Kevin Warsh Steps Closer to Becoming Fed Chairman

The Senate Banking Committee voted on party lines Wednesday to approve Kevin Warsh as the next chair of the Federal Reserve to replace Jerome Powell, a long-time target of President Trump's insults for not cutting interest rates as far as the president wanted. The vote was 13-11, with all Republican senators voting in favor and Democrats opposed, reports the AP. Warsh is a former top Fed official but has also been a sharp critic of the institution and Powell's leadership. He has called the inflation spike to 9.1% in 2022 the central bank's biggest policy mistake in four decades. A vote on his nomination probably won't take place until next month, but he could be confirmed by the time Powell's term as chair ends May 15.

The Senate Banking vote is the first of two key events surrounding the future of the Fed's leadership. Also Wednesday, Powell is presiding over what will probably be his last meeting of the Fed's interest rate-setting committee. At a news conference Wednesday afternoon, Powell may indicate whether he will remain as a member of the central bank's board of governors after his term as chair ends. It would be unusual for Powell to stay, but doing so would deprive the Trump administration of an opportunity to appoint a new member to the board. Powell may choose to stay if he sees it as necessary to protect the Fed's independence, which has become part of his legacy as its leader. The Fed on Wednesday is widely expected to leave its key rate unchanged at about 3.6% for its third straight meeting, defying Trump's calls for lower rates.

Sen. Tim Scott, a South Carolina Republican and chair of the committee, said Warsh is "battle tested" and added that, "It is incredibly important that we break the bind of Bidenomics on households across this nation." Sen. Elizabeth Warren, a Massachusetts Democrat, criticized the banking panel for voting for Warsh's nomination. Doing so "will bring the president one step closer to completing his illegal attempt to seize control of the Fed and artificially juice the economy," she said, citing Trump's efforts to fire Fed governor Lisa Cook and investigate Powell.

Warsh has called for "regime change" at the Fed and could alter many of its practices, including the economics models it focuses on, how it communicates with the public, and how large its bond-holdings will be in the long run. Just last week, Trump told Fox Business that he expects interest rates to head lower "when Kevin gets in."