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Sen. Warren: Transparency for Fed Nom. 04/17 06:16
WASHINGTON (AP) -- President Donald Trump's nominee to run the Federal
Reserve, Kevin Warsh, is likely to face tough questions about his vast
financial holdings at a hearing next week by the Senate Banking Committee.
Massachusetts Sen. Elizabeth Warren, the top Democrat on the panel, told
reporters she had met with Warsh Thursday and urged him to disclose more
information about his assets than was included in financial disclosure forms
released earlier this week. Warsh, a former top official at the Fed and a
wealthy investor, listed financial assets worth well more than $100 million.
The figures are given in ranges so a precise value wasn't disclosed.
Warsh has large stakes in several investment funds and owns a solo financial
advisory firm, Vicarage LLC. He has pledged in ethics filings to sell those
holdings and stop working as an adviser if he is confirmed as Fed chair. Yet he
has not disclosed the values of all his investments through the funds, or the
names of some of his clients.
"This is a real problem," Warren said. "No one has gone forward in the Trump
administration without disclosing fully their financial holdings."
It's the latest hurdle for Warsh, 56, who is already facing an unusually
turbulent path toward the Fed chair position, which he has sought for at least
a decade. Sen. Thom Tillis, a North Carolina Republican and member of the
Banking panel, said this week he won't vote for Warsh until a Department of
Justice investigation into current Fed chair Jerome Powell is resolved. The
stand-off threatens to delay Warsh's confirmation until after Powell's term as
chair ends May 15.
But even if Warsh is confirmed, he will likely face ongoing pressure from
Trump to cut the Fed's key interest rate despite the Iran war pushing inflation
higher and many other policymakers expressing skepticism about cuts. And he
could end up serving while Powell remains on the Fed's governing board, an
uncomfortable arrangement that hasn't occurred since the late 1940s.
Warsh was a member of the Fed's governing board from 2006 to 2011, and is
married to Jane Lauder, the daughter of billionaire cosmetics heir Ronald
Lauder, a major Republican donor. He has also worked in finance and has made
roughly $10 million as an advisor to billionaire investor Stanley
Druckenmiller's family office, according to his disclosure form.
Warren said Warsh declined in their meeting to disclose more information
about his holdings, "which, frankly, raises more concerns." She added that his
extensive investments are "a red flag surrounded by fireworks and sparklers."
Warsh said in his disclosures that "pre-existing confidentiality" agreements
prevent him from specifying the size of individual holdings or in some cases
what they are. For example, he owns a stake in Polymarket, the prediction
betting market, but did not say how large it is. He said he would comply with
all ethics requirements by selling those investments if confirmed.
Also Thursday, all 11 Democrats on the Banking Committee called for next
week's hearing to be postponed until the DOJ drops the investigation into cost
overruns for a $2.5 billion Fed building renovation project and Powell's role
in it, as well as an effort by Trump to fire Fed governor Lisa Cook.
Both moves "appear to be part of the Trump Administration's broader effort
to take control of the Fed," the letter said.
Powell said last month that he would continue to serve as Fed chair if no
replacement is confirmed by the end of his term. He added that previous chairs
have done the same. Yet on Wednesday, Trump threatened to try to fire Powell if
he did so.
Powell has also said he would remain on the Fed's governing board even after
his term as chair ends if the investigation isn't dropped. By doing so, he
could prevent the Trump administration from filling another seat on the board,
a step he might take if he saw it as a way to preserve the Fed's political
independence.
Powell serves a separate term as governor that lasts until January 2028. A
Fed chair hasn't remained on the board as a governor even after a new chair is
appointed since 1948.
The battles over Powell, as well as the uptick in inflation from the Iran
war, could create extensive headaches for Warsh.
"The ground has shifted materially beneath Warsh's feet since he was
nominated," Marco Casiraghi, an analyst at Evercore ISI, an investment bank,
wrote earlier this week. "Both with the oil shock and the failure to swiftly
resolve the DOJ investigation, which we think means Powell will now likely stay
on as a regular governor for several months."
Trump is likely to keep pushing for Fed rate cuts regardless of who is
chair. The Fed's short-term rate influences other borrowing costs in the
economy, including for mortgages, auto loans, and business borrowing.
Treasury Secretary Scott Bessent earlier this week appeared to reduce the
pressure on the Fed somewhat, when he told reporters Tuesday that rates should
be cut, "but if they want to wait for some clarity, I understand that." Many
Fed officials have said they want to see if the jump in energy prices starts to
push up inflation more broadly. If it doesn't, the Fed could potentially look
past the gas price spike and cut rates, particularly if the economy weakens.
Yet when Trump was asked Wednesday on Fox Business whether he still expects
interest rates to decline, he said, "when Kevin gets in, I do. ... interest
rates should be much lower."
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