality is what we are talking about is the eccles building and the east building. Bringing up, jack. You are a tall guys people can see it. These are overruns in part because the inputs went up 69% since the original estimate. Asbestos was identified. Mediation was required.
▶ 1:16:33Sen. Tillis: 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 would have to reserve an area roughly the size of texas for a penal connelly because of the way government projects work.
▶ 1:17:00Sen. Tillis: The inflation adjustment was about $730 million, the majority of which seems to be legitimate. Next slide. Acceptable. Unfortunate but legitimate. What I have a problem with, and by the way, I think you have to be independent, you have to convince 11 other people. Most of these folks are 11-1.
▶ 1:17:30Sen. Tillis: The president can appoint somebody and you can unilaterally lead, you will fail. The problem I have here is we had some U.S. attorney with a dream or assistant U.S. attorney thinking it would be cute to bring chair powell under investigation just a few months before the position was going to be open. This happened this year. Normal course and speed.
▶ 1:18:02Sen. Tillis: Here is how it works for the fed. The term would have expired may 15. We would be having this hearing, you would be getting confirmed. Custom suggests 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 about what seemed to be justifications for it are holding up this whole process.
▶ 1:18:30Sen. Tillis: It sounds like to me somebody over at the doj did not 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, he said he did not know anything about it. So we have 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 did not know about and. The president did not know about it.
▶ 1:19:00Sen. Tillis: Let's get rid of the investigation so can support your conversation. Mr. warsh, the only thing I found the least bit odd about you is you never watch an episode of "seinfeld." you spent so much time being a rocksolid economist that you are not even taking time away for a little laugh like that. I look forward to supporting your nomination and look forward to this investigation being taken down.
▶ 1:19:21Sen. Tillis: If the chair wants to have all of our subcommittees start looking at capital expenditure projects for the agencies that we are overseeing, I think that is a great idea, and I would like to be on a committee specifically drilling down on this analysis. If somebody can prove me wrong, I would be happy to make a criminal referral. But I don't have the D.C. circuit judge tell me a crime was committed when seven members on this committee said it wasn't, including the chair. Thank you, Mr. chair.
▶ 1:19:46Chair Scott: You are welcome. Only one question. What is "seinfeld?" senator van hollen.
▶ 1:19:54Sen. Van Hollen: Mr. chairman, thank you. Mr. warsh, good to see you. Reviewing our record, I am concerned that your position on interest rates seems to shift with what is politically convenient rather than based on sound economic judgment.
▶ 1:20:15Sen. Van Hollen: After 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.
▶ 1:20:41Sen. Van Hollen: You have made this payment even as today -- 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 is why price stability is an important part of the fed's mandate. Right?
▶ 1:20:57Mr. Warsh: Senator, yes.
▶ 1:20:59Sen. Van Hollen: And the fed uses its monetary policy tools for price stability and full employment. That is the job congress gave to the fed. Here is how ben bernanke described how the fed uses those tools. He said, and I am quoting, "generally if economic weakness is the primary concern, the fed asked to reduce interest rates -- acts to reduce interest rates.
▶ 1:21:26Sen. Van Hollen: If the economy is overheating, the fed can raise interest rates to constrain inflationary pressures." so that is 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 is generally how the fed can use monetary policy to affect the economy?
▶ 1:21:52Mr. 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 he said is a question about what is the economy's potential.
▶ 1:22:08Mr. Warsh: 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 the fed will have to dig deep in in evaluating what is the right policy choice in the upcoming meetings.
▶ 1:22:23Sen. Van Hollen: I want to push you a little bit on that in a moment. But right now, the fed has said its main interest rate at 3.5% to 3.7%. Last december, president trump told the wall street journal he wanted to cut rates to 1% and maybe lower than that by the end of this year.
▶ 1:22:45Sen. Van Hollen: So just to better understand how you think about economics, in the economic model bernanke laid out, let's say there is an economy with decent growth and no recession. If the central bank were to cut rates from 3.5% to 1% or lower, a massive cut, that would typically push prices up. Right?
▶ 1:23:04Mr. 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 is essential.
▶ 1:23:18Sen. Van Hollen: Mr. warsh, I am not asking you what decision you would make. Obviously, that will be up to you. I am asking you for the framework in which you think about these things. And it seems a pretty straightforward question about what would happen interest rates by the end of this year to 1% or less. Under the bernanke model, and I think almost every economist or most economists would say that would drive up prices.
▶ 1:23:49Sen. Van Hollen: So that is what I am asking you. Would you agree that would likely drive up prices?
▶ 1:23:54Mr. Warsh: So, senatormr. Warsh: , 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 across purposes. So it is hard for me to isolate one variable when we would have to have a discussion on the other.
▶ 1:24:14Sen. Van Hollen: All right.
▶ 1:24:15Mr. Warsh: But generally -- sorry.
▶ 1:24:18Sen. Van Hollen: Let me just say this was a pretty clear question about the framework in which these decisions are made. I have heard you talk about how ai may change that calculation. I will just say, and I think you know this, I have this, the financial times point out economists reject kevin warsh's claim that ai will enable rate cuts.
▶ 1:24:49Sen. Van Hollen: And I find it just impossible to suggest that by the end of this year ai would produce such increases in productivity that could reduce a rate cut to below 1% and you cannot tell me that would very likely increase prices.
▶ 1:25:08Mr. Warsh: Senator, cannot say two things? Sorry.
▶ 1:25:14Chair Scott: Quickly.
▶ 1:25:15Mr. Warsh: Sorry. 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 is likely to find its way to the real economy 6, 9, or 12 months later. So it is difficult to judge policy today for an immediate result. And that would be my only concern about the framing of your question.
▶ 1:25:40Sen. Van Hollen: Thank you, Mr. chairman. In closing, this is what concerns me. Your views now have flipped to conform with where the president of the united states is, and that has been a concern many of us have. Thank you, Mr. chair.
▶ 1:25:53Chair Scott: Senator kennedy.
▶ 1:25:55Sen. Kennedy: I want extra time.
▶ 1:25:58Chair Scott: I know.
▶ 1:25:59Sen. Kennedy: Consider these five minutes a parliamentary inquiry. What is a sock puppet?
▶ 1:26:07Mr. Warsh: I heard the reference from senator warren.
▶ 1:26:10Sen. Kennedy: What is it?
▶ 1:26:12Mr. Warsh: I am not sure I know. I think it is something you stick your hand in.
▶ 1:26:16Sen. Kennedy: Kind of like this.
▶ 1:26:17Mr. Warsh: Yes.
▶ 1:26:18Sen. Kennedy: What is a human sock puppet? Is a human sock puppet somebody that will do what somebody else wants them to do?
▶ 1:26:27Mr. Warsh: I think that is what was suggested.
▶ 1:26:29Sen. Kennedy: Are you going to be the president's human sock puppet?
▶ 1:26:32Mr. Warsh: Senator, absolutely not.
▶ 1:26:34Sen. Kennedy: Are you going to be anybody's human sock puppet?
▶ 1:26:37Mr. Warsh: No. I am honored I am nominated and will be an independent actor if confirmed to the federal reserve.
▶ 1:26:46Sen. Kennedy: My friend senator warren, and she is my friend, suggested 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 signature bank. She did not say the last part. I just did. Are you going to do that?
▶ 1:27:06Mr. Warsh: No, senator.
▶ 1:27:08Sen. Kennedy: Ok. The ethics folks, they have cleared you, but they said you have to sell some assets. Is that right?
▶ 1:27:16Mr. Warsh: Yes, sir.
▶ 1:27:18Sen. Kennedy: Ok. And these assets that you have, you can't just hold a yard sale, can you?
▶ 1:27:24Mr. Warsh: Not for most of them, sir.
▶ 1:27:27Sen. Kennedy: It takes a reasonable period of time. Right?
▶ 1:27:31Mr. Warsh: Yes, sir.
▶ 1:27:32Sen. Kennedy: And you promised to sell them, right?
▶ 1:27:35Mr. Warsh: I did.
▶ 1:27:36Sen. Kennedy: And if you don't sell them, we will know and the ethics folks will know, right?
▶ 1:27:42Mr. Warsh: Yes, I would be in violation of the ethics agreement.
▶ 1:27:46Sen. Kennedy: But you will sell them, right?
▶ 1:27:48Mr. Warsh: Yes I will, senator.
▶ 1:27:50Sen. Kennedy: Can we agree? Can we agree that politicians have the right to offer you advice about what to do with interest rates?
▶ 1:27:59Mr. Warsh: Senator, we can agree, and it is not something I which I away from. I heard many senators from this very committee in years past express strong views on interest rates. Central bankers should be listening and making their own decisions.
▶ 1:28:16Sen. Kennedy: But some politicians matter more than others. And generally speaking presidents, their opinion matters more than a senator. President trump has offered his opinion about what you ought to do with interest rates. Is that right?
▶ 1:28:32Mr. Warsh: He has not made his opinion on that a secret to anybody.
▶ 1:28:36Sen. Kennedy: Yeah. And every president has that you are aware of.
▶ 1:28:42Mr. Warsh: Yes. And they all tend to be in the same direction, senator kennedy.
▶ 1:28:48Sen. Kennedy: The problem is -- can we agree your credibility as fed chairman is the most important thing you have?
▶ 1:28:55Mr. Warsh: It is the most important thing to me. It is the most important thing to the institution. And it is the most important thing to the successful conduct of policy.
▶ 1:29:03Sen. Kennedy: That is a yes, right?
▶ 1:29:05Mr. Warsh: Yes, senator.
▶ 1:29:07Sen. Kennedy: The problem is president trump has said he will not appoint anybody who would not agree to lower interest rates. Have you agreed with the president that you are going to lower interest rates?
▶ 1:29:19Mr. Warsh: Senator, I am 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.
▶ 1:29:35Sen. Kennedy: So the president has never sat you down, look you in the eye, and said, here is the deal, scooter, I am going to a you but you have to agree to lower interest rates? That did not happen or it did happen?
▶ 1:29:49Mr. Warsh: The president never once asked me to commit to any particular interest-rate decision, period, and nor would I 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 have heard his view on interest rates. It sounded very similar to me to every other president in economic history I have studied.
▶ 1:30:12Sen. Kennedy: Ok. I've got one more question because I am about to run out of a 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 is not a problem. Therefore, rates can be cut.
▶ 1:30:43Sen. Kennedy: Do you really believe that right now?
▶ 1:30:44Mr. Warsh: That is not how I would characterize the story on ai.
▶ 1:30:48Sen. Kennedy: Ok, but you said what I just said.
▶ 1:30:51Mr. Warsh: I have said that this is the most disruptive moment in modern economic history in the U.S. and the world. I said that artificial intelligence, ai will have an effect.
▶ 1:31:06Sen. Kennedy: The chair will cut me off. Here is my worry. A lot of the stuff about artificial intelligence making us more productive is a bunch of hype by people who want to sell stock in an ipo. I would be careful there.
▶ 1:31:19Mr. Warsh: Yes.
▶ 1:31:21Sen. Kennedy: Thank you, Mr. chairman. I will get to my five minutes in a little bit.
▶ 1:31:25Chair Scott: If you come back about midnight, sir, we will go ahead and start it all over again. Brand-new day, sir. Brand-new day. Senator cortez masto. Sen. senator court -- Sen.
▶ 1:31:40Cortez Masto: Thank you for taking the time to meet with me. Congratulations on this nomination and welcome to all of your family and friends who are here. Let me talk to you about a couple of things really around economic theory, and we have talked a little bit about this when we were meeting. Inflation has been above the fed's target for five years. Would you agree with that?
▶ 1:32:05Mr. Warsh: Yes, senator, it has.
▶ 1:32:09Sen. Cortez Masto: Core pce inflation has been running a full point above the fed target, correct?
▶ 1:32:12Mr. Warsh: Yes.
▶ 1:32:13Sen. Cortez Masto: So some federal reserve officials have said this excess is due to tariffs. Do you agree with that?
▶ 1:32:20Mr. Warsh: Senator, I don't. If I can make two points.
▶ 1:32:24Sen. Cortez Masto: Please.
▶ 1:32:25Mr. Warsh: Much as we discussed in your office, I think the data that is being used to judge inflation is quite imperfect data. Among the projects that the economics profession and it confirmed as chairman of the fed the fed needs to do is to try to use our new understanding, new data sources to see what is the inflation rate in the economy.
▶ 1:32:49Mr. Warsh: We used to use core pce, core measures so we would exclude food and energy because it was sort of a rough swag as to what was going on. We don't have to do a rough swag anymore. What I am most interested in is what is the underlying inflation rate, not the one-time change in prices because of a change in geopolitics or a change in beef. But what is the underlying generalized change in prices in the economy?
▶ 1:33:15Mr. Warsh: And my broad sense is that these inflation risks and the inflation damage the last several years is improving somewhat. It has improved somewhat in the last year. The measures I prefer are looking at things called trimmed averages where we take out all of the tail risks, all of the one-off items, and we ask ourselves whether the generalized change in prices is having second order effects on the economy. Again, they are not where they should be but the trend is quite favorable.
▶ 1:33:43Sen. Cortez Masto: And these trend averages in the data you are looking at is not the norm that economists use in this position. Is that correct?
▶ 1:33:53Mr. Warsh: Some in the economic profession are increasingly looking to these median type measures, but among the projects I would hope to undertake as one of the first reforms of the fed is a data project where we would go off and evaluate with the public sector and private sector, including the bureau of labor statistics a survey of a billion prices.
▶ 1:34:14Mr. Warsh: What I am really most interested in is, what is the change of the 500 millio1 price -- 5 00,000,001 price? I do want to be confused by that. I want to know what inflation is and I think there is work to do.
▶ 1:34:32Sen. Cortez Masto: And I respect -- listening to you today and talking with you, I respect you truly believe as an economist and a theorist in this theory, in what you are talking to us today about, which is traditionally not the norm, and many are disagreeing with you on that and publicly disagreeing, so I understand that. But I guess the position I have is I hope you are right.
▶ 1:34:58Sen. Cortez Masto: But at the end of the day, my concern is people are suffering right now with high costs and we need to address it. I don't know how long it will take for your economic theory to gain traction or to be proven that it will benefit so many people in this country right now. He is one other thing because I don't have much time, and this is the concern of mine so I want you to address it.earlier , you have been on the federal reserve board and were there during the financial crisis of 2008. You and I talked about this.
▶ 1:35:29Sen. Cortez Masto: I was attorney general then. It hit nevada so hard. Here is what I knew at that time . In 2006, you attended numerous meetings where housing experts pleaded with you to stop predatory mortgages. In fact, gail burks, who I worked with, repeatedly warned fed leadership including you about predatory lending practices such as flipping loans or misinforming seniors about reverse mortgages.
▶ 1:35:59Sen. Cortez Masto: And in 2007, you said "subprime mortgages have gotten a bad name in this environment, and in some cases that is not just." you also said that you do not see any immediate systemic risk issues among big banks. You said that at that time. And just recently, this is what I want you to address, senator warren has said you told her you have no regrets during this tenure.
▶ 1:36:23Sen. Cortez Masto: How can we trust your economic theory when you were wrong then and it is going to be the accuracy we we need now to help so many families and businesses that are struggling with policies we are dealing with now?
▶ 1:36:34Mr. Warsh: Senator, let me address a few things. The chairman will cut me off when he must, but I would say this. For many years before the global financial crisis, I warned about the very real risks of fannie mae and freddie mac blowing up, which they did. I think that part of the housing market was vulnerable for many years. And not enough was done about it even in spite of my protestations and urging about reform. It was not done.
▶ 1:37:04Mr. Warsh: I think that compounded the financial crisis. Secondly, I think subprime mortgages then, subprime assets then were indicative of prices of almost every financial asset that were mispriced. What I suggested then and what I believe now, subprime mortgages were just indicative of a set of prices that were incorrect and they all repriced. Just to get one final example --
▶ 1:37:27Chair Scott: Perhaps no examples right now.
▶ 1:37:30Sen. Cortez Masto: Thank you.
▶ 1:37:31Chair Scott: Let's go to senator hagerty. Want to give an opportunity to finish the exchange.
▶ 1:37:39Sen. Hagerty: Thank you. Welcome to you and your family. I want everyone to know I have known kevin warsh for 30 years. We first crossed paths in 1992 shortly after kevin graduated from stanford. We both worked at the white house staff at that point in time. I just want to say this, that the man testifying before us today is the same man I got to know then. Serious, disciplined with a true heart for public service. And I want to say this. I have said it before.
▶ 1:38:11Sen. Hagerty: Kevin warsh is the man for the moment. His background, experience, and discipline are precisely what we need to bring our economy to its full potential. I am delighted to see him here today as we both reinforced competence at home and do the same thing abroad. I think about kevin's qualifications. I think about the contrast with the nominations we saw with the last administration.
▶ 1:38:38Sen. Hagerty: I think this committee will recall 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 is an asset. It brings a practical understanding in terms of how markets function.
▶ 1:39:09Sen. Hagerty: 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?
▶ 1:39:22Mr. 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 so I have known him for a very long time. I think my prior experience at the fed, which some of your colleagues made reference to, will allow me to hit the ground running. This is as consequently moment for the U.S.
▶ 1:39:49Mr. Warsh: Economy and frankly for the institution as any point since the late 1970's. And so my experience at the fed, my understanding of the people, the culture, the governance, and of the that are ripe for reform will give me a leg up. We do not 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.
▶ 1:40:17Mr. Warsh: And because ai that senator kennedy referenced is so consequential and ai is quickly becoming something like escape velocity, it is 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 infection easier, there is a question about what it means for employment, which is another part of the fed's mandate.
▶ 1:40:46Mr. Warsh: So I think that is part and parcel of what my background and history would suggest. But if I can make one other point, what the needs is a reform to frameworks and communications. I have seen what the fed has done well and often will give them one cheer or two. But now more than ever, the fed needs three cheers, and that is what I hope to deliver.
▶ 1:41:10Sen. Hagerty: Let's stay on this point. Particularly, and you mentioned this in your commentary, the point of the fed's mission over the years. If you think about what the fed has done, and straight into what I would call politically contentious areas, going well beyond the core mandate. And we have seen this across the federal reserve system. What the fed has done is eroded into credibility of what it should be, which is an apolitical independent bank.
▶ 1:41:41Sen. Hagerty: The fed is focused on nonmaterial and often politically non-charged areas. Elsewhere we have seen regional reserve banks use preference to promote divisive partisan policies and there I am thinking about d.e.I., climate policy, even racial reparations. The minneapolis fed went so far as to have an amendment to state constitution on policy. How far beyond the remit can they get?
▶ 1:42:09Sen. Hagerty: The fed even sought to redefine legislative mandate of maximum employment as "broad-based and inclusive goal." that is tacitly understood the to mean the fed should -- and while the fed undertook this social engineering, it also engineered a massive footprint in our market.
▶ 1:42:30Sen. Hagerty: Qe provided government debt, which made it easy for us to subsidize more government debt here, subsidized government financing, and encouraged 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 on policy decisions that ought to be left with those of us who are democratically accountable. Mr. warsh, the fed's own actions have eroded its credibility. What you think should be done to regain public trust?
▶ 1:43:01Mr. Warsh: Senator, robust reform. The fed can deliver on the mandate that you gave it if it sticks to its netting. As it wanders into areas of how much it has neither authority or expertise, it loses its focus. I will just give one example.
▶ 1:43:20Mr. Warsh: In 2020 come as you referenced, when the federal reserve changed its framework in august of 2020 come inflation was running at around 1.72%, and the fed changed its framework, rewrote in some sense the remit you gave it, and they asked for a little more inflation. They ended up with a lot more, and that was the foundation for the inflation surge that happened in the subsequent years, which we are still living with.
▶ 1:43:46Sen. Hagerty: Thank you, Mr. warsh. Thank you, Mr. chair.
▶ 1:43:50Chair Scott: Senator smith.
▶ 1:43:51Sen. Smith: Thank you, Mr. chair. Good morning, Mr. warsh. It is still a. Let me start with this. I think you have said you have confidence that this economy has potential. I think that is fair to say. You have also said this is a time of great consequence for the nation's economy, perhaps one of the most significant hinge points in a couple of generations. That is fair to say.
▶ 1:44:16Mr. Warsh: Yes, senator.
▶ 1:44:18Sen. Smith: Thank you. I agree with that and want to go a bit further because I think it seems to me this economy is amazing for rich people, people who have a lot of capital. And in fact, we can see in 2020 5 billion are both grew three times faster than the average rate of the previous five years and wealthy households hold a massive portion of the nation's wealth. This I think is the tipping point that our economy actually faces right now.
▶ 1:44:49Sen. Smith: I can tell you that in minnesota a lot a people are telling me is harder and harder for them to afford the basics. They are not rich. They don't have enough money to pay their bills, pay their doctors bills. So I want to look at this with you for a few minutes. And I want to start with inflation.
▶ 1:45:07Sen. Smith: So last week, president trump said that gas prices are "not very high" and "we are having some inflation because of the fuel." understanding what you said about the data, do you think gas prices going up 20% is think inflation?
▶ 1:45:26Mr. Warsh: Senator, gas prices like beef prices, eggs, milk, and the rest, they move and when they move in the wrong direction, people are hurt by it.
▶ 1:45:38Sen. Smith: That is right, american people file. It is not fake to them. They don't have money in their pocket because gas is up 20%. I think my constituents would say that inflation is real and not fake. Let's look at one point. At the state of the union, the president said the economy is a roaring economy. Excuse me. Open op"the roaring economy is roaring like never before." do you agree with that statement?
▶ 1:46:07Sen. Smith: Do you see the economy as roaring like it has never roared before?
▶ 1:46:10Mr. Warsh: Senator, if I can clarify two things, there is a difference between the change in prices and inflation. Change in prices happen in a market economy. When inflation moves up, that is because that is because the fed had something to do with it. On the state of the economy, I would take the broad contours of the economy are improving. The potential of the economy, the real results of the economy are improving. But I think it can improve more. And I think in the years ahead, the economy's potential is strengthening.
▶ 1:46:38Sen. Smith: So, you know, the reality is the economic data, understanding what you are saying about economic data not being imperfect, but there was almost zero job growth in 2025. That looks to me like not a roaring economy. It looks like a weak economy which is what my constituents are telling me back in minnesota. Let me go to one last look at this. Around the country, the average cost of home insurance rose 12% last year.
▶ 1:47:07Sen. Smith: In my home state of minnesota, not a coastal state, premiums rose 34% in 2025. This is of course caused by extreme weather events, hail, floods, tornadoes and hurricanes, climate change. So is that inflationary in your perspective? Is that increase in home insurance property, casual insurance, isn't that inflation?
▶ 1:47:31Mr. Warsh: Senator, if I can answer two questions that I think I heard, we talked about both of these in your office. We look at the payroll numbers every month and ask ourselves whether it is good or bad. The job you gave to the federal reserve is to ensure we are at maximum sustainable. The economy is running close to full employment but we never know what the right number is.
▶ 1:47:55Mr. Warsh: So if americans that want a job can find a job, by the fed's metric, we are at full employment. On the question of insurance premiums and the rest, when I look broadly across the economy, I would say when we look at health care, when we look at education, when we look at housing, those prices tend to go up more in the less regulated part of the economy. We have seen a downward structure, a downward change in prices, and try to aggregate them the best we can.
▶ 1:48:23Sen. Smith: So I am not exact sure what your point is there, but I would say my point here is rising home insurance rates caused by increasing extreme weather events, climate change is another inflationary pressure and people in my state are dealing with.
▶ 1:48:41Sen. Smith: This of course -- the reason I am focusing on this is because I am worried that because of the pressure that you are going to be under from the president to lower interest rates that this inflationary pressure that my constituents are feeling is going to get worse and not better. I don't have time to ask my last question, but it is not really this, the president has had he demands the next fed chair will lower interest rates.
▶ 1:49:13Sen. Smith: I take him at his word at that, and that is what causes me such grave concern here. Thank you, Mr. chairman.
▶ 1:49:17Chair Scott: Yes, ma'am. Senator lummis.
▶ 1:49:21Sen. Lummis: Thank you, Mr. chairman. Welcome, Mr. warsh. Thanks for appearing before this committee and taking both positive questions and some of the hostility. I apologize for my colleagues's behavior when it strays out of decorum. My first question is about the balance sheet of the fed.
▶ 1:49:48Sen. Lummis: What is your view about the size of the balance sheet currently?
▶ 1:49:51Mr. Warsh: Thank you, senator. As we talked about your office, the fed balance sheet has played a particularly I think unhelpful role in helping the fed achieve its dual mandate. The senator had just mentioned what she described as the increase for financial assets relative to real assets. Part of that is the federal reserve.
▶ 1:50:18Mr. Warsh: The fed is not blameless in that as it has grown, the fed's balance sheet has grown, those with financial assets have benefited from it. The reason why I prefer monetary policy to use interest rates as the dominant force is interest rates affect a far broader cross-section of the economy. Interest rates get in the cracks. If we were to cut rates, a broader number of people would benefit from adverse's quantitative easing, which tends to move through financial assets first.
▶ 1:50:51Mr. Warsh: Half of our constituents don't on financial assets so they don't know what is in it for them. Roughly speaking, I was involved in 2008 and 2009 in response to the global financial crisis that senator warren mentioned and we created a bigger balance sheet, but we agreed to do that only in the times of emergencies, only when interest rates were pinned to zero.
▶ 1:51:15Mr. Warsh: The big balance sheet has become an ordinary recurring force and I think quite unhelpful and is part of the reason why the fed is in the business of politics. Slowly and deliberately, I believe we need a smaller central bank balance sheet. It took us 18 years to create this big balance sheet that has done quite a bit of harm. It strikes me to the fed's credit.
▶ 1:51:43Mr. Warsh: Working with the treasury, we will have to find a way to take the fed balance sheet and make it smaller because a large balance sheet where the fed owns more outstanding debt than many parts of the financial markets, that is fiscal policy in disguise. That needs to get out of the fiscal business, focus on the monetary business so the fed can deliver on the remit you gave us.
▶ 1:52:03Sen. Lummis: Thanks for that response. Because some of us don't appreciate the connection between the size of the fed's balance sheet and interest rates. With regard to interest rates, can you tell us a little bit about your conversations president trump about interest rates?
▶ 1:52:22Mr. Warsh: I don't want to put words in the president's mouth, but I think he has said loudly and clearly his view on interest rates. I don't think I am breaking any news here, but I can tell you what I said. And what I sent to the president is what I sent to this committee and what I have frankly been writing about for more than a decade.
▶ 1:52:44Mr. Warsh: Interest rates are the much better way to be using monetary policy than buying bonds and mortgages some of which are issued from the united states treasury department. That is a confusion of roles that leads to a set of mission. Interest rates are the dominant tool and interest rates as I mentioned get in the cracks.
▶ 1:53:05Mr. Warsh: My broadview on the conduct of policy from here is that too many fed officials past and present opine in advance about where they think interest rates should be next meeting, next quarter, next year. I think that is quite unhelpful. As we have heard today from many of your colleagues, we don't know the state of ai. We can't be certain about the state of geopolitics. The economy is going to change.
▶ 1:53:32Mr. Warsh: You need central bankers that are humble, nimble, open-minded, that can react when we have good data, when events strike us. My view is interest rates need to be forward-looking, based on better data come and we should have a big robust deliberation inside the fomc.
▶ 1:53:52Mr. Warsh: I favor messier meetings t somewhere peoplehan -- than some where people do not show up with rehearsed scrips. Where we can have a good family fight. If we have a family fight, they will make better decisions and if we make mistakes, they will correct them sooner. I am not one for pre-deciding what interest rates should be. I never said to the president where I think rates should be. I never committed any such thing, and I would not have even thought about doing so.
▶ 1:54:20Sen. Lummis: Quick yes or no. Do you believe digital assets should be incorporated into our financial industry so americans have new investment opportunities and consumer protections?
▶ 1:54:34Mr. Warsh: Senator, digital assets are already part of the fabric of our financial services industry in the united states, yes.
▶ 1:54:41Sen. Lummis: Thanks, Mr. welch.
▶ 1:54:42Chair Scott: Senator warnock.
▶ 1:54:45Sen. Warnock: Thank you, brother chair. Mr. warsh, congratulations on your nomination. I appreciated our time in my office a few weeks ago. If confirmed, you will serve as chair of one of the most powerful economic institutions in the world. The decisions you make would move markets, affect americans's, retirement savings, and ability to buy homes.
▶ 1:55:17Sen. Warnock: It would influence the global economy. You currently serve as a lecturer at stanford university. If you were to assign -- if professor warsh were to assign a letter grade to the american economy today for the average working family, what grade would you assign?
▶ 1:55:37Mr. Warsh: Senator, it was good to meet with you in your office. You know, and modern academic institutions, they give everybody a's. So it is not a fair comparison. Especially at elite universities. I know everybody gets perfect grades.
▶ 1:55:59Sen. Warnock: What grade would you give the economy?
▶ 1:56:07Mr. Warsh: If a student anything other than an a, the dean would summon me to his office.
▶ 1:56:11Sen. Warnock: Those who I talked to in georgia who have not had the benefit of attending some of these elite institutions are trying to make their lives work. They are sitting around their kitchen tables trying to figure out how to put their kids through school. Regardless of how the markets are doing, consumer confidence is at a record low. So that is there grade on the economy. Working families are struggling.
▶ 1:56:44Sen. Warnock: And things are getting worse. Inflation rate has remained elevated above the fed's 2% target rate throughout president trump's term despite his promise to lower inflation. The president's war in iran has spiked energy prices by 11%. And americans are paying on average nearly four dollars a gallon for gas because of the war. We have lost nearly 90,000 manufacturing jobs since president trump took office.
▶ 1:57:16Sen. Warnock: He promised as a manufacturing boom. We have lost 90,000 manufacturing jobs. And americans already dealing with high prices paid $1000 more per household in 2025 as a direct result of president trump's illegal tariffs, which he remains committed to in spite of the supreme court decision.
▶ 1:57:47Sen. Warnock: He does even better than this practice of these institutions when asked what grade he would give the economy. He said an a and then thought about it and said, no, actually a+++. As I thought about his answer, I was wondering, who was he talking about? Who is it an a+ for?
▶ 1:58:14Sen. Warnock: Certainly not the working-class georgians I am fighting for every single day. Be the people closest to him, but I am hard-pressed to think that folks across the state of georgia who are looking at their grocery bill, looking at their gas bill, looking at the $1000 they have had to pay would give the economy an a++. What are your thoughts?
▶ 1:58:41Mr. Warsh: Senator, thank you. If the fed were to execute on a series of policy reforms, then I believe the economy can be stronger. I believe inflation can be lower. And I believe real take-home pay can be higher. I think the fed is not blameless for the divergence you described between those who have financial assets and those that don't.
▶ 1:59:08Mr. Warsh: Had the balance sheet not been brought from the 800 billion dollars level when I showed up at the fed in 2006 to an order of magnitude higher, if the fed had kept a smaller balance sheet the way the senator and I just talked about a few moments ago, I think interest rates could be lower, inflation could be better, and the economy could be stronger.
▶ 1:59:28Sen. Warnock: You discussed your theory of the case with me in that regard, but I think you agree that the recognition, and puts it testimony is the recognition, that this is not an a++ economy. Your testimony, you knows the importance of price stability, particularly harming low income folks.
▶ 1:59:57Sen. Warnock: But I notice your testimony did not really discuss the fed's other mandate, and that is to maximize employment. Inflation is quickly important but if you don't have a job, you are in trouble. Do you view the fed's mandate for maximizing employment as equally important to its price stability mandate? And are you concerned about weak job growth numbers?
▶ 2:00:20Chair Scott: Before the nominee answers the question, the senator from the elite university of morehouse is out of time. So appreciate the question. You will have the answer submitted.
▶ 2:00:33Sen. Warnock: I know you wanted to attend morehouse college. I'm sorry.
▶ 2:00:37Chair Scott: Everybody wants to attend morehouse, by the way. Charleston southern. Could not get into charleston southern but good you got in somewhere.
▶ 2:00:47Sen. Warnock: If you cannot get into morehouse, go to stanford. [laughter]
▶ 2:00:51Chair Scott: Everybody's got jokes up here. Senator britt.
▶ 2:00:55Sen. Britt: Thank you, Mr. chairman. Before I get started, I want to emphasize that transparency at the fed is absently vital. The american people need to have trust in our government. We need to have trust in our government agencies and that includes transparency and accountability at the fed so when we are talking about billions of dollars being spent on renovations, it is absolutely appropriate for congress to ask questions. And it is absolutely appropriate for congress to get answers.
▶ 2:01:27Sen. Britt: We need to understand where the substantial amount of money has gone. And we need to ensure every institution, including the fed, is always making decisions that are in the best interest of the american people. And so I urge everyone involved to make sure that any outstanding questions on this matter come to fruition so that we can get answers and move on and have a smooth and timely transition and a confirmation process of which I want to say congratulations on both your
▶ 2:01:58Sen. Britt: Nomination, your willingness to be here today, and I also want to say that to your family. I think a lot of people miss the fact that when any of us step up to serve, that it is not just you. Your family goes through so much, and so I just want to say that sacrifice is often overlooked. And we certainly appreciate your family being with you today and all of you and what you are willing to do here.
▶ 2:02:24Sen. Britt: I had a chance to get to know you over the years, as many of my republican colleagues have and other colleagues. I think we would all say you are absolutely the right man for the job at the right time in our country's history, and I am excited about your leadership at the fed.
▶ 2:02:41Sen. Britt: We have had an opportunity to talk about a number of issues, but I know that your integrity and your commitment to the american people are going to help restore confidence at the fed and will ultimately serve our country incredibly well. So it is not going to be an easy task to return that confidence. We have spoken about needed reforms at the fed on the monetary policy side and also the operational and internal standpoint as well.
▶ 2:03:10Sen. Britt: And of course, your calls for reform are not baseless. You served at the fed during one of the most challenging times. You just referenced it in your previous answer to a question from my colleague across the aisle. I believe you said there was a balance sheet of $800 billion when you showed up in 2006. So talk to me a little bit.
▶ 2:03:32Sen. Britt: Speak to me about that, about what you have seen during your time and tenure at the fed already and what other life experiences you have that you will bring as you tackle this role.
▶ 2:03:41Mr. Warsh: So, senator, great to see you again. So the chairman knows, I worked with the senator when she was a staffer on this very committee and I was a young staffer myself. It is an honor to be here. Senator, as you know, this is a serious responsibility. I am honored president nominated me for it. This is a time of consequence not just for the country but for the central bank. The central bank can go back to first principles and improve itself.
▶ 2:04:13Mr. Warsh: I see most of the actions of the fed come from good intentions, but when you gave the fed a remit, it was not a general roving remit to do what it thought was right. It was a particular remit to focus on particular issues and not wander. That is the trade-off on independence. Independence about the conduct of monetary policy. We can hear criticisms from others in the economics profession, elected officials, and we should be open-minded to them.
▶ 2:04:41Mr. Warsh: Listen, I think there has been a considerable amount of groupthink in the economics profession so being open-minded to it is important, but outside of monetary policy, it is important the central bank work with the government on areas of overlap so I think that is likely to happen going forward. If you ask, senator britt, about my biggest lessons, my biggest lessons are about how essential it should be acting in crisis times versus normal times.
▶ 2:05:09Mr. Warsh: In the crisis of 2008, the pandemic, the crisis of 2020, that is when the fed needs to take extraordinary measures going back to the founding of the fed in 1913. It was created to respond to shocks. So there I think central bankers often should get the benefit of the doubt. When the world is racing away from it, the real economy is suffering fast, the central bank should show up with liquidity support, but the job of the central bank Mr.
▶ 2:05:35Mr. Warsh: Trump to try to mitigate those risks in advance, to buy insurance so we do not go from shot to shot, from boom to bust my criticism is more about the conduct of monetary policy and regulatory policy in normal times, and that is the area that are in need of reform. We have a window where the economy is improving, but I would say more improvement is still possible.
▶ 2:06:01Mr. Warsh: And it is during this policy we need to look introspectively, look fundamentally at reform, so when there is another risk, there is another shock, the central bank is prepared to address it with less harm to the real economy.
▶ 2:06:14Sen. Britt: Thank you so much. I am out of time. I look forward to your service to our nation and I know we will be in great hands.
▶ 2:06:21Mr. Warsh: Thank you.
▶ 2:06:22Chair Scott: Senator kim.
▶ 2:06:24Sen. Kim: Thank you, Mr. chairman. Mr. warsh, good to see you. I want to start talking but the state of american families right now. Nearly 60% of people surveyed said they were worried about affording the basics, rent, gas, groceries, the bills. 60% of americans say they cannot handle a $1000 emergency. 40% of americans say they cannot handle a $400 emergency.
▶ 2:06:52Sen. Kim: I wanted to ask, do you agree the american families are struggling right now with affordability?
▶ 2:06:57Mr. Warsh: Senator, as we discussed in your office, central bankers should not be second-guessing what people feel and see in their own lives. People's experience, lived experiences matter to them.
▶ 2:07:13Mr. Warsh: What I can say is the central bank has some responsibility for the things you have described and that the legacy of inflation, what I think is the biggest economic policy ever in 40 or 50 years, happened just a few years ago, and we are still living with the remnants of it. I think inflation is less problematic than it was a couple years ago, but --
▶ 2:07:34Sen. Kim: The problem of affordability continues though. I heard president trump say "what word have you not heard over the last two weeks? Affordability. Because I won. I won affordability." it sounds like you would disagree with that assessment that the fight for affordability for american families is over.
▶ 2:07:58Mr. Warsh: So I think the trend is going in the right direction.
▶ 2:08:01Sen. Kim: But we still have more work to do.
▶ 2:08:03Mr. Warsh: The way I would describe it, senator, is the cumulative increase in prices started in early 2020 until now is between 25 to 35% so I understand when hard-working americans say it is a struggle. That is a legacy of a past policy error.
▶ 2:08:20Sen. Kim: One thing that you talked about before is just about the real costs families are facing right now. I appreciate that you are pushing back on that comment the president had about calling the energy prices and fuel price increases we are having fake inflation because right now, americans pay more than $8.4 billion more in gas during the first month of this war.
▶ 2:08:46Sen. Kim: Fertilizer, 70% of respondents to the farm bureau survey said that fertilizer is unable to be afforded right now just given the price increases. Are you concerned there could be real long-term effects of this war in iran, especially if we are continuing to see these challenges when it comes to fuel and fertilizer?
▶ 2:09:10Mr. Warsh: Senator, if my reform agenda is confirmed stands for anything, it is for the central bank of especially the fed chairman, to stay in its lane.
▶ 2:09:16Sen. Kim: I know that.
▶ 2:09:17Mr. Warsh: You don't want to wander outside of it.
▶ 2:09:20Sen. Kim: You are also charged with forecasting in terms of understanding where our economy is going, so does and impact of that magnitude rise is something the fed should keep an ye on and be concerned about?
▶ 2:09:37Mr. Warsh: Things that central banks can affect are not one-off in nature but persistent and find their way to the generalized price level.
▶ 2:09:44Sen. Kim: I wanted to ask you about that because you talked about a fundamental policy change when it comes to the fed. I guess I wanted to get a little more clarity on that. Senator lummis mentioned the balance sheet and the concern you have about that. What level do you think the balance should be at? It is 7.2 trillion dollars now. Where is the goal in your mind?
▶ 2:10:06Mr. Warsh: So I have not fixed a particular number, but any changes in the balance sheet would be part of a public discussion debated rigorously, and if and when the central bank comes to a judgment about a new balance sheet policy, which I hope the central bank would, it would be described well in advance. As I mentioned, it took 18 years to create this balance sheet problem and we will not be able to fix it in 18 minutes. That is why depression is important.
▶ 2:10:34Mr. Warsh: Suffice it to say it should be smaller and at least as important, it should not be holding long-term treasury assets as if it is the fiscal authority.
▶ 2:10:42Sen. Kim: I appreciate you saying that it is important to be able to have that public discussion. One thing that has come up as I have been engaged with different experts is concerned about rapid reduction. If you are moving in that speed, it could generate a number of concerns, including upward pressure on long-term interest rates so I guess I just wanted to check, do you share that concern? As you I think about how to reduce it, do you understand there are concerns about rapid reduction and the speed with which you are trying to go down?
▶ 2:11:11Mr. Warsh: Yes, senator, and that kind of regime change would have to be delivered, well orchestrated, well choreographed, and well described so that unnecessary upsets are not done to financial markets as we go to a policy regime change much more focused on interest rates.
▶ 2:11:28Sen. Kim: With that, I will your back.
▶ 2:11:30Chair Scott: Thank you, sir. Senator ricketts.
▶ 2:11:34Sen. Ricketts: I want to continue to talk about inflation because it is something that is incredibly important. I think you share the view that inflation is a silent tax on american households. Is that accurate?
▶ 2:11:49Mr. Warsh: Senator, it is accurate. It is the most regressive tax anyone in washington could come up with. If you were trained to do the most harm to the least well off among us, inflation would be the way to do it.
▶ 2:12:00Sen. Ricketts: Yeah, and michael biggs on the other side of the aisle have been talking about that and I know at least I don't recall that they ever talked about that during the biden administration because it was during the biden administration that we saw this inflation, this forty-year high inflation. And yet my democrat colleagues were excited about it. Now they want to talk about it but of course american households were hurting back then as well.
▶ 2:12:27Sen. Ricketts: Inflation was caused by president biden's reckless policies and reckless spending. Let's look at a partisan bill passed by democrats which cost taxpayers $1.9 trillion. When it was passed in march of 2021, inflation was at 2.6%. Inflation quickly accelerated by over 5% in may, june, july. By the end of the year in december, it was 7%. Does program spending have anything to do with inflation?
▶ 2:12:57Mr. Warsh: Senator, as we talked about in your office, my view of inflation is a bit different from some. I don't think inflation comes about when the economy grows too much for hard-working americans get increase to their wages. It comes about when the government prints too much, by which I mean the central bank, and broadly speaking the government spends too much.
▶ 2:13:18Sen. Ricketts: So we are spending too much money and now will be cleaning up their mess ever since. Republican's have been taking efforts to reduce the deficit. You today, down 10.6% from where it was last year. This is why it is so important we get our spending under control. I think you also talked about the balance sheet.
▶ 2:13:41Sen. Ricketts: One of the things about the balance sheet is I think if I hear you saying it is too big and it benefits people who have financial assets, but if you don't have financial assets, you have not seen the benefit of a large balance sheet at the fed, is that accurate?
▶ 2:13:57Mr. Warsh: Senator, it is broadly accurate. When the balance sheet was created in the 2008 financial crisis, the agreement between my colleagues and I was that we would only use this in an emergency scenario because the transmission mechanism for a large balance sheet goes two ways, through signaling effects and through asset prices.
▶ 2:14:20Mr. Warsh: At the time of the financial crisis, financial asset prices were down so it was understandable interest rates were at zero, but the central bank, independent body, should not be adopting a set of policies that have that kind of distributional consequence. That is why interest rates are a better way to besetting monetary policy.
▶ 2:14:41Sen. Ricketts: I don't want to put words in your mouth, but what I hear you saying is let's reduce the size of the balance sheet because that benefits half of the american population, and then let's focus on interest rates and inflation so we can benefit all americans that if we take interest rates down, that benefits all americans and gets into the nooks and crannies, that if we get inflationary control, that is how we benefit all americans, and the size of the balance sheet will only affect some americans.
▶ 2:15:09Sen. Ricketts: What you are about as trying to change a policy that has benefited from the last administer should people who have a lot of money. Actually, not just the last ministration but previous administrations, which also want to make sure we get off of the inflation. During the biden administration, we saw for use in a row of declining real wages for american households and what you want to do is get the inflation under control so that all american households benefit. Is that fair?
▶ 2:15:34Mr. Warsh: That is fair. I will paraphrase former chairman paul volcker, where he said something along the following lines. You would need to have a phd from an elite institution to believe inflation does not have something to do with money.
▶ 2:15:50Sen. Ricketts: Ok, great. I only have a few seconds here but I will switch topics on you real briefly. Chairman powell, leaders of our largest banks recently talked about identifying banking vulnerabilities.
▶ 2:16:11Sen. Ricketts: When confirmed, what will you do to modernize the federal reserve's internal risk assessments to ensure that we can anticipate and defend against the type of emerging risk that potentially models like that could present if used in the wrong hands?
▶ 2:16:25Chair Scott: You have about 20 seconds to answer that.
▶ 2:16:28Mr. Warsh: 20 seconds.
▶ 2:16:32Mr. Warsh: A lot is the short answer. 15-second answer beyond that is the pace of change of these technologies is accelerating. Ai, which I think of as american ingenuity, gives america a huge head start relative to our competitors around the world, but it is not without real risks and real challenges, reform-oriented central bank needs to be on the front end of it.
▶ 2:16:56Sen. Ricketts: Thank you very much, and I look forward to your leadership.
▶ 2:16:59Chair Scott: Senator gallego.
▶ 2:17:02Sen. Gallego: In 2019 and the produce of that monetary policy is important for the reasons he gives for expert nations. The federal open market committee -- the fed sets monetary policy through interest-rate decisions at those meetings. Do you commit to maintaining the current practice of holding a meeting at we least once every eight weeks? Yes or no?
▶ 2:17:24Mr. Warsh: Senator, by statute, as we talked about in her office, the statute requires a minimum of four meetings, but four is not enough so having more meetings than that is appropriate, that I have not begun to look at the schedule for 2027 and beyond, subject to confirmation.
▶ 2:17:42Sen. Gallego: Do you commit to holding a press conference on the day of fomc meetings?
▶ 2:17:47Mr. Warsh: Senator, right now press conferences are held periodically. If you ask me my true personal opinion, right fed chairs and central bankers around the fomc speak quite frequently. There is no lack of transparency. But I would say this -- truth seeking is more important than repetition. If one has a press conference, one wants to deliver important news --
▶ 2:18:14Sen. Gallego: Perfect. Would you commit to taking questions others press conferences?
▶ 2:18:19Mr. Warsh: If a press conference were held, it would be in coming to hear what the reporters of that I had in mind.
▶ 2:18:24Sen. Gallego: Thank you. Our personal meeting regarding this was very enlightening. Earlier today use attitude senator kennedy. President trump never demanded if you said to senator kennedy that president never demanded you cut rates in your interview. Someone is like, the-- lying then, to you or president trump.
▶ 2:18:51Sen. Gallego: In a new view with "the wall street journal," president trump said he press you on your commitment to support interest-rate cuts. "during the 45-minute meeting with warsh at the white house, the president pressed warsh on whether he could trust him to support interest-rate cuts if you were to appoint him to be the central bank.
▶ 2:19:09Sen. Gallego: Trump in the general interview confirmed that." I would like to enter for the record the "wall street journal" article, december 12, "trump leaning towards warsh." who is lying here, you are the president? The president said-- you or the president? The president said he press you to cut interest rates.
▶ 2:19:35Mr. Warsh: There is a third alternative. You cited reporters for a leading financial newspaper. I recall reading it at the time. I think those reporters need better sources are better standards.
▶ 2:19:50Sen. Gallego: Did you ask for a correction?
▶ 2:19:52Mr. Warsh: There are things in the newspaper all the time they don't like my ears is correct.
▶ 2:19:57Sen. Gallego: Is the president lying when he said he did not ask you?
▶ 2:20:00Mr. Warsh: I can only repeat what I said to several of your colleagues --
▶ 2:20:04Sen. Gallego: So you did not? You right now under sworn testimony are saying right now that the president of the united states in the job interview did not ask you to cut interest rates.
▶ 2:20:16Mr. Warsh: The president never asked me to commit to interest-rate cuts at any particular meeting over the period of my tenure at the fed. He didn't ask for it, he didn't demanded, he didn't require it, and nor what I've ever done so.
▶ 2:20:28Sen. Gallego: So if these reporters do another follow-up on this and they confirm what they heard, what will your sponsor be?--response be?
▶ 2:20:38Mr. Warsh: My response would be what I suggested you a few moments ago -- as I read that story at the time, I remember thinking they need better standards or better sources.
▶ 2:20:48Sen. Gallego: Here is my problem, Mr. chairman and colleagues, and Mr. warsh, I think you are incredibly qualified. A lot of us are worried about the integrity of the federal reserve. We are worried what this means for economic markets. We are worried what this means for inflation. We are worried about your independence. And now we are hearing direct contradictions about whether you asked by the president to cut interest rates. You are saying out, he is saying yes you are saying no -- you are saying out, he is saying yes.
▶ 2:21:20Sen. Gallego: There is a reason why many of us are voting no. Until you spoke to Mr. kennedy and answered his question, the president to cut interest rates, this was not going to be--the president did not ask you to cut interest rates, this was not going to be brought up. There is a true question about who is like, you--lying, you or the the president. I yield back.
▶ 2:21:45Mr. Warsh: Senator, if I might respond? I take my responsibility to be an independent leader of the federal reserve very seriously, if confirmed by this body. I take the integrity of the office and my personal integrity very seriously. And I said. The president never asked me to commit to any such thing, nor what I ever do so.
▶ 2:22:10Chair Scott: Mr. banks.
▶ 2:22:14Sen. Banks: Thank you, Mr. chairman. Governor warsh, congratulations on your nomination. As I said during our meeting in my office, I strongly support your nomination and look forward to voting for you for the next chairman of the federal reserve, and it can't happen soon enough. One policy every we strongly agree on is that that that china poses to america's economy. You have written publicly that china is deliberately positioning its financial system to rival U.S.
▶ 2:22:42Sen. Banks: Leadership and actively working to elevate its current currency on the global . -- currency on the global stage. Can you talk about how the federal reserve reinforces the strength of the U.S. dollar as the world's reserve currency in the face of that challenge?
▶ 2:22:58Mr. Warsh: Senator, it's great to see you again. We talked about some of these issues of the g2 rivalry, the rivalry between the U.S. and china, in your office. If confirmed as chairman of the federal reserve, I will then have to say that it is the treasury secretary's business to talk about the dollar, it is the fed chairman's business to talk about interest rates. But I think I can say this quite comfortably, the dollar is the linchpin of the global economy.
▶ 2:23:27Mr. Warsh: The united states and the federal reserve is a beneficiary of the strength of the dollar. The U.S. financial system is the most important financial system in the world. And the central bank's been charged with really important responsibilities in overseeing and supervising it. There are risks to the U.S. position in the world, including economic. The economic statecraft agenda led by secretary bessent, secretary rubio, is an important one.
▶ 2:23:55Mr. Warsh: On that, the fed will play a supporting role in ensuring that the financial system is as safe as it can be, and work with them, because it is outside the conduct of monetary policy, to ensure the U.S. is on its front foot and in a position of strength during this period of rivalry between the U.S. and another nation around the world.
▶ 2:24:14Sen. Banks: What are some of those -- I understand the role of the treasury department versus the fed, but what are the most important steps the fed can take to reinforce confidence in the U.S. dollar?
▶ 2:24:25Mr. Warsh: Deliver stable prices, senator. Deliver an economy that improve from here even further, where real take-home pay moves up, where inflation falls, and the U.S. economic growth potential is the best in the world. I mentioned earlier, senator, something I really do believe. Ai is a testament to american ingenuity.
▶ 2:24:51Mr. Warsh: The united states is the best positioned country in the world to take advantage of it, so that the U.S. economy, U.S. workers benefit from it. The U.S. is in a better position than anyone else. But it is filled with challenges. Geopolitical challenges, technology challenges. The sooner we can hit the ground running on the reform agenda, the better.
▶ 2:25:12Sen. Banks: You wrote in an op-e d in 2021 in "the wall street journal" that I recommend everyone read and one of the reasons I wholeheartedly support you, because it says a lot about you in this op-ed, but you talk about how the prc is actively promoting its digital yuan currency with the explicit goal of treating an alternative payment system that sidesteps U.S. sanctions. You have been very clear that china is not playing by the rules.
▶ 2:25:41Sen. Banks: China is buying over 80% of iran's sanctioned oil in chinese currency through chinese banks, completely outside swift. The iranian government says it is charging ships to transit the strait of hormuz and collects payments via crypto and chinese currency. What tools does the federal reserve have to defend the dollar as countries rent payment through these financial systems to do business with iran another adversaries -- and other adversaries?
▶ 2:26:08Mr. Warsh: Senator, thank you. As he talked about before, monetary policy is independent. Outside monetary policy, the federal reserve can be working hand-in-hand with the rest of the government. The federal reserve is independent inside of government, not independent of government. What the U.S. can do with respect to the dollar is have a more robust payment system. The fed has a number of payment systems that most financial participants in the worldviews.
▶ 2:26:39Mr. Warsh: I would say they are all in need of substantial form. There is a system called fed now which some describe as fed yesterday. There is a series of new technologies that the fed needs to oversee an architect so that the payment system in the U.S. is the safest, most efficient, most capable and the world. Otherwise we will be losing to adversaries around the world in being the linchpin of the global a comment.
▶ 2:27:06Sen. Banks: Thank you. Your leadership is so important and it is so important right now. We need you on the job right now. Not later, right now. I look forward to voting for you quickly and seeing you confirmed and getting on the job. With that, I yield back.
▶ 2:27:21Chair Scott: Senator blunt rochester.
▶ 2:27:24Sen. Blunt Rochester: Thank you, Mr. chairman and ranking member warren. Thank you,, Mr. warsh, but taking the time to meet with me earlier this week. I share many of the concerns of different committee members of us putting the cart before the horse. In one regard, it is the whole issue of independence of the fed.
▶ 2:27:48Sen. Blunt Rochester: And I know you have made commitments both in your testimony and here today with us in the process of watching the president tried to fire chairman powell, as well as governor lisa cook. It really raises a lot of red flags for us.
▶ 2:28:09Sen. Blunt Rochester: Even justice kavanaugh said new president as fired a sitting governor--no president has a sitting governor in the 112-year history of the fed, which was structured to be independent of day-to-day politics, and that it would weaken if not shatter the independence of the federal reserve. There are a lot of questions today as well about both ethics and whether or not all the paperwork is in.
▶ 2:28:32Sen. Blunt Rochester: Even senator warren's question about selling of the assets and whether they would be transparent is something that is important to ensure confidence. I shared some of these concerns with you in person when we met and I share them here for the record. I did have a question -- I want to focus on ai, but I did have a question beforehand and I wanted to clarify. You mentioned your desire for reform, as well as regime change at the fed.
▶ 2:29:01Sen. Blunt Rochester: Could you just clarify commute didn't mean removing the regional--you didn't mean removing the regional bank presidents whose five-your terms were just re-upped in december?
▶ 2:29:11Mr. Warsh: Senator, I meant policy regime change.
▶ 2:29:15Sen. Blunt Rochester: Got it. For the record we are not looking at regime change for those 12 board presidents. I want to jump to ai because it is one of the number-one teachers in my state. I am former secretary of labor in delaware. This is something I asked chair powell when he was here about. A lot has happened in a year.
▶ 2:29:37Sen. Blunt Rochester: One of the things you have characterized this as the most productivity-enhancing wave of our lifetimes, past, present, and future. You have described it as structurally this inflationary, and that central bankers must make a bet.
▶ 2:29:55Sen. Blunt Rochester: I am in the camp with senator kennedy, I am concerned about us making a bet on something that we know -- you have set it, chairman powell said it -- we don't have the data to even understand yet. And so my first question is what happens for policy if that surge doesn't materialize as expected?
▶ 2:30:17Mr. Warsh: So, senator, I enjoyed our discussion. I think the essential elements of new policy for the federal reserve is to get access to better data and to dig deeper into the productivity possibilities that could come out of this new investment wave. Today we call it artificial intelligence. Two years from now we are going to call it business cap ex.
▶ 2:30:48Mr. Warsh: Three years from now we will call it ordinary business. It has two important effects on the conduct of policy. Don't claim to have appropriate knowledge of how any of these are going to go, but I do have an intuition that the pace of change is accelerating. I'm sorry, senator, go ahead.
▶ 2:31:02Sen. Blunt Rochester: I was going ask, how much of your view on interest rates depends on those productivity gains showing up quickly?
▶ 2:31:09Mr. Warsh: Yeah, so I think it has two elements. One is the increase in capital expenditures to build data centers and the rest. That will have an effect on demand. That will increase demand, my guess is a few tenths of 1%. But on the supply side of the economy, to increase the potential output of the economy, that could be considerably bigger. We don't know that, we can't bank on that.
▶ 2:31:36Mr. Warsh: But considerable work needs to be done by the federal reserve in evaluating this productivity wave. As I said before, monetary policy works with, long and variable lags so you have to make informed judgments. Unlike other people in office, if the judgment is wrong, you gotta call the flag on yourself and corrected them.
▶ 2:31:54Sen. Blunt Rochester: I think there has been a lot of conversation here about concerns that in your record, in your history, you have been hawkish on inflation rates and keeping them low. And now we are looking at ai -- what I don't want to see is us use ai as an excuse for making good policy. Too much depends on it. Too many families' lives depend on it.
▶ 2:32:21Sen. Blunt Rochester: In our conversation, we also talked about the fact that wall street is going to be ok, but who we are concerned about as well as main street. Thank you, I yield back.
▶ 2:32:30Chair Scott: Thank you, senator. Senator cramer, you recognize.
▶ 2:32:34Sen. Cramer: Thank you, Mr. warsh, for being here, for stepping in the gap. I'm a little curious as to why you want to do this. [laughter] I don't know. Anyway, congratulations on the choice.
▶ 2:32:52Sen. Cramer: By the way, with regard to independence, real quickly, I find a curious -- in fact, I've often found it curious that people expect somebody who is appointed by an elected official has to be confirmed by 100 other elected officials, would somehow not have a philosophy. That is when I hear sometimes. Speaking of ai, we should just have an ai for chairman. That way it would-- ai fed chairman.
▶ 2:33:21Sen. Cramer: That way it would be completely neutral, other than the people who put information the algorithms. That's it, we should not forget that it would be common for a president who believes that interest rates should be lower to want to nominate somebody who has expressed that may interest rates could be a little lower. As opposed to the quid pro quo that is being accused of today. I'm just grateful you are willing to do it.
▶ 2:33:47Sen. Cramer: The other thing about independence that strikes me with regard to the fed, do you have any idea how often an interstate decision by the fed --interest rate decision by the fed is a 12-0 or 10-0 vote? Do you have a sense of it?
▶ 2:34:04Mr. Warsh: I do, senator. Within the last 15 years decisions have been unanimous or near unanimous. As I said to one of your colleagues earlier, I prefer clean memos and Mr. meetings. There's nothing wrong with---messier meetings. This nothing wrong with a diversity of opinions.
▶ 2:34:25Sen. Cramer: Thank you. I don't remember when diversity became a bad thing, especially with staggered terms. The other thing that's like me as have a lot of experience. This is your 20th anniversary, or at least her second anniversary. - have your thoughts changed much evolved over those 20 years of experience, not to mention your research and academic writings? Have you evolved a little bit?
▶ 2:34:54Mr. Warsh: Absolutely. I will make the point if I can. One is it is essential for the chavez organization be open minded--chair of his organization be open minded to new ideas. The world is moving fast. The mistake that is common in the economic profession, which is secretary shultz once described to me, he said it is fine to get a phd but make sure that is not the last day you are learning.
▶ 2:35:23Mr. Warsh: Too many people in the profession go back to what they learned 30 or 40 years ago. We've got to be open-minded. The world is changing and the facts are changing. The characterization I heard from some of your colleagues about did my opinions change, my opinions change when the facts change. When interest rates are a zero on the balance sheet is growing and the economy is booming, relative to that I sounded hawkish.
▶ 2:35:46Mr. Warsh: In 2018 when the federal reserve pushed to raise rates into our financial market meltdown, an economic weakening, I said that was a mistake. That was dovish. I expect to have a divergence of views based on the facts on the ground. If I could just answer one other question you asked about why I want to do this job, I would say I've lived the american dream. I've been the luckiest, most blessed, fortunate person with the greatest teachers.
▶ 2:36:15Mr. Warsh: I was a kid from upstate new york in public schools, and I had an opportunity to serve after 9/11. I was walking with a friend of mine who happens to be in this room away from a building near the site of the tragedy. I was walking up fifth avenue, and I thought to myself, what am I doing? I committed myself to public service then. I did 10.5 years of public service.
▶ 2:36:40Mr. Warsh: I've been grateful for 15 years in the private sector where I've been able to practice my discipline, think anew about things. The call the service's --the call to service struck again and I would be honored to serve in this body confirmed to me.
▶ 2:36:54Sen. Cramer: Excellent. I find it curious that people seem to be hung up on the fact that you have been successful, in between bouts of public service, probably a better way to put it. I'm not wealthy, never have been wealthy, not sure I have potential to be wealthy, but I have nothing against people who are. Real quickly, I want to talk about debanking. That hasn't been talked about a hold on.
▶ 2:37:18Sen. Cramer: Speaking of institutions that are dug in, 22,000 people, there are a lot of them who still believe that reputational risk should be a factor, reputational risk could be based on out-of-favor industries. Can you give me a sense of how you plan to attack that?
▶ 2:37:37Mr. Warsh: Politics have no place not just in monetary policy, but supervision and regulation. If central bankers should stand for anything, it should be to resist pads, resist trends--resist fads, resist trends, call balls and strikes.
▶ 2:37:53Sen. Cramer: I would lean hard yes, chairman.
▶ 2:37:58Chair Scott: Senator alsobrooks. .
▶ 2:38:02Sen. Alsobrooks: Thank you for meeting me meeting with me last week. In 2025 president trump tried to fire lisa cook for unsubstantiated allegations widely believed to be politically motivated. Thankfully, a federal district court and the D.C. circuit court of appeals ruled in favor of governor cook, preventing her from being fired while the investigation proceeds. This is a landmark test for independence.
▶ 2:38:29Sen. Alsobrooks: Supreme court justice brett kavanaugh said allowing cook's firing to go forward would weaken if not shattered the independence of the federal reserve. I would like to ask you, will you commit to defending governor cook's tenure as chairman powell has done?
▶ 2:38:45Mr. Warsh: Senator, it was a pleasure to meet you in your office and spend time with you. As I said to you that, I will repeat to the broader committee, if I stand for anything, it is the fed should stay in its lane. As I understand that matter, it pending before the united states supreme court. I think it is inappropriate for me to weigh in on that, especially because in the event that I am confirmed, I could be party to that matter.
▶ 2:39:09Sen. Alsobrooks: Well, I disagree with you. This is your future colleague who is confirmed by this committee and senate to serve her country. Chairman powell has defended her tenure. And your answer to this is you will not defend her, is that correct?
▶ 2:39:26Mr. Warsh: No, senator, that is not my answer. My answer is that there is a pending case before the supreme court, the results of which we will hear about soon. If confirmed by this body, I will follow the constitution, the supreme court law, and the rest of the fed's traditions.
▶ 2:39:42Sen. Alsobrooks: Let me ask you this, do you agree or disagree with justice kavanaugh on the supreme court, who said that her firing would weaken, if not shatter, the fed's independence? Do you agree with justice kavanaugh?
▶ 2:39:56Mr. Warsh: I took a constitutional law class by ut I would not say I worthy of being a supreme court justice. Fed independence is everything, and that is what I would do if I'm confirmed.
▶ 2:40:08Sen. Alsobrooks: I would like to move onto to the criminal investigation of chairman powell. The trump administration could have taken many offramps to end what is overtook is exercise. Instead, they have doubled down. The U.S. attorney for the district of columbia jeanine pirro sent prosecutors to defend last week to continue this circus, and they were turned away.
▶ 2:40:28Sen. Alsobrooks: Chairman powell has said that the investigation is not about any testimony or the renovations of a building, calling these arguments pretexts, and he said that the threat of criminal charges as a consequence of the federal reserve setting interest rates based on its best assessment of what will serve the public, rather than following the preferences of the president. Do you dispute chairman powell's assertion that the investigations are pretext for policy disagreements?
▶ 2:40:55Mr. Warsh: Senator, as I said with respect to the other case, this is also pending before the courts. I have a ton of confidence in the court's ability to make a final resolution. I would abide by any judgment of the courts. I would follow that judgment and the best --
▶ 2:41:09Sen. Alsobrooks: Ok, so let me just ask you another question instead. Just a few days ago, bless his heart, president trump called chairman powell a stubborn, incompetent person, who he says suffers from trump derangement syndrome. Can you say before this committee that you disagree with this characterization?
▶ 2:41:28Mr. Warsh: My disagreements with chairman powell are about policy, not about personality or personnel.
▶ 2:41:35Sen. Alsobrooks: Let me ask you about another question about the president. My colleague a moment to said you -- you said the president has never asked you about lowering interest rates and you said he never specifically, the word you used, demanded that you decrease interest rates. Did the president generally suggest this to you as well?
▶ 2:41:56Mr. Warsh: In my recitation to your colleagues, I wasn't trying to be clever. The president never generally or specifically instructed me, suggested I should commit to any interest rate path whatsoever.
▶ 2:42:09Sen. Alsobrooks: Let me go to another point. If the senate does not confirm you by may 15, the president may inject more financial chaos into our economy by illegally attempting to remove chairman powell and installing someone else until your confirmation. The law is quite clear here, if there is a vacancy, the current chairman continues to serve as chair pro tem until the senate confirms a replacement.
▶ 2:42:35Sen. Alsobrooks: But the trump administration is giving up to fight this assertion, and I excite every financial leader and reporter is watching --expect every financial leader and reporter is watching your words ring out, which can move markets. I would like to give you an opportunity to reassure them -- do you agree that the log requires the current fed chair to continue serving as interim chair will this replacement is confirmed?
▶ 2:42:55Mr. Warsh: I have been advice on that and I will say this -- I was a summer associate for eight weeks at a law firm, and that was the extent of my legal career. I'm certainly not capable of defining whether the vacancy act applies to the federal reserve or not.
▶ 2:43:10Sen. Alsobrooks: Thank you.
▶ 2:43:11Chair Scott: Yes, ma'am. Senator bernie moreno.
▶ 2:43:16Sen. Moreno: Thank you for the honor of going last. That is usually reserved for people with much more status than I have, so I appreciate that very much. [laughter] Mr. chairman, I'm going to read something for a second. It is clear that Mr. porsche is tremendously accomplished--Mr. warsh is to mislead,. He is committed--is tremendously,. He is committed to meaningful market discipline.
▶ 2:43:43Sen. Moreno: He knows unequivocally that the fed must be independent, not ideological and not partisan. For this reason, I am proud to support his nomination. I wish I had said those words come up with are the words of senator chuck schumer -- but those are the words of senator chuck schumer when he voted to confirm you, in fact introduced you. I would like to enter that into the record. As they say, there's nothing wrong with that, but it looks like democrats used to love you at one point. What changed? [laughter]
▶ 2:44:12Mr. Warsh: Senator, I don't know.
▶ 2:44:16Sen. Moreno: You do not catch the "seinfeld" reference, which proves you did not watch the show. A lot has been said, and I think it is important, on the plight of working americans when it comes to being able to afford the basic elements of what it means to be somebody who is successful in the working class. Working-class-- are working-class americans better off or worse off than they were three years ago?
▶ 2:44:43Mr. Warsh: The aggregate statistics show improvement, but I want to suggest with better for policy, improvement could be stronger.
▶ 2:44:53Sen. Moreno: Clearly. We are not done and we have a long way to go. If you are an average working american today in 2026, you're better off than you were three years ago because three years ago you were getting demolished by general chunli higher inflation. Is that true--generationally higher inflation. Is that true?
▶ 2:45:13Mr. Warsh: It is improving but there was more work to do.
▶ 2:45:16Sen. Moreno: One of the key parts of why I am supporting you is the total and complete focus and understanding that the interest-rate tool is the tool that allows you to help working americans much more than the balance sheet tool. Do you agree?
▶ 2:45:30Mr. Warsh: Yes, senator, idea.
▶ 2:45:33Sen. Moreno: Do you agree that the federal reserve has no legal right to issue a central-bank digital currency?
▶ 2:45:39Mr. Warsh: Senator, I agree that they don't have the right, and I think it would be a bad policy choice.
▶ 2:45:45Sen. Moreno: Let me put an exclamation mark on that -- under your chairmanship of the federal reserve, you will not have the federal reserve explore in any way move towards the central-bank digital currency?
▶ 2:45:56Mr. Warsh: If it isn't within the power of the chairman of the federal reserve, I agree with that statement.
▶ 2:46:01Sen. Moreno: Let's shift over to ai. A lot has been said about that. I will read that some of my colleagues -- I worry that someone like police don't feel this is real or happening as quick as it is -- some of my colleagues don't feel this is real or happening as quick as it is. It is happening insanely fast. Do you agree it could lead to an employment shock especially for entry-level white-collar jobs?
▶ 2:46:24Mr. Warsh: Senator, I agree with you on the pace of the technology revolution. I have had to pick my own priors vs. Six or 12 months ago, as I have seen the rate of improvement of the models. The way I describe it is this -- I am more confident that there will be improved output than I am certain about when the effects of that will be on the labor market.
▶ 2:46:46Mr. Warsh: I basically believe in the following good economic tenet, described as the lump of labor fallacy. We tend to think in economics there is only a fixed number of jobs, and we have got to fill them every day possible. The labor force, the structure of the labor market changes.
▶ 2:47:04Mr. Warsh: The jobs that will be created two or three years from now, some of which are unimaginable to us today, but the lag between the improvement in output and the effect on the labor markets, that has got to be central to the fed's thinking, given the pace of innovation in the cycle.
▶ 2:47:17Sen. Moreno: This concept of price stability plus maximum employment, that maximum employment piece is problematic when policymakers open our borders and let tens of minds of people coming into this country illegally, is that not correct?
▶ 2:47:34Mr. Warsh: I'm going to let you guys handle immigration policy.
▶ 2:47:39Sen. Moreno: But adding 20 million to 30 million people into the country when you are trying to make certain everybody has a job is problematic, correct?
▶ 2:47:47Mr. Warsh: The central-bank takes the labor market as it is and that is a function of policies you and the administration put in place. It is not a place to be opining on that.
▶ 2:47:56Sen. Moreno: Ok. Let me add one more thing, more to your likeness how did you get so lucky to have a guy that is so romantic that on valentine's day 2026, he brings you to a senate hearing? You set a high bar for all the buzz. I will ruin the suspense--for all of us. I will ruin the suspense for everybody, you are going to be confirmed, you are going be the federal reserve chairman, and you will do an equivalent up. I am honored to be part of that process and will vote for you resoundingly.
▶ 2:48:25Mr. Warsh: Thank you, senator.
▶ 2:48:26Chair Scott: That concludes the question-and-answer portion of today's hearing. I would like to thank our nominees for testifying and thank you for your willingness to serve our country. For senators, all follow-on questions must be cemented by tomorrow, april 22, at noon. For you, the witness, please respond by thursday, april 23, 1:00 p.m., to the written questions you receive in order to facilitate this committee properly processing his nomination when it comes.
▶ 2:48:57Chair Scott: With that, this hearing is adjourned. [captioning performed by the national captioning institute, which is responsible for its caption content and accuracy. Visit ncicap.org]