GOP’s Kennedy Grills Trump Fed Nominee, Straight Up Asks if He Promised to Lower Interest Rates

Sen. John Kennedy (R-LA) pressed President Donald Trump’s Fed Chair nominee Kevin Warsh during his confirmation hearing Tuesday in front of the Senate Banking Committee about any promises he may have made President Donald Trump.

Kennedy, a MAGA ally of the president, noted in his line of questioning that Trump has been explicit about saying he would only nominate a new Fed chair who would lower interest rates.

“The problem is that President Trump has said he’s not going to appoint anybody who wouldn’t agree to lower interest rates. Have you agreed with the president that you are going to lower interest rates?” Kennedy asked Warsh directly.

Warsh, a former Fed governor, thanked Kennedy for the chance to address the issue and made clear he has made Trump no promises and vowed to be an “independent actor.”

Warsh’s confirmation hearing comes after many, many months of Trump’s attacks on current Fed Chair Jerome Powell, who has refused to lower interest rates despite Trump’s insistence. Notably, the Fed chair cannot unilaterally lower interest rates as they are set by a vote of the Federal Open Market Committee.

Trump’s attacks on Powell, which also appear to have inspired a DOJ investigation, have long roiled the financial community and global observers worried about the politicization of monetary policy, which would undermine faith in the U.S. economy.

Below is the full exchange between Kennedy and Warsh:

KENNEDY: Professor, what’s a sock puppet?

WARSH: I heard the reference from Senator Warren. Yeah, what is it? I’m not sure. I know. I think it’s that thing you stick your hand in.

KENNEDY: Kind of like this? What’s a human sock puppet? Isn’t a human sock puppet somebody who’ll do what somebody else tells them to do?

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

KENNEDY: Are you going to be the president’s human sock puppet?

WARSH: Uh… Senator, absolutely not.

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

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

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

WARSH: Uh, no, Senator.

KENNEDY: The ethics folks, they’ve cleared you, but they said you’ve got to sell some assets, is that right? And these assets that you have, you can’t just hold a yard sale, can you? Not for most of them, sir. Okay, so it takes a fair, a reasonable period of time. Right? Yes, sir. And you’ve promised to sell them, right? I did. And if you don’t sell them, we’ll know and the ethics folks will know, right?

WARSH: Yes, I’d be in violation of the ethics agreement if I refused to sell.

KENNEDY: But you’re gonna sell.

WARSH: Yes, Senator, I will.

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

WARSH: Senator, we can agree, and it’s not something that I would shy away from. I’ve heard many senators from this very committee in years past express strong views on interest rates. Humble central bankers should be listening and then making their own decisions.

KENNEDY: But some politicians matter more than others. And generally speaking, presidents matter — their opinion matters more than, say, a senator’s. President Trump has offered his opinion about what you ought to do with interest rates. Is that right?

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

KENNEDY: And every president has, that you’re aware of.

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

KENNEDY: Now, can we agree that your credibility as Fed chairman is the most important thing you have?

WARSH: It’s the most important thing to me. It’s most important to the institution. And it’s the most important thing to the successful conduct of policy. Okay, that’s a yes, right? Yes, Senator.

KENNEDY: The problem is that President Trump has said he’s not going to appoint anybody who wouldn’t agree to lower interest rates. Have you agreed with the president that you are going to lower interest rates?

WARSH: Senator, I’m glad you framed it that way. The president never asked me to predetermine, commit, fix, or decide on any interest rate decision in any of our discussions, nor would I ever agree to do so.

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

WARSH: The president never once asked me to commit to any particular interest rate decision, period, and nor would I ever agree to do so if he had — but he never did. I was honored he nominated me. Like everyone else on the committee and in the world, I’ve heard his view on interest rates. It sounded very similar to me to every other president in economic history that I’ve studied.

KENNEDY: I’ve got one more question, because I’m about to run out of my time. I’ve heard your argument the last few months about artificial intelligence having made us so productive — labor so productive — that companies don’t have to raise prices, therefore inflation isn’t a problem, therefore rates can be cut. Do you really believe that right now?
Warsh: You know, that is not how I would characterize the story on AI.

KENNEDY: Okay, but you’ve said what I just said, haven’t you?

WARSH: I have said that this is the most disruptive moment in modern economic history in the U.S. and the world. I’ve said that artificial intelligence — AI — short-term and long-term, can have a big effect on the American economy.
Kennedy: Here’s my worry: that a lot of this stuff about artificial intelligence making us more productive is a bunch of hype by people who want to sell stock in an IPO. Okay, I’d be careful there.

Watch the full clip above via C-SPAN.

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