JUANA SUMMERS, HOST:
The leader of the Federal Reserve holds one of the most powerful jobs in the global economy. President Trump's pick to occupy that post was quizzed today by members of a Senate committee about his approach to interest rates, inflation and a president who likes to get his own way. Kevin Warsh insisted he would not take marching orders from the president, but he does see room for changes at the Fed. NPR's Scott Horsley joins us now. Hey there.
SCOTT HORSLEY, BYLINE: Hi, Juana.
SUMMERS: So, Scott, I mean, the Federal Reserve is supposed to operate independently of the White House, but President Trump has not been shy at all about demanding lower interest rates. So what did you hear from Kevin Warsh today about that?
HORSLEY: Warsh says a president who's outspoken about wanting rate cuts is not a threat to the Fed's independence, but Warsh insisted he has not made any promises to Trump, and he says the president didn't ask for any guarantees before offering Warsh the top job at the Fed.
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KEVIN 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 demand it. He didn't require it and nor would I have ever done so.
HORSLEY: Warsh has said publicly, though, he thinks there's room to lower interest rates without a big danger of runway inflation. And Democratic Senator Elizabeth Warren says, you know, that's the opposite of positions Warsh has taken in the past. She accused the nominee of bending his views to curry favor with the president.
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ELIZABETH WARREN: Trump's economic failures are causing him political problems, and he wants the Fed to use monetary policies to artificially juice the economy in the short term. And this is his last chance to do that before the November elections.
HORSLEY: Now, I should note, even if Warsh is confirmed as Fed chair, he would not be able to cut rates single-handedly. Rates are set by a 12-person committee, and many other committee members are skittish about lowering interest rates while inflation is still well above the central bank's target.
SUMMERS: OK. So I understand that Warsh is getting some pushback from Democrats in the Senate, but what about Republicans?
HORSLEY: The Republicans on the Banking Committee are mostly supportive of Warsh's nomination, with the exception of Thom Tillis. The North Carolina senator is really the only thing standing in the way of Warsh being confirmed, and Tillis' objection has nothing to do with Warsh himself. It's all about the Justice Department launching a criminal investigation of cost overruns on the Fed's headquarters renovation. Tillis argues there is nothing extraordinary about that project and no basis for a criminal probe.
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THOM TILLIS: If we put everybody in prison in federal government that had had a budget go over, we'd have to reserve an area roughly the size of Texas for a penal colony because of the way government projects work.
HORSLEY: Tillis thinks the investigation is just another way for the administration to put pressure on the Fed to cut interest rates, and he has vowed to hold up Warsh's confirmation until that probe is put to bed.
SUMMERS: And if that gets resolved and Warsh does indeed take over at the central bank, what other changes might we see?
HORSLEY: Warsh says, if he's confirmed, he would like to see what he calls regime change at the central bank, not in terms of people but in terms of policy. He'd like the Fed to play a smaller role in the economy, maybe have policymakers give fewer speeches and news conferences and steer clear of politically charged issues like climate change.
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WARSH: The Fed can deliver on the mandate that you gave it if it sticks to its knitting. As it wanders into areas upon which it has neither authority or expertise, it loses its focus.
HORSLEY: Warsh himself was very focused during the confirmation hearing today. He avoided getting dragged into political minefields like immigration and how it affects the workforce. Despite strong opposition from Democrats, he seems likely to win confirmation if the administration can find a way to satisfy Senator Tillis and make that DOJ investigation go away.
SUMMERS: NPR's Scott Horsley, thank you.
HORSLEY: You're welcome. Transcript provided by NPR, Copyright NPR.
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