WASHINGTON — Sen. Elizabeth Warren, D-Mass., on Thursday sharply criticized former Federal Reserve governor Kevin Warsh, the White House’s reported front-runner to succeed Jerome Powell, saying his past record shows he “has learned nothing from his failures” and would weaken the central bank’s independence.
Warren’s remarks, delivered in a letter to President Donald Trump and obtained by several news outlets, come as Warsh’s potential nomination remains on hold while federal prosecutors investigate whether Chair Powell improperly disclosed non-public monetary policy deliberations, according to people familiar with the inquiry.
Two administration officials said the Justice Department opened the probe late last year after internal Fed e-mails, released under subpoena, suggested Powell discussed rate-setting conversations with an outside financial consultant. Powell’s attorneys have denied any wrongdoing, and no charges have been filed.
Warsh, 55, served on the Fed’s Board of Governors from 2006 to 2011 and later advised several hedge funds. Critics point to his advocacy for an early withdrawal of crisis-era stimulus in 2010 as evidence he would tighten policy prematurely. “Mr. Warsh got the recovery wrong once before — American workers cannot afford a repeat,” Warren wrote.
A senior White House official said Warsh “remains under serious consideration,” but acknowledged that any formal nomination is unlikely until the Justice Department clarifies the status of the Powell investigation. “We don’t want a confirmation fight overshadowed by unanswered legal questions,” the official said.
Markets reacted mutedly; the S&P 500 slipped 0.2% while Treasury yields were little changed. “Investors are focused on policy continuity more than personalities,” said Dana Robards, chief U.S. economist at CapitalSphere Advisors.
If nominated and confirmed, Warsh would be the first Fed chair in modern history appointed after previously leaving the Board. Supporters within the administration argue his White House experience under President George W. Bush would help navigate a divided Congress. Detractors, including several Senate Banking Committee Democrats, say he lacks the consensus-building style needed to guide monetary policy at a precarious moment of sticky inflation and slowing growth.
The Senate Banking Committee is expected to hold preliminary hearings on any Fed chair nominee before the August recess. Analysts note that a prolonged vacancy at the top of the Fed could complicate efforts to recalibrate interest-rate guidance ahead of the central bank’s September policy meeting.
“The longer the uncertainty persists, the harder it becomes for the FOMC to signal a clear path,” said former Fed economist Lydia Chen. “That could translate into tighter financial conditions even without a single rate hike.”