• Key insight: The fight over Federal Reserve independence has made confirming Warsh politically impossible, with one Republican senator blocking Kevin Warsh's approval by the Senate Banking Committee. 
• Forward look: Should the Senate not confirm a Fed chairman, it's unclear who will helm the central bank when outgoing Fed Chair Jerome Powell's term expires in mid-May. 
• What's at stake: Warsh, should he be confirmed, would balance White House demands for lower interest rates with an economy facing increasing inflationary headwinds. 

WASHINGTON — Kevin Warsh, President Donald Trump's pick to lead the Federal Reserve, repeatedly insisted at his confirmation hearing before the Senate Banking Committee that he didn't promise Trump that he would lower interest rates. 

The question of Fed independence has waylaid Warsh's nomination. Sen. Thom Tillis, R-N.C., didn't waver on his commitment to oppose Warsh's nomination until an investigation from the Department of Justice into Fed building renovation spending — an investigation that current Chairman Jerome Powell says is a pretext to fire him and replace him with a more malleable chairman — is dropped.

"We had some U.S. attorney or assistant U.S. attorney with a dream [thought] it would be cute to bring Chair Powell under investigation," Tillis said at the hearing. "It sounds like someone at the DOJ didn't check with the boss."

Tillis told outside reporters outside the confirmation hearing that he would be open to a compromise that would replace the DOJ investigation with a Senate Banking Committee panel overseeing the Fed renovation project — a potential offramp for Republican senators who are eager to confirm Warsh. 

But so far, there's been no sign of willingness from the DOJ or the White House to drop the case at all, nor does the White House show any sign of easing pressure on the Fed — whether it's helmed by Warsh or Powell — to lower interest rates. 

Trump, ahead of the hearing, told CNBC that he would be "disappointed" if Warsh didn't cut rates. 

Regardless, Warsh insisted throughout the hearing that he would act independently. 

"The President never, generally or specifically, instructed me [or] suggested I should commit to any interest rate path whatsoever," he said. "I will be an independent actor if confirmed as chair of the Federal Reserve."

Warsh would find himself in a tricky situation should he be confirmed. Inflation is worsening, with the war in Iran driving up gas prices in particular. Yet Warsh will face pressure from Trump and the White House to lower rates. Wall Street will watch Warsh closely on how he manages this dynamic. 

On Fed independence, Warsh repeated that the Fed needs to "stay in its lane" on political issues. The Fed, under the Biden administration, tackled some diversity issues and studied how environmental change would impact the economy and financial system, notably insurers who are dealing with more frequent and destructive weather events. 

Warsh did, however, say in his opening statement that the Fed is not independent in issues outside of monetary policy, including in bank regulation. 

Warsh also promised a degree of overhaul at the central bank. 

One of Warsh's more popular ideas across the aisle is shrinking the size of the Fed's balance sheet and, instead, using the more traditional interest rates to manage monetary policy. 

"The interest rate tool gets in the cracks. It's fairer," he said. "The balance sheet tool disproportionately helps those with financial assets. The interest rate tool hits the entire economy." 

He also wants to shift the Fed's communications strategy, suggesting that Fed officials are making too many statements on the forward path of interest rates. 

When asked by Sen. Ruben Gallego, D-Ariz., whether he would hold eight FOMC meetings per year, Warsh noted that the Federal Reserve Act requires four meetings annually, but "four is not enough, so having more meetings than that is appropriate." Warsh added that he has not considered the 2027 FOMC meeting schedule. 

Gallego then asked Warsh whether he would hold press conferences after FOMC meetings — a tradition that began in 2011 with then-Fed Chair Ben Bernanke — and Warsh did not say that he would. Past Fed chairs Bernanke and Yellen held four press conferences each year, but Powell has chosen to hold the press conferences after every FOMC meeting when he took the helm in 2018. 

"Right now, press conferences are held periodically," Warsh said. "If you ask me my true personal opinion, right now, Fed chairs and other central bankers around the FOMC, they speak quite frequently. There is no lack of transparency. But I would say this, I think truth-seeking is more important than repetition."

When asked whether he would take reporters' questions at any FOMC press conferences, Warsh again hedged his answer, saying that "if a press conference were held, I think it would be incumbent to hear what the reporters of the day had in mind."

Sen. Elizabeth Warren, D-Mass., spent her time trying to pin Warsh down on his financial disclosures, large parts of which are confidential. 

Warsh declined to share more information, saying only that he had disclosed ""all the information that is mine to disclose." He said that as part of his agreement with the Office of Government Ethics, he would divest "virtually" all of his assets into cash-like instruments, like Treasuries. 

Other Democratic lawmakers noted Warsh's record of agreement with Trump, suggesting no one is willing to cross the aisle to avoid a mid-May problem at the Fed once Powell's term expires. 

"I am concerned that your position on interest rates seems to shift with what's politically convenient, rather than based on sound economic judgment," said Sen. Chris Van Hollen, D-Md. 

Should the DOJ not drop the investigation into Powell, and Tillis continues to hold firm, then it's not clear who will helm the central bank after Powell's term ends. The White House will likely try to appoint a new chairman from the board. Powell has said he will stay on as chair pro tempore until a successor is confirmed.