Kevin Warsh, Trump's fed chair pick, testifies at his Senate confirmation hearing | full video
https://www.youtube.com/watch?v=PW_TEoW9YPM
[00:05] Good morning to everyone.
[00:08] Good morning to everyone.
[00:10] This is Kevin Wars, thank you for being with us today and we're excited about the opportunity to discuss America's economy with you.
[00:14] Uh, this is really about the kitchen table.
[00:20] People across our country uh want to have confidence in our institutions and that your nomination uh goes in the direction of reinforcing why they should have confidence in the institutions.
[00:31] You've been nominated by the president to be the chairman of the Federal Reserve system.
[00:37] The Federal Reserve plays a powerful role in our economy.
[00:42] Monetary policy choices made at the Federal Reserve can affect the Americans ability to buy groceries, whether or not they can afford a home, how far their paycheck goes, especially at the end of the month.
[00:56] And in South Carolina, I hear all the time how families are working hard, doing everything right, and still feeling squeezed.
[01:03] Dynamics made prices
[01:07] Feeling squeezed.
[01:07] Dynamics made prices go up and paychecks have not kept pace.
[01:10] Too many parents are stretching every single dollar they have just to cover the basics.
[01:16] And too many workers are wondering when the economy will start to feel stronger at their kitchen table, not just on paper.
[01:24] Congress, President Trump and his administration are focusing on fixing the disastrous mistakes of Bidenomics to restore Americans confidence in our economy.
[01:37] Through efforts like the working families tax cut bill, we are helping Americans keep more of their hardearned money.
[01:45] Compared to the average tax return under President Biden over four years, the average return is up 24% since then.
[01:56] Just in the last year, the average tax return is now around $3,400 an 11% increase because President Trump
[02:07] An 11% increase because President Trump and his leadership decided to focus on hardworking Americans who are struggling to make ends meet paycheck to paycheck.
[02:20] Nearly half the country, half the returns filed in 2026 claimed either deduction for tipped income, overtime earnings, senior citizens, or auto loan interest for major parts of the working families tax cut bill that every single person on this side to the right voted for.
[02:40] Under President Trump's leadership, Americans are keeping more of their hard-earned money.
[02:45] About $300 more every month.
[02:53] It is necessary that Congress continues to put money back in the hands of everyday Americans.
[02:58] And that is why it is important, and I want to be clear here, that is why it is important that we confirm Kevin Walsh.
[03:08] It is important that we confirm Kevin Walsh to be the Federal Reserve Chair.
[03:10] The Federal Reserve has a clear dual mandate to promote stable prices and maximum employment.
[03:16] The policies of the Fed therefore directly affect Americans' cost of living and their income.
[03:24] And when the Fed is successful in fulfilling its dual mandate, affordability improves with Americans taking home more money and paying less for everyday necessities.
[03:42] Unfortunately, in recent years, the Fed has faced real challenges.
[03:46] There have been questions about its decisions, its focus, and whether it has engaged in issues far outside its jurisdiction.
[03:58] Under the Biden administration, the Federal Reserve appeared to move with the political winds, raising real concerns about politics and weaponizing one of the most powerful weapons we have.
[04:09] One of the most powerful weapons we have for good economically, the entire Federal Reserve system.
[04:15] For example, under the Biden administration, the Fed pushed climate focused initiatives only to reverse that climate agenda as soon as President Trump took office.
[04:27] When actions appear to shift with changing political priorities, it can undermine confidence in the independence of this great institution.
[04:38] An independent Federal Reserve is essential to achieving its mission.
[04:43] Markets depend on it.
[04:47] Families depend on it.
[04:50] And that independence must be protected.
[04:52] The American people expect the Federal Reserve to stay focused on the economy, not politics.
[04:59] Today's hearing is an opportunity to refocus the Federal Reserve on its dual mandate to increase economic stability and affordability for everyday Americans.
[05:12] Everyday Americans.
[05:15] Kevin Walsh is battle tested and brings the necessary experience from his time as a Federal Reserve governor during the Great Recession.
[05:23] During his first term as governor, he helped our economy through the crisis and restored faith in the economy.
[05:32] He has seen the economy in its darkest days and understands how economic decisions affect job growth, our economy, and the opportunities that we have come to love as Americans.
[05:47] We want every citizen in this country to have a chance to live their version of the American dream.
[05:57] And that means having our private sector economy running as strong as possible.
[06:03] Which means your focus has to be on everyday Americans and not politicians, not the political winds, but on everyday.
[06:13] political winds, but on everyday Americans who desperately want to restore their confidence in our institutions.
[06:20] Today, this committee will examine the plans Mr. Worsh has for his return to the Fed.
[06:26] this time as chair and how he plans to lead the institution at a critical moment to deliver lower cost and real relief for working families for folks back home in the great state of South Carolina and across the country.
[06:33] The goal is simple.
[06:35] They want lower costs and more opportunities.
[06:38] The Federal Reserve plays a key role in bringing prices down and helping wages go up.
[06:53] confirming Kevin Worsh will make sure that affordability is at the center of our economic agenda.
[07:00] Senator Warren is now recognized.
[07:06] Thank you, Mr. Chairman.
[07:08] And if I may, I I just want to start by saying one of our members lost a child yesterday.
[07:14] Our members lost a child yesterday.
[07:17] And I know our hearts go out to Mark Warner and his family.
[07:19] And that that is true on both sides of the aisle.
[07:22] That we may disagree on policies, and we may do so vigorously.
[07:28] But when it comes to the safety and security and the health of our families, I know we are as one.
[07:34] And we are praying for them.
[07:36] We are praying for them.
[07:38] Ranking member, I think it'd be appropriate for us to take a few seconds of silence on his behalf.
[07:41] 36 years old.
[07:44] The one thing you don't want to do as a parent.
[07:55] Thank you.
[07:55] Thank you.
[07:57] Thank you, Mr. Chairman, and appreciate all you do.
[08:01] So, we should not be having this hearing today.
[08:04] And here's the context.
[08:07] First, over the past year, President Trump has racked up one economic failure after another.
[08:13] And Americans know that.
[08:15] Another, and Americans know that consumer sentiment just hit its lowest.
[08:18] Consumer sentiment just hit its lowest level on record ever.
[08:22] Inflation is rising, and families are paying more for groceries, more for health care, more for utilities, more for housing.
[08:28] All thanks to Trump's chaotic tariffs and one big, beautiful bill.
[08:31] And now his war with Iran is putting American troops in harm's way and further driving up the cost of nearly everything here at home.
[08:43] Second, in your testimony, you said it's perfectly fine for elected officials to state their views on interest rates, but that is not what Donald Trump is doing.
[08:54] The president has repeatedly and illegally attempted to take over the Fed.
[08:59] His bogus attacks on Governor Lisa Cook and Chair Powell were designed to threaten all the members of the Fed to do Trump's bidding and open more spots for Trump flunkies.
[09:13] Why try to end the
[09:16] For Trump flunkies, why try to end the independence of the Fed?
[09:19] Because 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.
[09:31] And this is his last chance to do that before the November elections.
[09:37] Having a sock puppet in charge of the Fed would also give the president access to the Fed's powerful authorities to enrich himself, his family, and his Wall Street buddies.
[09:45] It could mean granting special accounts to his family's crypto company or bailouts to his friends on Wall Street if they get into trouble.
[09:59] In other words, a Fed under Donald Trump's control creates more opportunities for Trump's corruption.
[10:08] Third, the nominee before us today, Kevin Walsh, is uniquely ill-suited for the job as Fed chair.
[10:11] In our meeting
[10:17] The job as Fed chair.
[10:17] In our meeting last week, we discussed the 2008 financial crash where 8 million people lost their jobs, 10 million people lost their homes, and millions more lost their life savings.
[10:32] Giant banks, however, got hundreds of billions of dollars in bailouts.
[10:34] Mr. Worsh was a Fed governor from 2006 to 2011.
[10:38] That's before, during, and after the crash.
[10:45] And he said to me that he has no regrets about anything he did.
[10:49] So, let's take a deeper dive into Mr. Worsh's record.
[10:52] In the years leading up to the 2008 financial crisis, he was an enthusiastic cheerleader for credit default swaps and complex securizations.
[11:04] He dismissed repeated and increasingly urgent concerns from housing advocates across the country regarding subprime mortgages.
[11:12] He refused to use the Fed's
[11:18] Mortgages.
[11:18] He refused to use the Fed's authorities to address the risks that were building in the financial system.
[11:24] And when the crisis hit and the economy blew up, Worsh took on the job of Wall Street's personal liaison on the Fed board.
[11:33] He was quick to respond to concerns from Wall Street CEOs and he worked tirelessly to arrange multi-billion dollar bailouts for them with nothing for American families.
[11:45] No regrets, he says.
[11:48] No regrets.
[11:52] After the crash, most people on the Feds saw millions of Americans unemployed, people who had lost their homes, and said, "Now might be a good time to lower rates and make the cost of borrowing cheaper for businesses to avoid more layoffs and make it cheaper for Americans who are worried about paying their mortgages or their credit cards."
[12:14] But not Mr. Walsh.
[12:14] Nope.
[12:14] He wanted to keep interest rates high.
[12:17] And he sang
[12:20] Keep interest rates high.
[12:20] And he sang the same song for more than a decade.
[12:23] The same song for more than a decade.
[12:23] Even as the economy struggled when the job of Fed chair became available during Trump's first term as president, Worsh held on to his high interest rate inflation hawk views and Trump passed him by.
[12:35] Regretful, he soon reversed course and called for the Fed to pause interest rate hikes.
[12:45] Then once Trump left office, Mr. Walsh flipped again and was even criticizing the Fed for cutting rates in the fall of 2024.
[12:59] But as soon as Donald Trump became president a second time, Worsh reversed himself once more and began shouting from the rooftops about how the Fed should cut interest rates.
[13:10] Evidently, he learned his lesson.
[13:13] This time around, he sucked up to Donald Trump to snag his dream job.
[13:18] Mr. Chairman, last week,
[13:22] Dream job.
[13:22] Mr. Chairman, last week, every single Democratic member of this committee asked that you postpone this hearing and instead conduct oversight on the president's role in directing bogus criminal probes into Chair Powell and Governor Cook.
[13:34] The Senate should not be aiding and abetting Donald Trump's illegal takeover of the Fed by installing his chosen sock puppet as chair.
[13:46] It's an invitation for corruption and for economic catastrophe.
[13:53] We have the power to stop it and we should be using that power.
[13:55] Thank you, Mr. Chairman.
[14:03] Well, there you have it.
[14:07] I I'll just say it is interesting that we're going to hear from Senator Dave McCormack and his introduction of Kevin Wars who was last time unanimously confirmed by the United States Senate.
[14:17] Unanimously confirmed by the US Senate.
[14:23] Unanimously confirmed by the US Senate.
[14:23] Dave, the floor is yours.
[14:25] Dave, the floor is yours.
[14:28] Thank you, Mr. Chairman, Ranking Member Warren, distinguished colleagues.
[14:30] It's really a great honor to introduce my friend Kevin Worsh and welcome him and Jane here today.
[14:33] Kevin has been a friend for many years.
[14:36] Winston Churchill observed that for great leaders there comes, and I quote, a special moment where they are figuratively tapped on the shoulder and offered the chance to do a very special thing.
[14:39] What a tragedy, he warned.
[14:41] if that moment finds them unprepared for that which would have been their finest hour.
[14:44] Colleagues, I'm here today to assure you as someone who knows Kevin and who knows this institution that Kevin Walsh could not be more prepared for this his finest hour.
[14:46] There's no one more fitting, no one more fitting, no one more qualified.
[15:27] One more fitting, no one more qualified to face this consequential moment as the 17th chair of the Federal Reserve.
[15:34] 17th chair of the Federal Reserve.
[15:36] Now, I'm not going to belabor Kevin's academic and professional record.
[15:39] They speak for themselves.
[15:41] Instead, I'd like to tell you about a man who Dena and I worked with decades ago and who has been someone I've called a friend for almost 30 years.
[15:51] 30 years.
[15:52] President George W. Bush famously appointed Kevin to the Federal Reserve in 2006 when Kevin was just 35.
[15:59] He was the youngest appointed board member in history.
[16:04] But President Bush saw in Kevin what I believe you will see in him with your questions today.
[16:12] Wisdom that belied his age now deepened by experience.
[16:18] A moral clarity.
[16:20] A moral clarity even in the most turbulent of times.
[16:26] A sharp and independent intellect further
[16:27] Independent intellect further strengthened by decades immersed in unforgiving global financial markets.
[16:34] And a deep, deep, honest understanding of how the decisions made in the marble hallways of Washington affect the lives of hardworking Americans.
[16:49] Now, I, unlike many on this committee, have seen these virtues on display across decades of friendship.
[16:54] I first met Kevin in the late 1990s when he and my younger brother were junior associates on Wall Street.
[17:01] And a decade later, we served together in the crucible of the global financial crisis.
[17:07] I as the Under Secretary of Treasury for International Affairs and Kevin on the Fed board for nearly two years.
[17:13] We worked hand in hand to contain the damage and navigate the country through the crisis.
[17:17] And I know that then Chairman Ben Bernanke relied heavily on Kevin during those turbulent times, and I did too.
[17:24] And I've continued to seek his counsel regularly in the
[17:31] To seek his counsel regularly in the years since.
[17:32] Years since.
[17:34] Now, Kevin came to Washington all those years ago as an outsider.
[17:37] An idealistic young man determined to serve his country.
[17:40] One who has succeeded beyond all expectations.
[17:44] Beyond all expectations.
[17:47] And he returns today is the ideal candidate to lead the Fed at this most crucial juncture.
[17:50] Candidate to lead the Fed at this most crucial juncture.
[17:53] Crucial juncture.
[17:55] If confirmed, Kevin will inherit a Federal Reserve in need of repair.
[17:57] Federal Reserve in need of repair and confronting serious uncertainty.
[18:00] Confronting serious uncertainty, an overextended balance sheet, a poor record on inflation, and a weak understanding of the profound opportunities offered in today's economy.
[18:03] An overextended balance sheet, a poor record on inflation, and a weak understanding of the profound opportunities offered in today's economy.
[18:06] A poor record on inflation, and a weak understanding of the profound opportunities offered in today's economy.
[18:09] Understanding of the profound opportunities offered in today's economy.
[18:12] Opportunities offered in today's economy.
[18:15] Economy.
[18:16] He is uniquely suited to confront these challenges.
[18:19] Challenges.
[18:22] He brings a reformer's heart.
[18:25] He will shake up a stagnant institution at a time when change is sorely needed.
[18:29] Institution at a time when change is sorely needed.
[18:30] Sorely needed.
[18:32] He possesses a deep understanding of markets and is trusted by leaders across the financial industry.
[18:38] But he equally understands the real economy.
[18:44] Born and raised in upstate New York, he knows from personal experience how the actions of the Fed can change the lives of working families.
[18:53] It's no small thing.
[18:56] It's most no small thing to know firsthand how an increase in gas prices or mortgage rates or an uptick in unemployment affect everyday Americans.
[19:06] The Federal Reserve must not be ruled by pointy head economists pouring over outdated models and reams of market data.
[19:14] It needs a leader.
[19:17] It needs a leader who understands that the Fed's mandate of stable prices and maximum employment serves a higher purpose, the preservation of the American dream.
[19:29] Now, colleagues, Kevin Walsh has lived the American dream.
[19:34] Walsh has lived the American dream.
[19:38] I know in my heart he will always fight to keep that dream alive for all Americans.
[19:44] He is the right man for this pivotal moment.
[19:48] And I urge you I urge you not to get caught up in the politics of the moment and support his speedy confirmation.
[19:56] Thank you, Mr. Chairman.
[19:59] Thank you, Senator McCormack.
[20:01] I will now swear in the nominee.
[20:04] Will you please stand and rise? raise your right hand.
[20:06] Do you swear that the testimony that you are about to give is the truth, the whole truth, nothing but the truth to help you guide?
[20:12] Do you agree to appear and testify before any duly constituted committee of the Senate?
[20:17] I do.
[20:19] You may sit down.
[20:21] Your written statement will be made part of the record in its entirety.
[20:24] Please keep your oral comments to five minutes.
[20:27] Mr. Worsh, you're now recognized.
[20:30] Uh, thank you, Mr. Chairman.
[20:32] Uh, I appreciate your consideration today.
[20:34] I've known you for quite a while and I certainly appreciate the many courtesies
[20:36] I certainly appreciate the many courtesies you've given me not just since the president's nomination but long before.
[20:40] Uh, it's an honor to be with you, with Ranking Member Warren, and with the entire committee.
[20:46] Uh, I'm deeply grateful to President Trump for asking me to take on this public trust because that's what it is, a public trust.
[20:55] The president believes that real economic growth in the US and real take-home pay will accelerate.
[21:00] I share the president's confidence in our country and its people.
[21:05] America's economic growth potential is rising as we sit here today.
[21:13] I'm also especially happy that my wife Jane is here.
[21:14] She's been with me for many of the most important moments in my life.
[21:20] I'm grateful for her love and her personal accomplishments.
[21:23] I reciprocate that with somewhat of my own love, though I'm a little more stoic than she.
[21:27] And about every 20 years, um, I reintroduce her to this committee.
[21:33] She sat behind me 20 years ago.
[21:36] And, uh, it
[21:39] Sat behind me 20 years ago.
[21:39] And it was almost 20 years ago to the day.
[21:41] And was almost 20 years ago to the day.
[21:41] And so, let me offer today what I said then.
[21:44] So, let me offer today what I said then.
[21:44] Um, Jane, happy anniversary.
[21:47] Um, Jane, happy anniversary.
[21:47] Um, I'm also thinking of my late mom and dad.
[21:50] Um, I'm also thinking of my late mom and dad.
[21:50] Uh, they were, uh, paying great attention to this hearing 20 years ago.
[21:53] Uh, they were, uh, paying great attention to this hearing 20 years ago.
[21:55] Uh, they're no longer with us, but I was always proud of them and the values they taught me, and I hope they'd be proud of me today.
[21:58] Uh, they're no longer with us, but I was always proud of them and the values they taught me, and I hope they'd be proud of me today.
[22:00] Always proud of them and the values they taught me, and I hope they'd be proud of me today.
[22:03] Taught me, and I hope they'd be proud of me today.
[22:05] Me today.
[22:05] We start today with a note of broad agreement.
[22:07] We start today with a note of broad agreement.
[22:07] Even though we might have heard different narratives at the outset of this hearing, this is a time of great consequence for the nation's economy.
[22:09] Agreement.
[22:09] Even though we might have heard different narratives at the outset of this hearing, this is a time of great consequence for the nation's economy.
[22:11] Heard different narratives at the outset of this hearing, this is a time of great consequence for the nation's economy.
[22:13] Of this hearing, this is a time of great consequence for the nation's economy.
[22:17] Consequence for the nation's economy.
[22:17] As a former Fed governor and friend or colleague of the last five Fed chiefs, from whom I've learned plenty of lessons, I'm particularly alert to the challenges and opportunities confronting the institution that I cherish, the Federal Reserve.
[22:20] As a former Fed governor and friend or colleague of the last five Fed chiefs, from whom I've learned plenty of lessons, I'm particularly alert to the challenges and opportunities confronting the institution that I cherish, the Federal Reserve.
[22:23] Colleague of the last five Fed chiefs, from whom I've learned plenty of lessons, I'm particularly alert to the challenges and opportunities confronting the institution that I cherish, the Federal Reserve.
[22:24] From whom I've learned plenty of lessons, I'm particularly alert to the challenges and opportunities confronting the institution that I cherish, the Federal Reserve.
[22:27] Lessons, I'm particularly alert to the challenges and opportunities confronting the institution that I cherish, the Federal Reserve.
[22:30] Challenges and opportunities confronting the institution that I cherish, the Federal Reserve.
[22:32] Confronting the institution that I cherish, the Federal Reserve.
[22:35] Cherish, the Federal Reserve.
[22:35] To the president, to the Congress, the nation, I owe my best judgment and my most.
[22:39] President, to the Congress, the nation, I owe my best judgment and my most.
[22:41] I owe my best judgment and my most faithful efforts in serving the mission.
[22:46] That you and Congress assigned to the Federal Reserve, including full employment and stable prices.
[22:51] The American people are counting on the Fed to deliver on its commitments, perhaps now more than ever.
[22:58] The real highlights of my life are not on my resume, as Senator McCormack said.
[23:03] They include the individuals with whom I worked and from whom I learned.
[23:08] I graduated from high school in upstate New York.
[23:12] I had some exceptional teachers there and some brilliant classmates.
[23:16] I've learned we're lucky in life if we start out with good influences in learning and in character.
[23:24] A public school education gave me both of these and I'm grateful.
[23:29] I made my way to Stanford and found myself in the company of some of the most highly accomplished economists and policy makers.
[23:36] George Schultz, former Secretary of State and Treasuring, was among the great patriots at the Hoover Institution, who I came to
[23:43] At the Hoover Institution, who I came to know as a teacher, mentor, and friend.
[23:46] He passed away right after CO at age 100, but I still feel him with me.
[23:51] I could not have imagined a better formative experience than working from and learning from folks like him.
[23:59] I could tell you about all the things I learned, but maybe the most important was to be around people completely devoted to the ideas and ideals of our country.
[24:08] Silicon Valley in the early 90s, another fitting backdrop for all the things we confront today.
[24:13] I found myself in the right place at the right time.
[24:18] The US was at the vanguard of a new era of technological leadership and I just looked out my door to see it.
[24:26] Now, in the last 15 years, I've gained deep experience in macro and in markets working with Stan Ducken Miller.
[24:31] He never held a position in government, but is no less a patriot.
[24:34] He never got a PhD in economics, but I don't know a finer economic thinker.
[24:40] Without their guidance
[24:43] economic thinker.
[24:45] Without their guidance and the guidance of Condi Rice, my friend and I should say my boss at the Hoover Institution, I doubt I would be sitting before you today as the president's Fed chairman nominee.
[24:54] But I'm certain of one thing.
[24:57] Absent their toutelage, absent their example, I would not be as prepared for the urgent missionritical task at hand.
[25:06] In between these bookend experiences, I served uh quite a while ago as a governor at the Federal Reserve at the at the birth at the onset of the financial crisis.
[25:18] As Senator Warren said, our central bank played an indispensable role and we benefited enormously from the credibility that our predecessors had built up and passed down to us, governors of the Fed at the time.
[25:33] In these unusual and exigent circumstances, I saw the Fed and its people at their very best.
[25:39] But I also witnessed an institution that was tempted to play a larger role in the
[25:44] Was tempted to play a larger role in the economy and society.
[25:47] So let me be very clear.
[25:48] Monetary policy independence is essential.
[25:52] Monetary policy makers must act in the nation's interest.
[25:57] Their decisions the product of rigor, deliberation, and unclouded decision-making.
[26:02] And as Senator Warren said, I do not believe that independence of monetary policy is threatened when elected officials state their views on rates.
[26:11] Fed independence is up to the Fed.
[26:14] That has three implications.
[26:16] First, Congress is tasked with the mission to ensure price stability.
[26:20] Inflation is the Fed's choice.
[26:24] Second, Fed independence is at its peak in the conduct of monetary policy.
[26:29] And third, as the chairman said, the Fed must stay in its lane.
[26:34] I'm committed to ensuring that the conduct of monetary policy remains strictly independent, equally committed to work with the administration and Congress on non-monetary matters that
[26:45] Congress on non-monetary matters that are part of the Fed's remit.
[26:47] And I commit myself to accountability.
[26:50] Finally, I'll just say this, Mr. Chairman.
[26:54] Milton Friedman had a phrase that always stayed with me.
[26:57] He always worried about government officials that lured and hung around with what he called the tyranny of the status quo.
[27:04] Status quo practices and policies are especially harmful when the world is changing this fast.
[27:08] If confirmed as chairman, I will be faithful to the Constitution, to the Federal Reserve Act, and to the very best of the Fed's traditions.
[27:17] I believe a reform-oriented Fed can make a real difference to the American people.
[27:22] And if confirmed, I will seek to create an environment in which the best people do their best work.
[27:28] Candor and goodwill will go a long way in pursuing those objectives.
[27:34] And I suspect this hearing, Mr. Chairman, will put us to the test.
[27:37] It's a real privilege to be >> Thanks, sir.
[27:40] I I will say that we typically stick to a five-minute uh opening comments.
[27:43] I would encourage all of us to stick with our five minutes as
[27:48] Of us to stick with our five minutes as it relates to our question and answers.
[27:50] It relates to our question and answers.
[27:52] Uh we have full attendance today and it's going to be really important for us to stick as closely to the five minutes as possible.
[27:56] Uh if we go over by by by much you'll you'll hear me which is an indication that you're already over and uh I'll do my very best to keep us on time.
[28:09] Kevin, there are so many questions to talk to you about to ask you about to be honest with you and and I just want to name a couple of them and we'll look forward to hearing more on these topics.
[28:18] I will not have enough time to delve into some of the most important issues facing our country.
[28:22] I'll take two of those issues and focus my time.
[28:27] I'm sure my colleagues on either side will have a conversation with you and ask questions about AI.
[28:31] The AI future is going to have massive impact on where we go as a nation.
[28:37] It's have massive impact on your dual mandate as relates to full employment.
[28:42] Our production may go up while while our employment stays flat.
[28:46] So this is a really important question.
[28:48] So this is a really important question that at some point we should delve into.
[28:51] I also think that someone should spend some time uh talking about our balance sheet.
[28:55] We have nearly a 7 trillion dollar balance sheet at the Federal Reserve.
[29:00] Too much attention has been paid to your balance sheet and not enough attention has been paid to the nation's balance sheet.
[29:06] I think it's really important for us to dig into that issue as well.
[29:08] Digital assets.
[29:10] The future of finance in the world seems to have a major component of it being artificial being a digital assets.
[29:17] The market structure legislation we don't want your comment on but the important role of of the blockchain in the future is another really important part of the future of our economy.
[29:27] I will spend some time talking about affordability and the importance of the independence of the Fed.
[29:37] Uh, one of the things I I've appreciated about your previous comments is the importance that you have placed on the dual mandate, stable prices, which typically comes through the form
[29:48] Which typically comes through the form of interest rate changes as well as promoting maximum employment.
[29:53] I think those two will become more challenging in the current environment.
[29:56] One obviously, the second one being the AI and the future of full employment.
[30:03] You've criticized the Federal Reserve for getting too big, mismanaging inflation.
[30:07] I'm sure you know the definition of transitory, so I won't ask you, but I got a feeling you know, and some of your predecessors did not.
[30:15] Compromising the independence of the Fed.
[30:17] I think we should spend more time on finance, less time on climate change, on politics, on who is or who's not in charge.
[30:27] I think you would agree on those issues, though I will not ask you.
[30:28] I will ask you however that under your leadership, how will you steer the Federal Reserve to address the real life issues of affordability is my first question and my second question will be about how do you make sure that the Federal Reserve stays out of the lane of external influences?
[30:49] Well, thank you, Mr. Chairman.
[30:52] There's probably no more pressing question than the cost of living.
[30:57] Um, we know at the Federal Reserve that price stability was an objective that the that you and your colleagues gave to the Fed.
[31:06] So when over the course of the last several years, especially after the after co when prices went up to the tune of 25 to 35% for virtually all deciles of the American people, that's an indication that the Fed missed its mark and we are still dealing with the legacy of the policy errors in 2021 and 2022.
[31:29] um once you let inflation take hold in the economy, it's more expensive and harder to bring it down.
[31:36] And so the fatal policy error going back four or five years is still a legacy that we're dealing with.
[31:44] We need, in my judgment, fundamental policy reforms to fix it.
[31:47] And while it's true that inflation is
[31:49] And while it's true that inflation is less problematic, meaning the rate of change in prices is less severe than it was some years ago, hardworking Americans are no doubt feeling it.
[31:58] I think that means a regime change in the conduct of policy.
[32:00] I think that means a different new inflation framework.
[32:05] I look forward to working with my colleagues at the Fed, if confirmed, to achieve that.
[32:11] I think it means, as you suggested, using tools differently.
[32:14] The Fed has an interest rate tool and a balance sheet tool.
[32:16] My view is the interest rate tool gets in the cracks.
[32:20] It's fairer.
[32:20] Uh the balance sheet tool disproportionately helps those with financial assets.
[32:27] the interest rate tool hits the entire economy.
[32:27] So, we need a new framework, new tools, and I'd also say, Mr. Chairman, new communications.
[32:34] Yes, I think part of the reason why after making a mistake in 2021 and 22, the mistake was compounded is the Fed gives its forward guidance.
[32:43] The Fed tells the whole world what their dots are going to be, what their forecasts are going to be.
[32:48] Well, the Fed's human then they hold
[32:51] Well, the Fed's human then they hold on to those forecasts longer than they should.
[32:56] I think if the Fed were to wait until it gets into a meeting before making a decision that incremental deliberation can keep the central bank from compounding its errors.
[33:04] I think these are big changes that are needed and if confirmed I look forward to doing it.
[33:07] Thank you very much. Ranking member Warren.
[33:10] Uh thank you, Mr. Chairman.
[33:13] So the Fed has been plagued by deeply disturbing ethics scandals in recent years involving at least six Fed officials.
[33:21] So, it's critical that the next chair have no financial conflicts.
[33:24] None.
[33:27] Uh, you have more than hundred million in investments that you have refused to disclose to ethics officials and to the public.
[33:34] So, let me ask, do the Juggernaut Fund or the THSDFs LLC invest in any companies affiliated with President Trump or his family?
[33:46] companies that have facilitated money laundering,
[33:52] That have facilitated money laundering, Chinese controlled companies or Chinese controlled companies or financing vehicles established by Jeffrey Epstein.
[33:59] Uh, Senator Warren, thank you.
[34:02] So, let me first share a point of agreement with you.
[34:04] Um, the Fed has two tools.
[34:07] One is its monetary policy and the second is its credibility and the scandals that you talked about, the ethics problems you talked about, but went to the core of the credibility that has hurt the answer my question, please.
[34:18] I asked you have a hundred million dollars in undisclosed assets.
[34:22] And what I'm asking is are any of those with uh this outfit that invests in um uh companies affiliated with President Trump or his family, companies that have facilitated money laundering, Chinese control companies, or financing vehicles set up by Jeffrey Epste?
[34:41] It's a yes or no question.
[34:42] Uh, Senator, I have worked tirelessly with the ethics officials at the office of government ethics and you have not come to an ethics agreement and have agreed, Senator, to sell all of
[34:54] And have agreed, Senator, to sell all of my financial assets.
[34:58] My financial assets, Mr.
[35:01] Refusing to tell us if you have investments, for example, in vehicles set up uh to advance Jeffrey Epstein.
[35:07] Is that what you're telling us?
[35:08] You just won't tell us.
[35:10] Uh, Senator, what I'm telling you is that those assets that you represent at Juggernaut will be sold if I'm confirmed before I take office and sign the oath of office.
[35:19] Let me follow up on that.
[35:21] Will you at least disclose how you plan to disclose and divest these secret assets?
[35:28] I'm sure you understand that the public might question your motives if, for example, billionaire Stanley Ducken Miller, uh, who you honored in your opening statement, and who makes a living guessing what the Fed will do next, cuts you a massive check for $und00 million as you take the oath of office to become the new Federal Reserve chair.
[35:52] Uh, Senator, as you know, it sounds like your fight not be might not be with me.
[35:55] Your fight might not be with me, but the Office of Government Ethics.
[35:58] But the Office of Government Ethics, I've come to full agreement with them.
[35:59] I've come to full agreement with them and have agreed to divest all of those assets.
[36:03] And have agreed to divest all of those assets, especially those that you reference forward question before I take the oath of office.
[36:07] Reference forward question before I take the oath of office and that is, will you disclose how you divest those assets or will you just collect a check for hundred million from someone whose whole business is betting on what the Fed will do?
[36:20] Business is betting on what the Fed will do? As I said to the ethics officials at the Federal Reserve and the Office of Government Ethics, they agree.
[36:26] Government Ethics, they agree.
[36:26] I'll take that as a redeeming my Trump has made clear that he does not want an independent Fed.
[36:31] Has made clear that he does not want an independent Fed.
[36:34] In fact, he has said, and I quote, "Anybody that disagrees with me will never be Fed chairman."
[36:39] And he's made clear that you are his sock puppet, saying last week that interest rates will drop, quote, "when Kevin gets in."
[36:46] In." Yeah, I think they do. Not when economic conditions change, we'll get lower rates.
[36:51] Not when the economy needs it. Nope. He said, "When my guy Kevin
[36:57] It. Nope.
[36:59] He said, "When my guy Kevin Walsh is in there, we'll get the interest rates that I, Donald Trump, wants."
[37:04] So independence takes courage.
[37:06] Let's check out your independence and your courage.
[37:09] We'll start easy.
[37:09] Mr. War, did Donald Trump lose the 2020 election?
[37:16] Um, uh, we try to keep politics, if I'm confirmed, out of the federal.
[37:17] I'm just asking a factual question.
[37:19] I need to know.
[37:21] I need to measure your independence and your courage,
[37:25] Senator.
[37:25] I believe that this body certified that election many years ago.
[37:29] That's not the question I'm asking.
[37:29] I'm asking, did Donald Trump lose in 2020?
[37:35] And I'm suggesting you in 2020, the Fed your huge inflation problem and you certified the election politics out of monetary policy.
[37:44] Meeting you would be independent because you're quote a tough guy.
[37:48] Those were your words, tough guy.
[37:50] And you will be able to stand up to President Tric Trump.
[37:52] So, let's try it again.
[37:55] Name one aspect of President Trump's economic agenda with which you
[37:58] Trump's economic agenda with which you disagree.
[38:01] Well, Senator, the Federal Reserve in recent years has wandered outside of its remitt, wandered into other.
[38:08] Donald Trump on the Federal Reserve should stay in its lane.
[38:14] Just one, just one little place where you disagree with Donald Trump.
[38:16] Well, I do have a disagreement actually, Senator, with the president.
[38:21] I think even this morning he said that he thought I was out of central casting.
[38:25] Um, I think central casting I'd look older, grayer, and maybe show up here with a cigar of sorts.
[38:32] Quite adorable.
[38:34] But, you know, we need a Fed chair who is independent.
[38:37] That's the only way we preserve the independence of the Federal Reserve.
[38:42] If you can't answer these questions, you don't have the courage and you don't have the independence.
[38:49] I agree with you on independence.
[38:52] Senator Rems.
[38:54] Thank you. Thank you, Mr. Chairman. Um, Mr. Walsh, first of all, welcome and uh
[39:01] Mr. Walsh, first of all, welcome and I appreciated the opportunity to visit with you personally in the office.
[39:07] I agree with you and I think Fed independence is critical and I think that's an item that you and I agree on wholeheartedly.
[39:15] I want to take an opportunity just to kind of perhaps give you an opportunity to respond.
[39:22] I know that the ranking member had a number of items that she expressed concerns with.
[39:26] I'd like to give you an opportunity to just kind of work this way through and let me just ask you a few questions and I'll allow you to take the time to fully answer the questions.
[39:34] As I understand, Mr. Worsh, you worked with the career ethics professionals at the office of government ethics and at the Fed to come to an agreement in terms of your dissolution of some of the assets that you as a businessman have.
[39:52] Is that correct?
[39:55] Uh yes, Senator, that that is correct.
[39:58] I worked with the Fed ethics officials first, answered all of their questions, then with the career
[40:02] Questions, then with the career professionals, the Office of Government Professionals, the Office of Government Ethics, uh, answered all of their questions.
[40:07] And then they drafted, wrote up an ethics agreement, um, which is part of the public record.
[40:12] But because I agree with Senator Warren on the ethical questions that have been raised over the last several years by several people that were members of the FOMC.
[40:21] So that there's no question about my independence, no question about the clarity of my financial record.
[40:29] I agreed to divest virtually all of my financial assets, the large majority of which will be divested before I raise my right hand and sworn into office if confirmed by this body.
[40:43] So I've gone above and beyond not for any speestablish its credibility because the conduct of policy depends on it.
[40:55] So let me just for the record the agreement which you have signed clearly states that you have agreed to divest your assets that are in
[41:04] Agreed to divest your assets that are in question within 90 days of confirmation.
[41:08] Question within 90 days of confirmation if you have not already divested them.
[41:10] If you have not already divested them.
[41:10] That is correct.
[41:11] That is correct.
[41:13] Yes, Senator.
[41:13] And in fact, the large majority of those assets will be divested before I am sworn into office if confirmed.
[41:19] Divested before I am sworn into office if confirmed.
[41:20] If confirmed.
[41:23] Thank you.
[41:23] Um, the career ethics professionals were the ones that basically had sent your signed paperwork to this committee's chief clerk.
[41:33] Paperwork to this committee's chief clerk.
[41:33] I really question whether or not they would have done that if they did not come to the ethics agreement with you in the first place.
[41:38] They would have done that if they did not come to the ethics agreement with you in the first place.
[41:40] Not come to the ethics agreement with you in the first place.
[41:40] Correct.
[41:43] You in the first place.
[41:43] Correct.
[41:45] Yes, I presume I presume that's right.
[41:45] Yes, I presume I presume that's right.
[41:47] We had a very good working relationship and I'm happy to be sitting after the divevestature and cash or tea bills or whatever is the permitted asset so we can get back to the business of fixing the Fed, reforming an institution that has lost its way a bit that has missed the mark.
[41:49] The divevestature and cash or tea bills or whatever is the permitted asset so we can get back to the business of fixing the Fed, reforming an institution that has lost its way a bit that has missed the mark.
[41:52] Or whatever is the permitted asset so we can get back to the business of fixing the Fed, reforming an institution that has lost its way a bit that has missed the mark.
[41:55] So we can get back to the business of fixing the Fed, reforming an institution that has lost its way a bit that has missed the mark.
[41:56] The Fed, reforming an institution that has lost its way a bit that has missed the mark.
[41:59] Has lost its way a bit that has missed the mark.
[42:02] As Chairman Scott said at the
[42:05] The mark.
[42:05] As Chairman Scott said at the outset, uh this inflation risk is still something that's being talked about around kitchen tables and and boardrooms.
[42:14] My preferred definition of stable prices is a little different than most academics.
[42:19] Uh I believe that price stability should be a change in prices such that no one's talking about it.
[42:24] That's an old-fashioned definition, but I think it's still valid.
[42:28] The sooner that we can reform the institution with my colleagues if confirmed, the sooner we can ensure price stability and we can have a new set of leaders at top the institution with high credible ethical standards to um return the Fed to what it should be.
[42:47] The independence that both Chairman Scott and Senator Warren mentioned critically important, but independence has to be earned and it's earned by delivering on the promises, the commitments that the Fed has made.
[42:58] And as the Fed hasn't delivered on those promises, we shouldn't be surprised that we hear politics that are entering the room at the Fed.
[43:04] We need to get to
[43:06] room at the Fed.
[43:08] We need to get politics out of it so the Fed can focus on its day job, deliver on full employment and stable prices.
[43:13] It's true that people want to see stability within the Fed, but is it okay for a Fed governor or a chairman to change their mind on a particular policy?
[43:25] Uh, it's more than okay. It's essential.
[43:28] Uh, economics is not physics.
[43:31] It's not math.
[43:33] Frankly, most of us that ended up in the economics business, we started like I did as a math major.
[43:35] It was too hard.
[43:38] Uh, so we end we ended up in economics.
[43:40] In economics, what we need to do is focus to the left of the decimal point, not to the right of the decimal point.
[43:44] We need to focus on the big things.
[43:46] And if mistakes are made, central bankers, economic policy makers need to correct them fast.
[43:51] The real mistakes, the mistakes that cause inflation be persistent to undermine hardworking Americans standard of living.
[43:59] And when those mistakes go on.
[44:02] Thank you. Thank you, Mr. Chairman.
[44:05] Yes, sir. Senator Reid.
[44:08] Mr. Chairman, before we start the next question, I ask that we have entered into the record the US Office of Government Ethics certification, which requires that all nominees disclose all of their assets and showing that Mr. Worsh is out of compliance and that um uh he has not met the ethics requirements without objection.
[44:37] I will note however that what has been clearly articulated is that he will according to his agreement with OG do what many others have done as well within 90 days be not only in compliance but to have devested himself from any assets that are in question.
[44:55] Mr. Chairman can I ask I don't think we've had other nominees who are out of compliance and not disclosing at the time they come before the hearing.
[45:01] Not in this committee. That's correct.
[45:03] Not in this committee. Before we before we here's what we're not going to do.
[45:08] We, here's what we're not going to do.
[45:09] Fair enough.
[45:11] We're not going to have two chairmen for sure.
[45:11] Just ask.
[45:13] Number one. Number two, what we're also not going to do is debate what we're putting into the record.
[45:18] And finally, what we are going to do is have a conversation about America's economy.
[45:22] And frankly, we all deserve the opportunity to ask our questions.
[45:28] We don't get to figure out the answers, but we do get to ask our questions.
[45:34] And I hope that we are able to continue in that direction.
[45:37] As long as we are, we're going to have a very good hearing.
[45:39] And if we're not, then I will find a way to help us to expedite getting back on track.
[45:47] Senator Re.
[45:49] Thank you very much, Mr. Chairman.
[45:53] Mr. WSH uh until you dispose of all the assets you've identified to the Office of Government Ethics, you will not be in compliance.
[46:00] Is that correct?
[46:06] That's not my understanding.
[46:07] My understanding is that a signed ethics
[46:08] My understanding is that a signed ethics agreement provides duties and responsibilities on me and duties and responsibilities on the government, and that's what the nature of the ethics agreement is.
[46:18] You have an agreement that within 90 days you will dispose of all your assets.
[46:23] All your assets.
[46:24] Is that correct?
[46:27] Uh Senator, I have an agreement within 90 days so that there is no appearance of anything inappropriate that I would divest all of my assets, the majority of which before sworn in.
[46:35] What I've disclosed, Senator, is all the information that is mine to disclose.
[46:39] I've shared all information about assets that I control and that I can share, which I did much to the satisfaction of the government ethics office.
[46:47] Excuse me.
[46:49] What you've said is that you will take the oath if confirmed as chairman with assets that already been identified as presenting potential conflicts of interest.
[46:59] Will you agree to not take the oath until you have fully disposed all the assets that you've been identified?
[47:07] Uh, Senator, I'll agree to take the oath
[47:09] Senator, I will agree to take the oath pursuant to the terms of the ethics agreement that I struck with the Office of Government Ethics.
[47:14] I don't think anyone could do more than that other than me.
[47:19] I've agreed to divest even more assets that I will have virtually no financial assets.
[47:24] The divestiture is totally up to you.
[47:27] You can select what assets you're disposing of, what assets you're keeping.
[47:30] Is that correct?
[47:32] And then still be sworn in as sharing.
[47:35] Uh the divestiture is up to the agreement that I struck with the office of government ethics.
[47:38] Who makes the decision as to what assets are divested?
[47:40] You or the office of government ethics?
[47:43] Uh both of us.
[47:45] That's why it's an agreement.
[47:46] Excuse me.
[47:50] Uh I must commend you on the way you can circularly go around questions and not answer them.
[47:54] It's it's a skill.
[47:56] Unfortunately, it's not a good skill for the chairman or the of the Federal Reserve Board.
[48:00] We typically ask questions in respect to get direct faithful answers.
[48:05] You've never give you haven't given them to the ranking member and you're not given to me.
[48:14] And you're not given to me.
[48:16] So, um, again, uh, you feel you will not be, uh, you will be compliant if after 90 days you still have a significant number of assets that have been identified as presenting conflicts of interest.
[48:27] Is that your view?
[48:27] No, Senator.
[48:30] If I were to violate the uh ethics agreement, I would not be in compliance.
[48:34] If I follow the agreement, I will be.
[48:38] Well, um, that's your position.
[48:41] I think others would differ.
[48:44] Uh, the uh, when you uh sell all your assets, where are you going to place the proceeds of those sales?
[48:56] I believe that uh Chairman Pow has placed them in sort of uh funds uh that which are very difficult to individually influence it.
[49:05] Do you propose to do that?
[49:06] Yeah, I propose to put them in permissible assets that are as close to cash or treasury bills as I possibly can.
[49:13] I haven't selected anything but it
[49:15] Can. I haven't selected anything, but it will be as plain vanilla as possible.
[49:17] It will be as plain vanilla as possible so that there would be no appearance or reality of having any influence.
[49:21] It will be sitting in something like cash.
[49:23] Sitting in something like cash.
[49:26] Okay. Now, uh, the question of independence is just, uh, one that I think will dominate these proceedings.
[49:32] Uh, this morning, President Trump was asked on CNBC, "Will you be disappointed if your new Fed chair doesn't cut rates right away?"
[49:41] And President Trump answered, "I would."
[49:45] It's very hard to uh separate President Trump's obsession with rate cuts, his attacks on the Federal Reserve, on Chairman Powell particularly uh and your nomination.
[50:01] Uh so this independence thing seems to be have evaporated quite quickly between President Trump's statements and and your positions.
[50:08] Uh your positions.
[50:11] Uh again, um you maintain you'll be independent of
[50:16] You maintain you'll be independent of President Trump.
[50:17] President Trump.
[50:17] Uh yes, Senator, I do.
[50:19] Well, President Trump constantly maintains that nobody's independent of him, that it's his morality that guides the whole United States government, including the Federal Reserve, and that you will be someone who will carry out his wishes.
[50:22] Uh, frankly, do you suspect that he chose you because you indicated to him that your want to cut rates?
[50:41] Uh, Senator, I don't I don't know the reason for the president's choice, but I can tell you uh what I've been writing about for 15 years and what I what I said to the president, which is you're gonna cut I'll cut rates if you give me the job.
[50:55] No, that's not what I said, Senator.
[50:57] Now, the president, as you might know, much like virtually all presidents I've either known or studied, presidents tend to be for cutting rates.
[51:06] I think the difference is President Trump uh expresses it quite publicly without surrogates or subtuge, but presidents want lower rates, but Fed independent is up to the Fed.
[51:15] Fed leadership has to
[51:17] Up to the Fed.
[51:19] Fed leadership has to make a decision about what's the right thing to do.
[51:21] No, in my judge, you're a leader.
[51:24] You're the leader.
[51:26] You establish the moral and ethical standards and economic principles of the Fed and you just pass it off to well, you know, it's not my job, it's everybody's job.
[51:36] That means it's nobody's job.
[51:36] Thank you, Senator Tillis.
[51:42] Mr. Chair, before my time starts, can I make a parliamentary inquiry?
[51:47] Certainly.
[51:49] Um, I I I want to make sure that we get this right because I'm not an attorney.
[51:53] Uh but I think it's pretty important to suggest that according to Mr. Walsh, he has signed an agreement that is in compliance provided that he executes the agreement.
[52:01] So we should not have into the record that he is before us out of compliance because you you you stipulated that what Senator Warren said um was a first of a kind here, but he is not out of compliance.
[52:15] He has agreement that if he executes will be in
[52:17] That if he executes will be in compliance.
[52:19] That's why he's properly compliance.
[52:19] That's why he's properly before us.
[52:20] Said, I just want to make sure for the record that that is clear.
[52:22] Yeah, very clear.
[52:25] Let me just say it.
[52:25] I'm going reiterate what you just said, but I was writing it down myself.
[52:28] The Office of Government Ethics has entered into an agreement with Kevin Worsh that he has up until 90 days after confirmed to the vest of his assets.
[52:41] So the word I mean to to non- attorneys here uh I I heard someone say he's before us out of compliance and that's why I checked with the staff to be absolutely certain he is properly before us.
[52:51] He will be in compliance if he executes agreement that addresses the concerns that have been presented by some of my colleagues on the other side of the aisle.
[53:00] I just want to confirm for the record that that is in fact accurate.
[53:04] So if we're doing a matter here of is this parliamentary inquiry?
[53:07] Is that what this is?
[53:08] I I've made a parliamentary inquiry so I'm not burning my time on something that I thought felt like a cheap shot to say he's out of compliance when in fact he's not.
[53:16] Then I'd like to ask the other question
[53:19] Then I'd like to ask the other question and that is have we seen this agreement?
[53:23] And that is have we seen this agreement?
[53:23] Do we have any way to verify that in fact these sales will occur if we have no idea what's in them and no one has told?
[53:25] Do we have any way to verify that in fact these sales will occur if we have no idea what's in them and no one has told?
[53:28] That in fact these sales will occur if we have no idea what's in them and no one has told.
[53:31] We have no idea what's in them and no one has told.
[53:31] And let's do remember the law for a minute.
[53:35] One has told.
[53:35] And let's do remember the law for a minute.
[53:39] The Fed, unlike other parts of government, do not have a 90-day you can be out of compliance.
[53:42] Parts of government, do not have a 90-day you can be out of compliance.
[53:45] Fed law is explicit that you cannot own any portion of a financial interest in a bank.
[53:49] Law is explicit that you cannot own any portion of a financial interest in a bank.
[53:53] Portion of a financial interest in a bank.
[53:54] Bank.
[53:54] Mr. President, Mr. Chairman, excuse me for interrupting, Senator, I'm going to let the attorneys take care.
[53:56] Mr. President, Mr. Chairman, excuse me for interrupting, Senator, I'm going to let the attorneys take care.
[53:59] For interrupting, Senator, I'm going to let the attorneys take care.
[54:00] Let the attorneys take care.
[54:00] Are we going to all get extra time here?
[54:02] Are we going to all get extra time here?
[54:02] No.
[54:02] I'd like extra.
[54:04] I'd like extra.
[54:05] Yeah.
[54:05] Three minutes.
[54:05] All right.
[54:05] Okay.
[54:08] M chair, I just for the record, but and the only reason I said that was a parliamentary inquiry so it doesn't count.
[54:10] I just for the record, but and the only reason I said that was a parliamentary inquiry so it doesn't count.
[54:10] Reason I said that was a parliamentary inquiry so it doesn't count.
[54:12] That was a parliamentary inquiry so it doesn't count.
[54:13] Doesn't count.
[54:14] Yeah.
[54:14] Okay.
[54:17] Mr. Chair, the reason I mentioned that is because you had stipulated that I don't think you meant it this way, but
[54:19] Is because you had stipulated that I don't think you meant it this way, but
[54:20] I don't think you meant it this way, but you as a chair said that this is the first of a kind of someone being out of compliance.
[54:26] I don't think you meant that.
[54:27] I wanted to make sure.
[54:29] Let me it was clear for the record.
[54:31] Well, let me just uh be very clear again.
[54:34] The career ethics professionals were the ones that sent Mr. Worsh's signed paperwork to this committee's chief clerk.
[54:38] They would not have done so if they did not come to an ethics agreement with Mr. Worsh.
[54:45] Mr. Kennedy, Senator Kennedy does raise a good point.
[54:47] We we are going to stick to our timeline and I appreciate you raising the point of how long inquiry can go on.
[54:56] And that does not buy you more time unless of course we all decide we want more time and then I would rule on that and I would rule against it.
[55:09] Thank you, Mr. Chair.
[55:11] Uh Mr. Wsh, congratulations.
[55:13] Uh you can't count this as a date with Jane, particularly this one.
[55:15] And I I think probably the first hearing was uh a little less acrimonious.
[55:19] Um I'm not going to ask you
[55:22] Acrimonious. I'm not going to ask you anything.
[55:23] You can take a break and get ready for the bludgeoning on the other side.
[55:26] They're going to beat you till you bleed and then they're going to beat you for bleeding.
[55:29] I'm going to talk about what's preventing me from being in a position to vote for you.
[55:35] Until we've spent time together in my office.
[55:37] You have extraordinary credentials.
[55:39] They're impeccable.
[55:41] I think the way you're dealing with the ethics issue is strong.
[55:45] The problem I have is how we are right now.
[55:48] And we start by saying I loved your opening statement.
[55:53] I love your focus on the independence of the Fed.
[55:55] I love the idea of Fed independence with respect to achieving the dual mandate.
[56:03] But Fed transparency on so many other things that the Fed does that frankly we're all frustrated with.
[56:06] Bank examination supervision being some among them that I think we should have more insight into.
[56:14] Mr. Chair, I'd like to submit for the record two executive orders under President Trump and one in 2020 and one in 2025 talking about.
[56:22] In 2020 and one in 2025, talking about making federal architecture beautiful.
[56:24] Making federal architecture beautiful again and uh focusing on trying to preserve the integrity of old buildings.
[56:29] Preserve the integrity of old buildings.
[56:31] Thank you.
[56:33] And Mr. Chair, I will be submitting an analysis, but if we can go to slide two.
[56:38] To slide two uh and turn it up right.
[56:41] Um, much has been made about the building project that uh has Senator or that has Chair Powell under investigation.
[56:49] Um, I'm not going to get into the details except to say that I used to work for a firm that did audit and compliance.
[56:55] So, I'm naturally wired to go back from the ground up and figure out what the deal is.
[56:59] Here's what I know.
[57:02] The Martin building has been conflated into this project to make it a $4 billion building.
[57:07] Even if you put the Martin building in, it's a three billion dollar building.
[57:10] The reality is what we're talking about is the Eckles building and the East building for which Bring that up higher, Jack.
[57:18] You're a tall guy so people can see it.
[57:21] These are the overruns.
[57:23] The overruns.
[57:25] And these overruns occurred in part because the cost of inputs went up 69% since the original estimate.
[57:30] Asbestos was identified.
[57:33] Remediation was required.
[57:36] Pylons had to be uh had to be built underneath the building because turns out they used it as a landfill and they had a water table issue.
[57:43] There were a variety of reasons why this building went over budget.
[57:45] And as a matter of fact, 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 colony because of the way government projects work.
[58:00] And the reality is the overage of inflation adjusted was about 730 million.
[58:05] The majority of which seems to be uh legitimate.
[58:07] Next slide.
[58:11] Not acceptable, unfortunate, but legitimate.
[58:14] Now, what what I've really got a problem with, and we're talking about Fed independence, by the way, I think you're going to be independent.
[58:20] You have to be.
[58:21] You got to convince 11 other people to vote with you.
[58:23] At least the majority.
[58:24] Vote with you.
[58:24] At least the majority.
[58:27] It's a consensus organization.
[58:27] You try to get the majority to.
[58:29] Most of these votes are 11 to 1.
[58:31] So if anybody thinks a president can appoint somebody and you unilaterally can control things, you're going to be an unsuccessful chair if history is any guide.
[58:36] And you've served under some of the best.
[58:39] So I know you're going to do it right.
[58:41] The problem that I have here is that we had some US attorney with a dream or assistant US attorney thinking it would be cute to bring Chair Pal under an investigation just a few months before the position was going to be open.
[58:55] This happened this year.
[58:57] Normal course and speed.
[59:00] Here's how it works at the Fed.
[59:03] February the or March May the 15th the term would have expired.
[59:05] We'd be having this hearing.
[59:08] You'd be getting confirmed.
[59:10] Custom also suggests that the sitting chair, even though he has two years left on his term, would have exited it.
[59:14] But instead, we have somebody who thinks a building project that went over by about $700 million with a lot of what seemed to be
[59:28] Millions with a lot of what seemed to be justifications for it are holding up this whole process.
[59:30] It sounds like to me somebody over in the DOJ didn't even check with the boss.
[59:35] The boss said on the same night that I said I can't go forward until this bogus investigation is done with.
[59:41] Said he didn't know anything about it.
[59:43] So we've got people in DOJ over in the DC circuit or the DC district doing these investigations.
[59:52] We have got to end this investigation.
[59:54] Big DOJ didn't know about it.
[59:55] The president didn't know about it.
[59:57] Let's get rid of this investigation so I can support your confirmation.
[59:59] Mr. Worsh.
[01:00:01] The only thing I've found the least bit odd about you is you've never watched an episode of Seinfeld.
[01:00:06] You've spent so much time at being a rockolid economist that you're not even taking time away for a little laugh like that.
[01:00:14] I look forward to supporting your nomination.
[01:00:16] And I look forward to this investigation being taken down.
[01:00:18] If the chair wants to have all of our subcommittees start looking at capital expenditure projects for the agencies that we're overseeing,
[01:00:30] For the agencies that we're overseeing, I think that's a great idea.
[01:00:32] And I'd like to be on a committee specifically drilling down on this analysis.
[01:00:35] If somebody can prove me wrong, I'd be happy to make a criminal referral.
[01:00:37] But I don't have the DC Circuit tell me a crime was committed when seven members on this committee said it wasn't, including the chair.
[01:00:46] Thank you, Mr. Chair.
[01:00:48] You're welcome.
[01:00:49] Only one question.
[01:00:52] What is Seinfeld?
[01:00:55] Senator Van Holland.
[01:00:57] Uh Mr. Chairman, uh thank you.
[01:01:00] Uh Mr. Worsh, good to see you.
[01:01:02] Uh reviewing your record, I am concerned that your position on interest rates seems to shift with what's politically convenient rather than based on sound economic judgment.
[01:01:12] In the aftermath of the 2008 financial crisis, the worst recession since the Great Depression with some of the worst unemployment in our lifetimes, you were a hawkish voice, expressing concern that the Fed might wait too long to raise rates.
[01:01:25] I think you got it wrong.
[01:01:30] To raise rates.
[01:01:34] I think you got it wrong then, but now you seem to have swung 180 degrees in the opposite direction to embrace lower rates, a view that conveniently aligns with the president who nominated you.
[01:01:43] You've made this pivot even as today prices are too high.
[01:01:47] We all know that our economy works for families when prices are affordable and unemployment is low.
[01:01:52] That's why price stability is an important part of the Fed's mandate.
[01:01:57] Right.
[01:02:00] Uh Senator, yes.
[01:02:02] And the Fed uses its monetary policy tools for price stability and full employment.
[01:02:06] That's the job Congress gave to the Fed.
[01:02:09] Here's how Ben Bernani described how the Fed uses those tools.
[01:02:15] He said, and I'm quoting, "Generally, if economic weakness is the primary concern, the Fed acts to reduce interest rates, which supports the economy.
[01:02:26] If the economy is overheating, the Fed can raise interest rates to constrain
[01:02:31] Raise interest rates to constrain inflationary pressures.
[01:02:35] Inflationary pressures.
[01:02:35] So, that's a textbook model of the Fed.
[01:02:38] So, that's a textbook model of the Fed.
[01:02:38] Cutting rates supports the economy but can lead to higher inflation while raising rates helps to fight inflation but can limit growth.
[01:02:41] Cutting rates supports the economy but can lead to higher inflation while raising rates helps to fight inflation but can limit growth.
[01:02:43] Can lead to higher inflation while raising rates helps to fight inflation but can limit growth.
[01:02:45] Raising rates helps to fight inflation but can limit growth.
[01:02:45] Do you agree with Chairman Bernani that that's generally how the Fed can use monetary policy to affect the economy?
[01:02:48] But can limit growth.
[01:02:48] Do you agree with Chairman Bernani that that's generally how the Fed can use monetary policy to affect the economy?
[01:02:51] Chairman Bernani that that's generally how the Fed can use monetary policy to affect the economy?
[01:02:53] How the Fed can use monetary policy to affect the economy?
[01:02:54] Affect the economy?
[01:02:54] Uh Senator, I do agree generally with that proposition, but I'll note at a moment like this, the supply side of the economy is changing dramatically.
[01:02:57] Uh Senator, I do agree generally with that proposition, but I'll note at a moment like this, the supply side of the economy is changing dramatically.
[01:03:00] That proposition, but I'll note at a moment like this, the supply side of the economy is changing dramatically.
[01:03:02] So the core of what Chairman Bernani said is a question about what's the economy's potential.
[01:03:05] Economy is changing dramatically.
[01:03:05] So the core of what Chairman Bernani said is a question about what's the economy's potential.
[01:03:07] Core of what Chairman Bernani said is a question about what's the economy's potential.
[01:03:08] Question about what's the economy's potential.
[01:03:08] As I said in my opening remarks, I think the economy's potential is growing quite quite quickly.
[01:03:11] Potential.
[01:03:11] As I said in my opening remarks, I think the economy's potential is growing quite quite quickly.
[01:03:12] Remarks, I think the economy's potential is growing quite quite quickly.
[01:03:15] And that makes the decision that you uh tee up to be a difficult one and one that the Fed's going to have to dig deep in in evaluating what's the right policy choice in the upcoming meetings.
[01:03:17] Be a difficult one and one that the Fed's going to have to dig deep in in evaluating what's the right policy choice in the upcoming meetings.
[01:03:19] Fed's going to have to dig deep in in evaluating what's the right policy choice in the upcoming meetings.
[01:03:21] Evaluating what's the right policy choice in the upcoming meetings.
[01:03:23] Choice in the upcoming meetings.
[01:03:23] Well, I want to I want to push you a little bit on that in a moment, but right now the Fed has set its main interest rate at 3.5 to 3.7%.
[01:03:25] Well, I want to I want to push you a little bit on that in a moment, but right now the Fed has set its main interest rate at 3.5 to 3.7%.
[01:03:27] Want to I want to push you a little bit on that in a moment, but right now the Fed has set its main interest rate at 3.5 to 3.7%.
[01:03:29] On that in a moment, but right now the Fed has set its main interest rate at 3.5 to 3.7%.
[01:03:31] Fed has set its main interest rate at 3.5 to 3.7%.
[01:03:34] 3.5 to 3.7%.
[01:03:37] Last December, President Trump told the Wall Street Journal he wanted to cut rates to 1% and maybe lower than that by the end of this year.
[01:03:46] So just to better understand how you think about economics in the economic model Bernanki laid out, let's say there's an economy with decent growth and no recession.
[01:03:57] If the central bank were to cut rates from 3.5 to 1% or lower, a massive cut, that would typically push prices up, right?
[01:04:06] Uh Senator, unlike um uh many of my colleagues past and present, I don't believe in forward guidance.
[01:04:12] I don't believe that I should be previewing for you what a future decision might be.
[01:04:19] I think it's essential that decisions in the room.
[01:04:22] Mr. Walsh, I'm not asking you what decision you would make.
[01:04:25] Obviously, that's going to be up to you.
[01:04:27] I'm asking you for the framework in which you think about these things and it seems a pretty straightforward question about what
[01:04:35] Straightforward question about what would happen if we reduced interest rates by the end of this year to 1% or less.
[01:04:44] And under the Bankei model, and I think almost every economist, um, or most economists would would say that that will drive up prices.
[01:04:51] And so that's what I'm asking you.
[01:04:53] Would you agree that that would likely drive up prices?
[01:04:55] Uh, so Senator, the Fed has two important monetary policy tools.
[01:04:58] One is interest rates and the other is a balance sheet.
[01:05:03] A balance sheet that we uh created in the 2008 financial crisis.
[01:05:09] Those tools should be working in concert, not across purposes.
[01:05:11] So, it's hard for me to isolate one variable when we'd have to have a discussion on the other.
[01:05:16] All right, let me >> But generally, sorry.
[01:05:18] Well, let let me let me just um say this was a a pretty clear question about the framework in which these decisions are made.
[01:05:29] I have heard you talk about how AI may change that calculation.
[01:05:37] May change that calculation.
[01:05:38] I will just say and I think you you know this.
[01:05:40] I mean I have this you know the Financial Times pointed out that economists reject Kevin Worsh's claim.
[01:05:45] Economists reject Kevin Worsh's claim that AI the AI boom will enable rate cuts.
[01:05:48] And I think find it just implausible to suggest that by the end of this year.
[01:05:54] AI would produce such increases in productivity that it could reduce in a a rate cut to below 1%.
[01:06:07] And you can't tell me that that would very likely increase prices.
[01:06:10] So, Senator, can I say two things?
[01:06:13] First, quickly sorry um uh monetary policy center works with long and variable lags.
[01:06:23] Quite famously if the Fed were to make a decision today about the conduct of policy that's likely to find its way to the real economy six nine or 12 months later.
[01:06:32] So it's difficult to judge um policy today for an immediate result and.
[01:06:39] policy today for an immediate result and that would be my only concern about the framing of your question.
[01:06:43] Thank you Mr. Chairman.
[01:06:44] Let I just in closing this is what concerns me is that your views now have sort of flipped to conform with where the president United States is and and that's been a concern many of us have.
[01:06:54] Thank you, Mr. Chairman.
[01:06:55] Senator Kennedy, I want extra time.
[01:06:59] Mr. Mr. I know.
[01:06:59] Consider consider these five minutes of parliamentary inquiry.
[01:07:08] Um, professor, what's the sock puppet?
[01:07:10] Uh, I heard the reference from Senator Warren.
[01:07:12] Yeah.
[01:07:12] What is it?
[01:07:14] I'm not sure I know.
[01:07:14] I think it's that thing you stick your hand in.
[01:07:17] Yeah.
[01:07:17] Kind of like this.
[01:07:18] Yes.
[01:07:18] What's a human sock puppet?
[01:07:20] In a human sock puppet, um, somebody will do what somebody else tells them to do.
[01:07:26] I think that's what the senator was trying to suggest.
[01:07:28] I think that was the innuendo.
[01:07:30] Are you going to be the president's human sock puppet?
[01:07:33] Uh, Senator, absolutely not.
[01:07:35] Are you going to be anybody's human sock puppet?
[01:07:37] Uh, no.
[01:07:37] I'm honored the president
[01:07:39] Uh, no.
[01:07:39] I'm honored the president nominated me for the position and I'll be an independent actor if confirmed as chairman of the Federal Reserve.
[01:07:45] My friend, Senator Warren, um, and she is my friend suggested that I wrote it down.
[01:07:50] Uh, you will use your power.
[01:07:53] You might use your power to bail out your friends if they get in trouble.
[01:07:59] Kind of like President Biden did with Silicon Valley Bank and a Signature Bank.
[01:08:03] She didn't say the last part.
[01:08:05] I just did.
[01:08:05] Are you going to do that?
[01:08:09] Uh, no, Senator.
[01:08:11] Okay.
[01:08:11] Um, the ethics folks, they've cleared you, but they said you got to sell some assets.
[01:08:16] Is that right?
[01:08:19] Uh, yes, sir.
[01:08:23] Okay.
[01:08:23] And these assets that you have, you can't just hold a yard sale, can you?
[01:08:26] Uh, no, not for most of them.
[01:08:31] Okay.
[01:08:31] So, it takes a fair a reasonable period of time, right?
[01:08:33] Uh, yeah.
[01:08:34] Yes, sir.
[01:08:35] And you're going, you've promised to sell them, right?
[01:08:38] Uh, I did.
[01:08:38] And if you don't sell them, we'll know
[01:08:40] And if you don't sell them, we'll know and the ethics folks will know, right?
[01:08:43] And the ethics folks will know, right?
[01:08:44] Uh, yes.
[01:08:44] I'd be in violation of the ethics agreement if I refuse to sell them.
[01:08:46] Them?
[01:08:46] But you're going to sell them, right?
[01:08:48] But you're going to sell them, right?
[01:08:50] Uh, yes, Senator.
[01:08:50] I will.
[01:08:50] Okay.
[01:08:50] Can we agree?
[01:08:54] Can we agree that politicians have the right to offer you advice about what to do with interest rates?
[01:08:57] Can we agree that politicians have the right to offer you advice about what to do with interest rates?
[01:08:59] What to do with interest rates?
[01:09:01] Uh, Senator, we can agree and it's not something that I would shy away from.
[01:09:04] Uh, Senator, we can agree and it's not something that I would shy away from.
[01:09:06] I've heard uh many senators from this very committee in years past express strong views on interest rates.
[01:09:08] I've heard uh many senators from this very committee in years past express strong views on interest rates.
[01:09:10] Okay.
[01:09:10] Humble central bankers should be listening and then making their own decisions.
[01:09:12] Humble central bankers should be listening and then making their own decisions.
[01:09:13] Some but some politicians matter more than others and generally speaking uh presidents matter their opinion matter matters more than say a senator.
[01:09:15] Decisions.
[01:09:15] Some but some politicians matter more than others and generally speaking uh presidents matter their opinion matter matters more than say a senator.
[01:09:17] Matter more than others and generally speaking uh presidents matter their opinion matter matters more than say a senator.
[01:09:20] Speaking uh presidents matter their opinion matter matters more than say a senator.
[01:09:24] Opinion matter matters more than say a senator.
[01:09:26] Um President Trump has offered his opinion about what you ought to do with interest rates.
[01:09:30] Um President Trump has offered his opinion about what you ought to do with interest rates.
[01:09:32] Is that right?
[01:09:34] Uh Senator, he has not made his opinion on that a secret to anybody.
[01:09:36] Uh Senator, he has not made his opinion on that a secret to anybody.
[01:09:38] Yeah.
[01:09:38] And
[01:09:41] Yeah.
[01:09:44] And uh every president has that you're aware of.
[01:09:46] Yes, they and they all tend to be in the same direction, Senator Kennedy.
[01:09:52] Okay. Now, the problem is, can we agree that your credibility as Fed chairman is the most important thing you have?
[01:09:59] It's the most important thing to me.
[01:10:00] It's the most important thing to the institution and it's the most important thing to the successful conduct of policy.
[01:10:06] Okay. If the markets Yes. Right.
[01:10:07] Yes, sir.
[01:10:10] Okay. Um, the problem is that President Trump has said he's not going to appoint anybody who wouldn't agree to lower interest rates.
[01:10:20] Have you agreed with the president that you're going to lower interest rates?
[01:10:24] Uh, Senator, I'm glad you framed it that way.
[01:10:27] The president never asked me to predetermine, commit, fix, decide on any interest rate decision uh in any of our discussions.
[01:10:37] uh nor would I ever agree to do so.
[01:10:40] So the president has never sat you down, looked you in the eye and said, "Here's
[01:10:43] I looked you in the eye and said, "Here's the deal, Scooter.
[01:10:45] I'm going to appoint you, but you got to agree to lower interest rates."
[01:10:48] That didn't happen or did happen.
[01:10:50] Uh the president never once asked me to commit to any particular interest rate decision, period.
[01:10:56] And nor would I ever agree to do so if he had, but he never did.
[01:11:01] I was honored he nominated me.
[01:11:04] Like everyone else in the committee in the world, I've heard his view on interest rates.
[01:11:08] It sounded very similar to me to every other president in economic history that I've studied.
[01:11:14] Okay.
[01:11:14] I I've got a I've got one more question because I'm about to run out of my parliamentary inquiry time.
[01:11:23] Um I've heard your argument the last few months about artificial intelligence has made us so productive.
[01:11:29] made us so productive that that companies don't have to raise prices therefore uh inflation isn't isn't a problem therefore rates can be cut.
[01:11:41] Do
[01:11:44] Problem, therefore, rates can be cut.
[01:11:44] Do you really believe that right now?
[01:11:46] No, I that is not how I would characterize the story on AI.
[01:11:50] Okay.
[01:11:50] But you've said what I just said, haven't you?
[01:11:55] Uh I have said that this is the most uh disruptive moment in modern economic history in the US and the world.
[01:12:01] I've said that artificial intelligence AI short.
[01:12:05] Let me stop you because the chair is going to cut me off.
[01:12:08] Sorry.
[01:12:09] Here's my worry that a lot a lot of this stuff about artificial intelligence making us more productive is a bunch of hype by people who want to sell stock in an IPO.
[01:12:18] Okay.
[01:12:18] I'd be careful there.
[01:12:21] Thank you, Mr. Chairman, I'll get to my five minutes in a little bit.
[01:12:28] You come back about midnight, sir.
[01:12:30] We'll go ahead start it all over again.
[01:12:32] Brand new day, sir.
[01:12:32] Brand new day.
[01:12:34] Thank you for your patience, Senator.
[01:12:37] Thank you, Cortez Mastto.
[01:12:38] Thank you.
[01:12:38] Uh Mr. Walsh, thank you uh for taking the time with me.
[01:12:42] I appreciate meeting with you.
[01:12:44] Congratulations on this nomination and
[01:12:47] Congratulations on this nomination and welcome to all your family, friends who are here.
[01:12:52] Let me talk to you about a couple of things on it's really around economic theory.
[01:12:57] And we have talked a little bit about this when we were meeting.
[01:13:02] Inflation has been above the Fed's target for five years.
[01:13:04] Would you agree with that?
[01:13:06] Uh yes, Senator.
[01:13:09] Yeah.
[01:13:09] And core PCE inflation has been running at about 3%, a full point above that Fed target.
[01:13:14] Correct.
[01:13:16] Yes.
[01:13:16] And so some Federal Reserve officials have said that this excess is due to tariffs.
[01:13:23] Do you agree with that?
[01:13:25] Uh Senator, I don't.
[01:13:25] I, if I can make two points.
[01:13:29] Uh much as we discussed in your office, I think the data that's being used to judge inflation is quite imperfect data.
[01:13:37] And among the projects that the economics profession and if I'm confirmed as chairman of the Fed, the Fed needs to do is to try to use our new understanding and new data sources to
[01:13:47] Understanding and new data sources to see what's really the inflation rate in the economy.
[01:13:53] We used to use core PCE core measures so we'd exclude food and energy because it was sort of a rough swag as to what was going on.
[01:13:59] We don't have to do a rough swag anymore.
[01:14:01] What I'm most interested in is what's the underlying inflation rate.
[01:14:05] Not what's the one-time change in prices because of a change in geopolitics or a change in beef, but what's the underlying generalized change in prices in the economy.
[01:14:15] And my broad sense is that these inflation uh uh risks and the inflation damage the last several years is improving somewhat.
[01:14:23] It has improved somewhat in the last year.
[01:14:26] The measures I prefer are looking at things that are called trimmed averages where we take out all of the tail risks, all of the one-off items.
[01:14:34] And we ask ourselves whether the generalized change in prices is having second order effects on the economy.
[01:14:41] Again, they're not where they should be, but I think that the trend is quite favorable.
[01:14:48] That you're looking at now, it's not traditionally the norm that economists would use in this position.
[01:14:52] Is that correct?
[01:14:54] Uh, some in the economics profession are increasingly looking to these median type measures.
[01:14:58] But among the projects I would hope to undertake as one of the first reforms at the Fed is a data project where we would go off and we would evaluate with the public sector and the private sector including the Bureau of Labor Statistics a survey of a billion prices.
[01:15:15] And what I'm really most interested, Senator, is what's the change of that 500 millionth and one price because that's inflation.
[01:15:22] That's a change in the generalized level.
[01:15:24] In a market economy, prices change all the time and I don't want to be confused by that.
[01:15:30] I want to know what inflation really is and I still think there's some work to do.
[01:15:33] And and I respect listening to you today and talking with you.
[01:15:38] I I respect you truly believe as an as a economist and a theorist in this theory and in in in in what you are talking to us today about which is traditionally not the norm and many are disagreeing with you on that.
[01:15:49] Many are disagreeing with you on that and publicly disagreeing.
[01:15:51] And so I understand that.
[01:15:55] Um, but I guess the position I have is I hope you're right.
[01:15:58] But at the end of the day, my concern is people are suffering right now with high cost.
[01:16:03] And we need to address it.
[01:16:05] And I don't know how long it's going to take for your economic theory um to gain traction or to be proven that it's going to benefit so many people in this country right now.
[01:16:14] And here's here's one other thing because I don't have that much time.
[01:16:17] And and this is what is also a concern of mine.
[01:16:19] So, I want you to address it.
[01:16:20] Um, earlier you've been on the Federal Reserve Board and you were there during the financial crisis of 2008.
[01:16:27] We and I you and I talked about this.
[01:16:29] I was the attorney general then.
[01:16:30] It hit Nevada so hard.
[01:16:33] Here's what I do know and um at that time um in 2006 you attended numerous meetings where housing experts pleaded with you to stop predatory mortgages.
[01:16:44] In fact, Gail Burks, who was the CEO of Nevada's
[01:16:50] Gail Burks, who was the CEO of Nevada's Fair Housing at that time, who I worked with, repeatedly warned Fed leadership, including you, about predatory lending practices such as flipping loans or misinforming seniors about reverse mortgages.
[01:17:00] And in 2007, you said, and I quote, "Subprime mortgages have gotten a bad name in this environment.
[01:17:07] And in some cases, that's not just."
[01:17:10] You also said that you don't see any immediate systemic risk issues among big banks.
[01:17:14] And you said that at that time.
[01:17:16] And then just recently, and this is what I want you to address, uh, Senator Warren has said that you told her you had no regrets during this tenure.
[01:17:21] H how can we trust that your economic theory when you were wrong then is going to be the accurate theory we need now to help so many families and businesses that are struggling with the policies that we're dealing with now?
[01:17:37] >> Uh, Senator, uh, let me address a few things.
[01:17:39] The chairman is going to cut me off uh when he must, but I would say this.
[01:17:43] Um, for many years before the global financial crisis, I warned about the very real risks of Fanny May and
[01:17:50] The very real risks of Fanny May and Freddy Mack blowing up, which they did.
[01:17:53] Freddy Mack blowing up, which they did.
[01:17:54] I think that part of the housing market was vulnerable for many years and not enough was done about it.
[01:17:59] Even in spite of my protestations and my urging about GSSE reform, it wasn't done.
[01:18:04] I think that compounded the financial crisis.
[01:18:06] Secondly, I think subprime mortgages then, subprime assets then were indicative of prices of almost every financial asset that were mispriced.
[01:18:23] What I suggested then and what I believe now is that some prime mortgages were just indicative of a set of prices that were incorrect and they all repriced.
[01:18:26] Just to give one fine example before I turn to the chairman.
[01:18:29] Perhaps perhaps no examples right now sir.
[01:18:31] Let's go to Senator Hagerty.
[01:18:34] Want to give you opportunity to finish that exchange.
[01:18:36] Thank you, Mr. Chairman.
[01:18:39] And um Mr. WSH, I want to welcome you and your family.
[01:18:43] Um and I want the committee to know that I have known Kevin Walsh for 30 years.
[01:18:47] We first crossed paths back in 1992, shortly after Kevin graduated from
[01:18:52] Shortly after Kevin graduated from Stanford.
[01:18:54] We both worked on the White House staff at that point in time.
[01:18:56] And I just want to say this that the man testifying before us today is the same man that I got to know then.
[01:19:04] Serious, disciplined, with a true heart for public service.
[01:19:07] And I want to say this, I've said it before.
[01:19:09] Kevin Walsh is the man for the moment.
[01:19:15] His background, his experience, and his discipline are precisely what we need to bring our economy into its full potential.
[01:19:23] I'm delighted to see him here today as we both reinforce competence here at home and do the same thing abroad.
[01:19:28] And if I think about Kevin's qualifications, think about the contrast with the nominations that we saw with the last administration.
[01:19:37] I think this committee will recall that President Biden nominated a prospective federal bank regulator, frankly a graduate of Moscow State University in Russia, who advocated for replacing private bank deposits.
[01:19:54] Deposits with retail accounts held at the central bank.
[01:19:57] Those who might criticize Kevin for his private sector success miss the point.
[01:20:03] Kevin's experience is not a liability.
[01:20:05] It's an asset.
[01:20:07] It brings a practical understanding in terms of how markets function to bear,
[01:20:10] how capital's allocated, and how policy decisions shape the real economy.
[01:20:16] Mr. Walsh, how will your experiences in both the public and the private sector shape your governance of the Fed should you be confirmed?
[01:20:24] Uh, Senator, thank you very much and thanks for the the kind introduction for your colleagues on this panel.
[01:20:31] Um, Senator Haggard and I shared a desk uh 91 and '92.
[01:20:36] So, I've known him for a very long time.
[01:20:40] Um, I think the my prior experience at the Fed, which uh some of your colleagues made reference to, are going to allow me to hit the ground running.
[01:20:45] Uh, this is as consequential a moment for the US economy and frankly for the institution as any point since
[01:20:53] For the institution as any point since the late 1970s.
[01:20:56] And so my experience at the Fed, my understanding of the people, the culture, the governance, and of the things that are ripe for reform are going to give me a leg up.
[01:21:06] We don't have a long time to do new studies and contemplate what reform should be.
[01:21:11] We have a short window to try to bring inflation back down to where it should be to ensure price stability.
[01:21:18] And because AI that Senator Kennedy referenced is so consequential and AI is quickly becoming at something like escape velocity, it's important to revisit the Fed's models and see whether this innovation cycle, while it could have over time improvements in the price level and make the Fed's job on inflation easier, um there's a question about what that means for employment, which is another part of the Fed's mandate.
[01:21:46] So I think that's part and parcel of what what uh my background and suggestion and uh history would suggest.
[01:21:52] But if I can make one other point, um
[01:21:55] But if I can make one other point, um what the Fed needs is a reform to its frameworks and a reform to its communications.
[01:22:03] I've seen what the Fed's done well and often I'll give them one cheer or two, but now more than ever the Federal Reserve needs three cheers and that's what I hope to deliver.
[01:22:11] Well, let's stay on this point, particularly, and you've mentioned this in your commentary, the the the point of the Fed's mission creep over the years.
[01:22:20] Um, if you think about what the Fed has done, they strayed into what I would call politically contentious areas.
[01:22:27] They've gone well beyond their core mandate.
[01:22:30] And we've seen this across the Federal Reserve system.
[01:22:33] And what the Fed has done is eroded its credibility as what it should be, which is an apolitical and independent central bank in bank regulation.
[01:22:39] Supervision.
[01:22:41] The Fed's focused on non-material and often politically charged areas.
[01:22:45] I'm thinking about climate change policy here.
[01:22:47] Elsewhere in the Federal Reserve system, we've seen regional reserve banks used as platforms for promoting very divisive partisan policies.
[01:22:54] There, I'm thinking about DEI, climate policy, even racial
[01:22:57] About DEI, climate policy, even racial reparations.
[01:23:00] The Minneapolis Fed even went so far as to publicly lobby for an amendment to a state constitution on education policy.
[01:23:07] How far beyond the remitt can they get?
[01:23:09] In the 2020 monetary policy review, the Fed even sought to redefine its legislative mandate of maximum employment as a broad quote broad and broad-based and inclusive goal close quote.
[01:23:19] I mean, that's tacitly understood to mean that the Fed should accept higher inflation to privilege select groups of Americans.
[01:23:26] And while the Fed undertook this social engineering, it also financially engineered a massive footprint in our market.
[01:23:30] QE provided near unlimited bid for government debt which of course made it easy for us to subsidize more government debt here.
[01:23:38] It subsidized government financing and it encouraged frankly what I view as very reckless federal spending.
[01:23:46] In each of these examples, we see a clear pattern.
[01:23:47] The Fed has strayed beyond its core mandate to encroach upon policy decisions that ought to be left to those of us that are democratically accountable.
[01:23:56] Mr. Worsh, the Fed's own actions have eroded its
[01:23:58] The Fed's own actions have eroded its credibility.
[01:24:00] What do you think should be done to regain public trust?
[01:24:03] Uh, Senator, uh, robust reform.
[01:24:07] 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.
[01:24:15] It loses its focus.
[01:24:18] And I'll just give one example.
[01:24:20] In 2020, as you reference, when the Federal Reserve changed its inflation framework, in August of 2020, inflation was running at around 1.72%.
[01:24:31] And the Fed changed its framework, rewrote in some sense the remit you gave it, and they asked for a little more inflation.
[01:24:38] They ended up with a lot more, and that's was the foundation for the inflation surge that happened in the subsequent years, which we're still living with.
[01:24:49] Thank you, Mr. Wars.
[01:24:50] Thank you, Mr. Chairman.
[01:24:53] Senator Smith.
[01:24:54] Thank you, Mr. Chair.
[01:24:57] Good morning, Mr. Wars.
[01:24:57] It's still morning.
[01:24:57] Um, so, um,
[01:25:00] Wars.
[01:25:00] It's still morning.
[01:25:00] Um, so, um, let me start with this.
[01:25:02] I think you have said that you have confidence that this economy has potential.
[01:25:06] I think that's fair to say.
[01:25:09] And you've also said that this is a time of great consequence for the nation's economy, perhaps one of the most significant hinge points um, in a couple of generations.
[01:25:17] Is that that's fair to say?
[01:25:18] Yes, sir.
[01:25:19] Thank you.
[01:25:21] And so I agree with that and I I actually want to go a bit further because I think that it seems to me that this economy is amazing for rich people, people who have a lot of capital.
[01:25:31] Um and in fact we can see in 2025 billionaire wealth grew three times faster than the average rate of the previous five years.
[01:25:39] Um and wealthy households hold a massive portion of the nation's wealth.
[01:25:46] And this, I think, is the tipping point that our economy actually faces right now.
[01:25:49] And I can tell you that in Minnesota, a lot of people are telling me that it is harder and harder for them to afford the basics.
[01:25:56] They aren't rich.
[01:25:57] They don't have enough money to pay their bills, to pay their doctor's bills.
[01:25:59] Um, so I want
[01:26:01] Pay their doctor's bills.
[01:26:03] So I want to look at this with you for a few minutes.
[01:26:05] And I want to start with inflation.
[01:26:07] So last week, President Trump said that gas prices are quote not very high and quote we're having some fake inflation because of the fuel.
[01:26:19] So understanding what you've been saying about data and measurement and all of that, let me just ask you, do you think the gas prices going up 20% is fake inflation?
[01:26:28] Uh senator, the gas prices like beef prices, eggs, milk, and the rest, they move.
[01:26:35] And when they move in the wrong direction, the American people are hurting by it.
[01:26:38] There's no question about it.
[01:26:38] That's right.
[01:26:40] American people feel it.
[01:26:41] It doesn't It's not fake to them.
[01:26:42] It's money that they don't have in their pocket because gas is up 20%.
[01:26:46] Um I think my my constituents would say that that inflation is real and not fake.
[01:26:51] Okay, so let's look at unemployment.
[01:26:53] At the State of the Union, the president said, quote, "The economy is the roaring economy, excuse me, this is the quote, the roaring economy is roaring like never
[01:27:03] The roaring economy is roaring like never before.
[01:27:05] So do you agree with that statement?
[01:27:07] Is that how you see the economy that is roaring like never roaring before?
[01:27:11] So So Senator, if I can clarify two things.
[01:27:15] One, there's a difference between the change in prices and inflation.
[01:27:19] The change in prices happen in a market economy.
[01:27:21] When inflation moves up, that's because the Fed had something to do with it.
[01:27:24] Now on on the state of the economy, I would say that the broad contours of the economy are improving.
[01:27:29] The potential of the economy, the real results of the economy are improving, but I think it can improve more and I think uh in the years ahead I think the economy's potential is strengthening.
[01:27:40] So um you know the reality is that the economic data understanding what you're saying about economic data being not imperfect that there was almost zero job growth in 2025.
[01:27:48] And so that looks to me like not a roaring economy it looks like a weak economy which is what my constituents are telling me back in Minnesota.
[01:27:58] Let me go to one last um one last um one last look at this.
[01:28:03] Let's look at this.
[01:28:06] Around the country, the average cost of home insurance rose 12% last year.
[01:28:09] Now, in my home state of Minnesota, not a coastal state, premiums rose 34% in 2025.
[01:28:16] This is of course caused by extreme weather events, hail, floods, tornadoes, hurricanes, climate change.
[01:28:25] So, is that inflationary from in your perspective?
[01:28:27] Is that increase in home insurance, property and casualty insurance, isn't that inflation?
[01:28:32] So, Senator, if I can answer two questions that I think I heard and we talked about both of these in your office.
[01:28:37] When we look at the payroll numbers every month and we ask ourselves whether it's good or bad, the job you gave to the Federal Reserve is to ensure we're at maximum sustainable employment.
[01:28:47] I think broadly speaking, the economy is running about close to full employment, though we never know what the right number is.
[01:28:53] So if Americans that want a job can find a job, then by the Fed's metric, we're at full employment.
[01:28:59] On the question of uh
[01:29:03] Full employment.
[01:29:05] On the question of insurance premiums and the rest, when I look broadly across the economy, I would say when we look at health care, when we look at education, we look at housing, those prices have tended to go up more in the less regulated parts of the economy.
[01:29:19] We've seen a downward structure, a downward change in prices, and we try to aggregate them the best we can.
[01:29:24] But so I'm not exactly sure what your point is there, but I would just say that my point here is that rising home insurance rates caused by increasing extreme weather events.
[01:29:37] Climate change is another inflationary pressure that people in my state are dealing with.
[01:29:41] And um this of course the reason I'm focusing on this is because I am um I I'm I'm worried that because of the pressure that you are going to be under from the president to lower interest rates that um this inflationary pressure that my constituents are feeling is is going to get worse and not better.
[01:30:04] Better.
[01:30:04] And so, um, I don't have time to ask my last question, but it is literally this.
[01:30:08] The president has said that he demands that the next fair Fed chair will lower interest rates.
[01:30:15] And, um, I take him at his word at that, and that is what causes me such grave concern here.
[01:30:18] Thank you, Mr. Chair.
[01:30:19] Yes, ma'am.
[01:30:19] Senator Lumis.
[01:30:22] Thank you, Mr. Chairman.
[01:30:24] Uh, welcome, Mr. Wson.
[01:30:27] Congratulations on your nomination and thanks for appearing before this committee.
[01:30:32] Uh, both and taking both the positive questions and some of the, uh, hostility.
[01:30:38] I apologize, uh, for my colleagues' behavior when it strays outside of decorum.
[01:30:44] Um, my first question is about the balance sheet of the Fed.
[01:30:49] What is your view about the size of the balance sheet currently?
[01:30:54] Uh, thank you, Senator.
[01:30:57] Uh, as we talked about in your office, the Fed balance sheet has played a particularly, I think, unhelpful role in, uh, helping the Fed.
[01:31:06] Unhelpful role in uh helping the Fed achieve its dual mandate.
[01:31:09] Um the senator had just mentioned what she described as the uh increase for financial assets relative to real assets.
[01:31:16] Well, part of that is the Federal Reserve.
[01:31:18] The Fed is not blameless in that as it's grown, the Fed's balance sheet grown, it's uh impremature on the economy.
[01:31:27] Uh those with financial assets have benefited from it.
[01:31:30] The reason why I prefer monetary policy to use interest rates as the dominant force is interest rates affect a far broader cross-section of the economy.
[01:31:39] Interest rates get in the cracks.
[01:31:43] If we were to cut rates, then broader number of people will benefit from it versus quantitative easing, which tends to move through financial assets first.
[01:31:50] Half of our fellow Americans don't own any financial assets.
[01:31:52] So, they're wondering what's in it for them.
[01:31:56] Broadly speaking, uh, Senator on the balance sheet, u, I was involved in 2008 and 9 in response to the global financial crisis that Senator Warren referenced and we used extraordinary measures and created a
[01:32:07] Extraordinary measures and created a bigger balance sheet.
[01:32:09] But we agreed to do that only in times of emergencies, only when interest rates were pinned to zero.
[01:32:16] The big balance sheet has become an ordinary recurring force.
[01:32:18] I think has been quite unhelpful and is part of the reason why the Fed is in the business of politics.
[01:32:26] Um, slowly and deliberatively, uh, I believe we need a smaller central bank balance sheet.
[01:32:34] It took us 18 years to create this big balance sheet that's done quite a bit of harm.
[01:32:39] It strikes me to the Fed's credibility.
[01:32:41] Uh, working with the Treasury Secretary, we're going to have to find out way in which we can take the balance sheet and make it smaller.
[01:32:48] Because a large balance sheet where the Fed owns more uh outstanding debt than many parts of the financial markets.
[01:32:58] That's fiscal policy in disguise, Fed needs to get out of the fiscal business, focus on the monetary business so the Fed can deliver on the remitt you gave us.
[01:33:09] Thanks for that response because some of us don't appreciate the connection.
[01:33:11] We don't appreciate the connection between the size of the Fed's balance sheet and interest rates.
[01:33:16] Um, with regard to interest rates, can you tell us a little bit about your conversations with President Trump about interest rates?
[01:33:25] Yeah, I don't want to put words in the president's mouth, but I think he has said loudly and clearly his view on interest rates.
[01:33:31] Don't think I'm breaking any news here.
[01:33:33] Um, but I can tell you what I said and what I said the president is what I've said to this committee and what I've frankly been writing about for more than a decade.
[01:33:44] Um, interest rates are the much better way to be using monetary policy than buying bonds and mortgages uh some of which are issued from the United States Treasury Department.
[01:33:54] That is a confusion of roles that leads to a set of mission creep.
[01:33:59] So interest rates are the dominant tool and interest rates as I mentioned get in the cracks.
[01:34:03] Um my broad view on the conduct of policy from here
[01:34:09] My view on the conduct of policy from here is that too many Fed officials past and present opine in advance about where they think interest rates should be next meeting, next quarter, next year.
[01:34:19] I think that's quite unhelpful.
[01:34:22] As we've heard today from many of your colleagues, um we don't know the state of AI.
[01:34:26] We can't be certain about the state of geopolitics.
[01:34:29] The economy is going to change.
[01:34:31] You need central bankers that are humble, that are nimble, that are open-minded, that can react when we have good data, when events strike us.
[01:34:39] My broad view is that interest rates need to be forward-looking, need to be based on better data, and um we should have a big robust deliberation inside the FOMC.
[01:34:53] Uh, I tend to favor messier meetings than some where people don't show up with rehearsed scripts, but we can have a good family fight.
[01:34:59] If the central bank has that good family fight, I think that they're going to make better decisions and if they happen to make mistakes, they'll correct them sooner.
[01:35:05] So, I'm not
[01:35:09] They'll correct them sooner.
[01:35:13] So, I'm not one for predeciding what interest rates should be.
[01:35:15] I never said to the president where I think rates should be.
[01:35:17] Um, I never committed any such thing and uh and I wouldn't have even thought about doing so.
[01:35:23] Quick yes or no.
[01:35:25] Do you believe that digital assets should be incorporated into our financial industry so Americans have new investment opportunities and consumer protections?
[01:35:38] Uh, Senator, digital assets are already part of the fabric of our financial services industry in the United States.
[01:35:42] Yes.
[01:35:44] Thanks, Mr. Walsh.
[01:35:47] Senator War.
[01:35:49] Thank you, brother Chair.
[01:35:51] Uh Mr. Walsh, congratulations uh on your nomination and I appreciated our time together in my office a few weeks ago.
[01:35:59] If confirmed, you will serve as chair of one of the most powerful economic institutions in the world.
[01:36:07] Decisions you make would move markets.
[01:36:12] decisions you make would move markets, affect Americans retirement savings and affect Americans retirement savings and ability to buy homes.
[01:36:18] ability to buy homes.
[01:36:18] It would influence the global economy.
[01:36:23] It would influence the global economy.
[01:36:25] You currently serve as a lecturer at Stanford University.
[01:36:29] Uh, if you were to assign, assign, if Professor Walsh were to assign a letter grade to the American economy today for the average working family, what grade would you assign?
[01:36:35] letter grade to the American economy today for the average working family, what grade would you assign?
[01:36:40] what grade would you assign?
[01:36:42] Uh, Senator, it was good to meet with you in your office.
[01:36:46] Um, uh, you know, in modern academic institutions, they give everybody A's, so it's not a it's not a fair comparison, especially at elite universities.
[01:36:51] everybody A's, so it's not a it's not a fair comparison, especially at elite universities.
[01:36:53] fair comparison, especially at elite universities.
[01:36:55] I know everyone gets perfect grades.
[01:36:57] everyone gets perfect grades.
[01:37:01] Well, what what grade would you give the economy?
[01:37:02] economy?
[01:37:04] Well, if I gave a student anything other than an A, the dean would summon me to his office because I would have hurt his self-image.
[01:37:07] his office because I would have hurt his self-image.
[01:37:08] self-image.
[01:37:10] Well, the the Americans that I talked to, particularly in the state of Georgia,
[01:37:12] to, particularly in the state of Georgia,
[01:37:14] Georgia, uh, who haven't had the benefit of attending some of these elite institutions, uh, are trying to make their lives work.
[01:37:25] uh, are trying to make their lives work.
[01:37:27] They're they're sitting around their kitchen tables trying to figure out uh how to put their kids through school and regardless of how the markets are doing, consumer confidence is at a record low.
[01:37:38] consumer confidence is at a record low.
[01:37:41] So that's that's their grade on the economy.
[01:37:44] Working families are struggling and things are getting worse.
[01:37:45] The inflation rate has remained elevated above the Fed's 2% target rate throughout President Trump's term.
[01:37:51] above the Fed's 2% target rate throughout President Trump's term.
[01:37:54] Despite his promise to lower inflation, the president's war in Iran has spiked energy prices by 11%.
[01:38:00] energy prices by 11%.
[01:38:03] And Americans are paying on average nearly $4 a gallon of GA for gas because of the war.
[01:38:04] And Americans are paying on average nearly $4 a gallon of GA for gas because of the war.
[01:38:13] We've lost nearly 90,000 manufacturing jobs since President Trump
[01:38:16] Manufacturing jobs since President Trump took office.
[01:38:18] He promised us a manufacturing boom.
[01:38:21] We've lost 90,000 manufacturing jobs.
[01:38:26] And Americans already dealing with high prices paid $1,000 more per household in 2025 as a direct result of President Trump's illegal tariffs, which he remains committed to in spite of the Supreme Court decision.
[01:38:42] uh decision.
[01:38:48] uh he does even better than than than this practice of you know these institutions.
[01:38:56] Uh when asked what grade he would give the economy he he said an A.
[01:39:01] And then he thought about it and said no actually A+ plus.
[01:39:05] And as I as I thought about his answer I was wondering who who was he talking about?
[01:39:09] Who who who is it an A+ for?
[01:39:14] uh certainly not the ordinary workingclass Georgians
[01:39:18] Working-class Georgians that I'm fighting for every single day.
[01:39:20] Maybe the people closest to him.
[01:39:23] But I, I, I'm hard-pressed to think that folks across the state of Georgia who are looking at their grocery bill, looking at their gas bill, looking at the $1,000 that they've had to pay would give the economy an A++.
[01:39:38] What are your thoughts?
[01:39:41] Uh, Senator, thank you.
[01:39:43] Um, if the Fed were to execute on a series of policy reforms, then I believe the economy can be stronger.
[01:39:51] I believe uh inflation can be lower, and I believe real take-home pay can be higher.
[01:39:57] I think the Fed is not blameless for the divergence you describe between those that have financial assets and those that don't.
[01:40:06] Had the balance sheet not been brought from the $800 billion level when I showed up at the Fed in 2006 to an order of magnitude higher, um, if the Fed had
[01:40:19] Of magnitude higher, um, if the Fed had kept a smaller balance sheet the way the senator and I just talked about a few moments ago, I think interest rates could be lower, inflation could be better, and the economy could be stronger.
[01:40:30] Yeah, you discussed your theory of the case with me in that regard.
[01:40:35] Um but I think you would agree that the recognition I think you implicit in is in your testimony is the recognition that this is not a pl plus plus economy.
[01:40:45] In your econ uh economy in your testimony you note the importance of price stability and correctly note that inflation means people lose purchasing power particularly harming lowincome folks.
[01:40:56] But I also noticed your testimony did not really discuss the Fed's other mandate, and that's to maximize employment.
[01:41:04] Inflation is critically important, but if you don't have a job, uh, you're in trouble.
[01:41:09] Do you view the Fed's mandate for maximizing employment as equally important to its price stability mandate?
[01:41:15] And are you concerned about weak job growth numbers?
[01:41:21] Concerned about weak job growth numbers?
[01:41:24] Uh, before the nominee answers the question, the senator from the elite university Morehouse is out of time.
[01:41:26] The question, the senator from the elite university Morehouse uh is out of time.
[01:41:30] So I appreciate the question.
[01:41:33] We will have the answer submitted for the record.
[01:41:34] Record.
[01:41:35] I I know you wanted to attend Morehouse College.
[01:41:38] I'm sorry.
[01:41:39] Everybody wants to attend Morehouse by the way, but I am a Charleston Southern B.
[01:41:41] The way, but I am a Charleston Southern B.
[01:41:42] B.
[01:41:45] He couldn't get into Charleston Southern, but it's good you got in somewhere.
[01:41:46] Southern, but it's good you got in somewhere.
[01:41:48] This is good.
[01:41:49] If you can't get into Morehouse, go to Stanford.
[01:41:54] Everybody's got jokes up here, so we'll go to Senator Brent.
[01:41:56] So we'll go to Senator Brent.
[01:41:58] Thank you, Mr. Chairman.
[01:42:00] Uh, before I get started, I want to emphasize that transparency and accountability at the Fed are absolutely vital.
[01:42:02] I want to emphasize that transparency and accountability at the Fed are absolutely vital.
[01:42:04] The American people need to have trust in our government.
[01:42:07] People need to have trust in our government.
[01:42:08] We need to have trust in our government agencies, and that includes transparency and accountability at the Fed.
[01:42:09] Government agencies, and that includes transparency and accountability at the Fed.
[01:42:11] So, when we're talking about billions of dollars being spent on renovations, it's absolutely appropriate
[01:42:13] Fed. So, when we're talking about billions of dollars being spent on renovations, it's absolutely appropriate
[01:42:15] So, when we're talking about billions of dollars being spent on renovations, it's absolutely appropriate
[01:42:19] Billions of dollars being spent on renovations, it's absolutely appropriate
[01:42:21] Renovations, it's absolutely appropriate for Congress to ask questions.
[01:42:24] And it is for Congress to ask questions and it is absolutely appropriate for Congress to get answers.
[01:42:29] We need to understand where this substantial amount of money has gone.
[01:42:33] And we need to ensure that every institution, including the Fed, is always making decisions that are in the best interest of the American people.
[01:42:40] And so I urge everyone involved to make sure that any outstanding questions on this matter um come to fruition so that we can we can get answers and move on.
[01:42:50] And have a smooth and timely transition and a confirmation process of which I want to say congratulations on both your nomination um your willingness to be here today.
[01:42:58] And I also want to say that to your family.
[01:43:02] Um I think a lot of people miss the fact that when any of us step up to serve that it's not just you.
[01:43:09] You know, it your family that goes through so much.
[01:43:13] And so we just want to say um uh that sacrifice is often overlooked and we certainly appreciate your family being with you today and all of you um and and what you're willing to
[01:43:23] Of you, and and what you're willing to do here.
[01:43:26] Um, I had a chance to get to know you over the years and as many of my Republican colleagues have and other colleagues.
[01:43:32] And I think we would all say you are absolutely the right man for the job at the right time in our country's history.
[01:43:39] And I am excited about your leadership at the Fed.
[01:43:43] We have had um an opportunity to talk about a number of issues.
[01:43:47] Um, but I know that your integrity and that your commitment to the American people are going to help restore confidence at the Fed.
[01:43:53] And it'll also ultimately serve our country incredibly well.
[01:43:59] So, um, it's not going to be any easy task to return that confidence.
[01:44:04] Um, we have spoken about needed reforms at the Fed on the monetary policy side and also the operational and internal standpoint as well.
[01:44:15] Um, and of course your calls for reform aren't baseless.
[01:44:17] Um, you served at the Fed during one of the most challenging times.
[01:44:20] You just referenced it in your previous answer to a question from my colleague across the aisle.
[01:44:25] From my colleague across the aisle.
[01:44:26] I believe you said there was a balance sheet 800 billion when you showed up in 2006.
[01:44:32] So talk to me a little bit.
[01:44:35] Speak to me about that, about what you have seen during your time and tenure at the Fed already and then what other life experiences you have that you will bring as you tackle this role.
[01:44:43] Yeah.
[01:44:46] So, so Senator, uh great to see you again.
[01:44:48] Um, so the chairman knows I work with the senator when she was a staffer on this very committee and I was a young staffer myself.
[01:44:54] So it's an honor to be here and senator as you know um this is a this is a serious responsibility.
[01:45:02] I'm honored the president nominated me for it.
[01:45:05] Um, this is a time of consequence not just for the country but for the central bank.
[01:45:09] I think the central bank can go back to first principles and improve itself.
[01:45:14] Um, I see most of the actions of the Fed come from good intentions.
[01:45:18] But when you gave the Fed a remit, it wasn't a general roving remit to do what it thought was right.
[01:45:24] It was a
[01:45:25] What it thought was right.
[01:45:27] It was a particular remit to focus on particular issues and to not wander.
[01:45:30] And that's the trade-off on independence.
[01:45:33] Independence about the conduct of monetary policy where we can hear criticisms from others in economics profession, elected officials, and we should be open-minded to them.
[01:45:41] Listen, I think there's been a considerable amount of group think in the economics profession.
[01:45:47] And so being open-minded to it is important, but outside of monetary policy, it's important that the central bank um uh work with the government on areas of overlap.
[01:45:56] And so I think that's likely to happen going forward.
[01:46:01] If you ask Senator Britt about my biggest lessons, my biggest lessons are about how a central bank should be acting in crisis times versus in normal times.
[01:46:11] In the crisis of 2008, and the pandemic of the crisis of 2020, uh that's when the Fed needs to take extraordinary measures.
[01:46:17] Going back to the founding of the Fed in 1913, it was created to respond to shocks.
[01:46:22] And so there I think central bankers often should get the benefit of the doubt when
[01:46:27] Should get the benefit of the doubt when the world is racing away from it.
[01:46:29] The world is racing away from it.
[01:46:32] The real economy is suffering fast.
[01:46:33] The central bank should show up with liquidity support.
[01:46:36] But the job of the central bank is to try to mitigate those risks in advance to buy insurance so that we don't go from shock to shock, from boom to bust.
[01:46:41] Risks in advance to buy insurance so that we don't go from shock to shock, from boom to bust.
[01:46:43] From boom to bust.
[01:46:46] And so my criticism is more about the conduct of monetary policy and regulatory policy in normal times.
[01:46:48] Policy and regulatory policy in normal times.
[01:46:51] And that's the area that are need of reform.
[01:46:53] Of reform.
[01:46:56] We have a window where the economy is improving but I would I would say more improvement is still possible.
[01:46:58] Economy is improving but I would I would say more improvement is still possible.
[01:47:01] Say more improvement is still possible.
[01:47:03] Um and it's during this policy that we need to look introspectively uh look fundamentally at reform.
[01:47:05] Need to look introspectively uh look fundamentally at reform.
[01:47:08] So when there is another risk, there is another shock, the central bank is prepared to address it with less harm to the real economy.
[01:47:10] there is another risk, there is another shock, the central bank is prepared to address it with less harm to the real economy.
[01:47:12] Shock, the central bank is prepared to address it with less harm to the real economy.
[01:47:14] Address it with less harm to the real economy.
[01:47:15] Economy. >> Thank you so much. I am out of time.
[01:47:17] I look forward to um your service to our nation and I know that we will be in great hands.
[01:47:19] Nation and I know that we will be in great hands.
[01:47:21] Great hands. >> Thank you.
[01:47:22] Thank you. >> Thank you, Senator Brit. Senator Kim, >> thank you, Chairman.
[01:47:23] Thank you, Senator Brit. Senator Kim, >> thank you, Chairman.
[01:47:25] Uh Mr. Wish, good
[01:47:27] Thank you, Chairman.
[01:47:27] Uh Mr. Wish, good to see you.
[01:47:28] To see you.
[01:47:30] I guess I just wanted to start off by talking about just the state of American families right now.
[01:47:32] Nearly 60% of people surveyed say that they're worried about affording the very basics, rent, gas, groceries, the bills.
[01:47:44] 60% of Americans say that they cannot handle a $1,000 emergency.
[01:47:49] 40% of Americans saying that they can't handle a $400 emergency.
[01:47:52] I want to ask, do you agree that the American families are are struggling right now with affordability?
[01:48:00] Uh Senator, as we as we discussed in your office, uh central bankers should not be second-guessing uh what people feel and see in their own lives.
[01:48:07] um people's experience, lived experiences matter to them.
[01:48:12] What I can say is the central bank has some responsibility for the things that you've described and that the legacy of inflation, what I think is the biggest economic policy error in 40 or 50 years happened just a
[01:48:27] An error in 40 or 50 years happened just a few years ago, and we're still living with the remnants of it.
[01:48:31] I think inflation is less problematic than it was a couple of years ago, but I would not affordability continues.
[01:48:37] That sounds right, right?
[01:48:39] Because I'll be honest with you, when I hear, you know, I heard two months ago President Trump say, he said, quote, "What word have you not heard over the last two weeks? Affordability because I've won. I've won affordability."
[01:48:53] It sounds like you would disagree with that assessment that the fight for affordability for American families is over.
[01:48:59] So, I think the trend is going in the right direction, but we still have more work to do.
[01:49:04] Well, the way I would describe it, Senator, is the cumulative increase in prices starting in um early 2020 till now is between 25 and 35%.
[01:49:16] So, I understand what hardworking Americans say, it's u it's still a struggle.
[01:49:20] That's a legacy of a past policy error.
[01:49:22] One thing that you talked about before is about, you know, just the real cost that families are facing right now.
[01:49:28] That families are facing right now.
[01:49:30] And I appreciate that you were pushing back.
[01:49:30] I appreciate that you were pushing back on that comment that the president had.
[01:49:32] On that comment that the president had about calling the energy prices and the fuel price increases that we're having.
[01:49:34] About calling the energy prices and the fuel price increases that we're having fake inflation because right now.
[01:49:36] Fake inflation because right now Americans have paid more than $8.4 billion more in gas during the first month of this war.
[01:49:41] Americans have paid more than $8.4 billion more in gas during the first year, first month of this war.
[01:49:44] Billion more in gas during the first year, first month of this war.
[01:49:48] Fertilizer, 70% of respondents to the Farm Bureau survey said that fertilizer is unable to be afforded right now, just given the price increases.
[01:49:50] 70% of respondents to the Farm Bureau survey said that fertilizer is uh unable to be afforded right now just given the price increases.
[01:49:53] Survey said that fertilizer is uh unable to be afforded right now just given the price increases.
[01:49:55] To be afforded right now just given the price increases.
[01:49:58] Are you concerned that there could be real long-term increases in long-term effects of this war in Iran?
[01:50:00] There could be real long-term increases in long-term effects of this war in Iran?
[01:50:03] Long-term effects of this war in Iran?
[01:50:03] Uh, you know, especially if we're continuing to see these challenges when it comes to fuel and fertilizer.
[01:50:04] Uh, you know, especially if we're continuing to see these challenges when it comes to fuel and fertilizer.
[01:50:06] Continuing to see these challenges when it comes to fuel and fertilizer.
[01:50:08] It comes to fuel and fertilizer.
[01:50:08] Uh, Senator, I, if my reform agenda, if confirmed, stands for anything, it's for the central bank, especially the Fed chairman, to stay in its lane.
[01:50:11] Uh, Senator, I if my reform agenda, if confirmed, stands for anything, it's for the central bank, especially the Fed chairman, to stay in its lane.
[01:50:13] Confirmed, stands for anything, it's for the central bank, especially the Fed chairman, to stay in its lane.
[01:50:16] The central bank, especially the Fed chairman, to stay in its lane.
[01:50:17] Chairman, to stay in its lane.
[01:50:17] I know that, but you also wouldn't want to wander outside of it.
[01:50:18] I know that, but you also >> I wouldn't want to wander outside of it.
[01:50:20] I wouldn't want to wander outside of it.
[01:50:20] I'm happy.
[01:50:20] But you're also you're also charged with forecasting in terms of understanding where our economy is going.
[01:50:22] But you're also you're also charged with forecasting in terms of understanding where our economy is going.
[01:50:24] Forecasting in terms of understanding where our economy is going.
[01:50:27] So does an impact of that magnitude rise to
[01:50:30] An impact of that magnitude rise to something that the Fed should keep an eye on and be concerned about?
[01:50:33] Uh the Fed should be have an open mind towards all sorts of data.
[01:50:38] But the things that central banks can affect are things that are not one-off in nature but are persistent and find their way into the generalized price level.
[01:50:45] And that's something I wanted to I wanted to ask you about that because you talked about a fundamental policy change when it comes to the Fed.
[01:50:52] And I guess I wanted to just get a little bit more clarity on that.
[01:50:56] You know, Senator Lumis mentioned about the balance sheet and the concern you have about that.
[01:51:00] Do what level do you think the balance should be at?
[01:51:01] You know, if it's 6.7 trillion now, where do you think the goal is in your mind?
[01:51:09] So I haven't fixed a particular number but any changes senator in the balance sheet would be part of a public discussion debated rigorously and if and when the central bank comes to a judgment about a new balance sheet policy which I hope the central bank would it would be described well in advance as I mentioned it took 18 years to create this balance sheet problem and
[01:51:30] To create this balance sheet problem, and we won't be able to fix it in 18 minutes.
[01:51:32] We won't be able to fix it in 18 minutes, and so that's why I think deliberation here is important.
[01:51:33] But it suffices to say it should be smaller and at least as important.
[01:51:38] It should not be holding long-term Treasury assets as if it's the fiscal authority.
[01:51:42] That's when it gets into politics.
[01:51:45] I appreciate you saying that it's important to be able to have that public discussion.
[01:51:48] I mean, one thing that's come up as I've been engaged with different experts is concern about rapid reduction.
[01:51:53] Uh, if you are moving in that speed, that it could generate a number of concerns, including upward pressure on long-term interest rates.
[01:52:00] So, I guess I just wanted to check.
[01:52:02] Do you share that concern, you know, as you are thinking about how to reduce it?
[01:52:07] Do you also understand though that there are concerns about rapid reduction in the speed with which you're trying to go down?
[01:52:12] Yes, Senator.
[01:52:15] And that kind of regime change would have to be deliberate, well orchestrated, well, um, choreographed and well described so that uh unnecessary upset are not done to financial markets as we go to a policy regime change much more focused on interest rates.
[01:52:30] More focused on interest rates.
[01:52:30] With that, I'll yield back.
[01:52:30] Thank you, sir.
[01:52:32] With that, I'll yield back.
[01:52:32] Thank you, sir.
[01:52:34] Senator Rickettts.
[01:52:34] Thank you, Mr. Chairman.
[01:52:35] Thank you, Mr. Chairman.
[01:52:35] Thank you, Mr. Waters.
[01:52:37] It was great to see you in my office.
[01:52:37] Thanks for coming by.
[01:52:39] I want to continue to talk about inflation because it is something that is incredibly important.
[01:52:43] You I think you share the view that inflation is a silent tax on American households.
[01:52:48] Is that accurate?
[01:52:51] Uh, Senator, it's accurate.
[01:52:53] It's the most regressive tax that anyone in Washington could come up with.
[01:52:55] If you were trying to do the most harmed, the least welloff among us, inflation would be the way to do it.
[01:53:01] Yeah.
[01:53:02] And my colleagues on the other side of the aisle have been talking about that.
[01:53:04] And I note, at least I don't recall that they ever talked about that during the Biden administration because it was during the Biden administration that we saw this record inflation, this 40-year-old high inflation.
[01:53:16] And yet my Democrat colleagues were silent about it back then.
[01:53:19] Now they want to talk about it.
[01:53:21] But of course, American households were hurting back then as well.
[01:53:22] Uh inflation was caused by B President Biden's irreckless policies and reckless
[01:53:32] Biden's reckless policies and reckless spending.
[01:53:35] Let's look at ARPA, a partisan spending.
[01:53:37] Let's look at ARPA, a partisan bill that was passed by the Democrats.
[01:53:41] Which cost taxpayers $1.9 trillion.
[01:53:44] When ARPA was passed in March of 2021, inflation was at 2.6%.
[01:53:47] Inflation quickly accelerated; it was over 5% by May.
[01:53:50] June, and July.
[01:53:52] And by the end of the year of December, it was 7%.
[01:53:57] Does federal government spending have anything to do with inflation, Mr. Walsh?
[01:54:02] Uh, Senator, uh, as we talked about in your office, my view of inflation is a bit different from some.
[01:54:06] I don't think inflation comes about when the economy grows too much or hardworking Americans get increase in their wages.
[01:54:14] I think inflation comes about when the government prints too much, by which I mean the central bank.
[01:54:18] And broadly speaking, the government spends too much.
[01:54:21] And so we were spending too much money and now we've been cleaning up their mess ever since.
[01:54:26] I will also note the Republicans have been taking efforts to reduce the deficit.
[01:54:32] I think year today it's down about 10.6% from where it was last year or uh and
[01:54:35] From where it was last year or uh and this is why it's so important we get our spending under control.
[01:54:37] This is why it's so important we get our spending under control.
[01:54:39] I think you also talked about the balance sheet and one of the things about the balance sheet is that I think if I hear you're saying it's too big and it benefits people who have financial assets.
[01:54:43] Talked about the balance sheet and one of the things about the balance sheet is that I think if I hear you're saying it's too big and it benefits people who have financial assets.
[01:54:45] Of the things about the balance sheet is that I think if I hear you're saying it's too big and it benefits people who have financial assets.
[01:54:47] That I think if I hear you're saying it's too big and it benefits people who have financial assets.
[01:54:50] it's too big and it benefits people who have financial assets.
[01:54:52] But if you don't have financial assets you haven't seen the benefit of a a large balance sheet at the Fed.
[01:54:54] But if you don't have financial assets you haven't seen the benefit of a a large balance sheet at the Fed.
[01:54:56] Is that accurate?
[01:54:57] Accurate?
[01:54:58] Uh Senator it's broadly accurate.
[01:55:02] Uh when the large balance sheet was created in the 2008 financial crisis, the agreement between my colleagues and I was that we would only use this in a emergency scenario because the transmission mechanism for a large balance sheet goes two ways through signaling effects and through asset prices.
[01:55:04] When the large balance sheet was created in the 2008 financial crisis, the agreement between my colleagues and I was that we would only use this in a emergency scenario because the transmission mechanism for a large balance sheet goes two ways through signaling effects and through asset prices.
[01:55:07] In the 2008 financial crisis, the agreement between my colleagues and I was that we would only use this in a emergency scenario because the transmission mechanism for a large balance sheet goes two ways through signaling effects and through asset prices.
[01:55:09] Was that we would only use this in a emergency scenario because the transmission mechanism for a large balance sheet goes two ways through signaling effects and through asset prices.
[01:55:12] Was that we would only use this in a emergency scenario because the transmission mechanism for a large balance sheet goes two ways through signaling effects and through asset prices.
[01:55:14] Emergency scenario because the transmission mechanism for a large balance sheet goes two ways through signaling effects and through asset prices.
[01:55:16] Transmission mechanism for a large balance sheet goes two ways through signaling effects and through asset prices.
[01:55:18] Balance sheet goes two ways through signaling effects and through asset prices.
[01:55:20] Signaling effects and through asset prices.
[01:55:22] Now at the time of the financial crisis, financial asset prices were down 60 or 70% and so it was understandable interest rates were at zero.
[01:55:24] Crisis, financial asset prices were down 60 or 70% and so it was understandable interest rates were at zero.
[01:55:27] 60 or 70% and so it was understandable interest rates were at zero.
[01:55:29] But in the ordinary course, the central bank, an independent body, should not be adopting.
[01:55:32] Ordinary course, the central bank, an independent body, should not be adopting.
[01:55:35] independent body, should not be adopting a set of policies that have that kind of distributional consequence.
[01:55:39] That's why interest rates are a better way to be setting monetary policy.
[01:55:43] So if I I don't want to put words in your mouth, but just what I hear you saying is let's reduce the size of balance sheet because that benefits maybe half the American population and then let's focus on interest rates and inflation so we can benefit all Americans.
[01:55:58] That if we take interest rates down that benefits all Americans, you said gets into the nooks and crannies.
[01:56:03] That if we get inflation under control that is how we benefit all Americans and the size of the balance sheet has only benefited some Americans.
[01:56:08] So what you're really about is trying to change a policy at the Fed that has really benefited under the last administration people who have lots of money.
[01:56:17] Actually, not just the last administration, people the previous administrations, but you also want to make sure we get off of the inflation.
[01:56:23] I mean, during the Biden administration, we saw four years in a row of declining real wages for American households.
[01:56:31] And what you want to do is get that inflation under control so that all American households benefit.
[01:56:34] Is that fair?
[01:56:35] Uh, that is fair.
[01:56:37] Uh, that is fair.
[01:56:37] Uh I'm going to paraphrase uh former chairman Paul Vulkar uh where he said something along the following lines.
[01:56:45] You would need to have a PhD from an elite institution to believe that inflation doesn't have something to do with money.
[01:56:52] Okay, great.
[01:56:53] Real briefly, I've only got a few seconds left here, but I'm going to hit upon switch topics on you real briefly.
[01:57:00] uh chairman pow secretary bassent met with leaders of our largest banks recently to talk about advanced AI models like mythos from anthropic toi identify banking um vulnerabilities
[01:57:09] that's apparently very good at finding those vulnerabilities when confirmed
[01:57:13] will you what will you do to modernize the Federal Reserve's internal risk assessments tabletop or scenario planning exercises to ensure that we can anticipate and defend against the type of emerging risks that potentially models like mythos could present if used in the wrong hands
[01:57:27] have about 20 seconds to answer that.
[01:57:29] 20 seconds.
[01:57:29] Uh Senator, um uh a lot is the short answer.
[01:57:32] This 15-second answer beyond that is the pace of change in
[01:57:38] Beyond that is the pace of change in these technologies is accelerating.
[01:57:41] These technologies is accelerating.
[01:57:44] AI, which I think of really is American ingenuity, gives America a huge head start relative to our uh competitors around the world, but it's not without real risks and real challenges.
[01:57:50] And a forward-looking reform oriented central bank needs to be on the front end of it.
[01:57:56] Great. Thank you very much.
[01:57:58] I look forward to your leadership.
[01:58:01] Senator Ggo.
[01:58:02] Hey, Mr. Chair.
[01:58:03] How are you?
[01:58:05] In a 2019 interview with Bloomberg, you said a monetary policy is important not for the decision it makes but for the reasons it gives for the explanations.
[01:58:09] Mr. Walsh, the Federal Open Market Committees or um that the Fed sets US monetary policy through interest rates decisions at those meetings.
[01:58:18] Do you commit to maintaining the current practice of holding a meeting at least once every eight weeks?
[01:58:22] Yes or no?
[01:58:25] Uh, Senator, by by statute, as we talked about in your office, I believe the statute requires a minimum of four meetings, but four is not enough.
[01:58:33] So, having more meetings than that is appropriate, but I've not even begun to look at the meeting schedules for 2027.
[01:58:39] Look at the meeting schedules for 2027 and beyond.
[01:58:41] Uh, of course, subject to confirmation.
[01:58:42] Confirmation.
[01:58:43] So, then do you commit to holding a press conference at least on the day of the FOMC meetings?
[01:58:47] Uh, Senator, um, uh, right now press conferences are held periodically.
[01:58:51] If you ask me my true personal opinion, uh, right now Fed chairs and other central bankers around the FOMC, they speak quite frequently.
[01:58:54] There is no lack of transparency.
[01:58:57] But I would say this, "I think truth seeking is more important than repetition.
[01:59:00] If one has a press conference, one wants to deliver some important news.
[01:59:02] Perfect.
[01:59:04] Follow up on that then.
[01:59:07] Would you commit to taking questions at those press conferences?
[01:59:09] Um I if a press conference were held, I think it would be incumbent to hear what uh the reporters of the day had in mind.
[01:59:12] Thank you.
[01:59:13] I'm glad.
[01:59:15] You know, our our personal meeting regarding this uh was very enlightening.
[01:59:17] Um earlier today, you said to Senator Kennedy that President Trump never demanded you to cut interest rates in your job interview.
[01:59:20] Is that
[01:59:39] Rates in your job interview. Is that your sworn testimony?
[01:59:40] Your sworn testimony?
[01:59:41] Uh that is, Senator.
[01:59:41] Okay.
[01:59:41] Well, someone here is lying then.
[01:59:44] Uh because it's either you or President Trump because in an interview with the Wall Street Journal of December 12th, President Trump confirmed that he pressed you on your commitment to support interest rates cuts and I quote during a 45-minute meeting with Walsh on Wednesday at the White House.
[01:59:53] The president pressed Walsh on whether he could trust him support interest rate cuts if he were chosen to lead the central bank.
[02:00:07] According to PIPA familiar with the meeting, Trump in the general interview confirmed that repeating uh Mr. Chairman I'd like to enter for the record uh the Wall Street Journal article December 12th.
[02:00:17] Trump says he's leaning towards Walsh or has it to lead the Fed.
[02:00:20] So, you know, this brings up an issue of credibility at this point.
[02:00:26] Who's lying here?
[02:00:28] Is it you or the president?
[02:00:28] Because the president confirmed that he did ask you to cut interest rates.
[02:00:32] Uh Senator, there's of course a third alternative.
[02:00:35] You cite a couple of reporters for a leading financial
[02:00:39] Reporters for a leading financial newspaper.
[02:00:41] I recall reading that story at the time.
[02:00:44] Did you issue a correction?
[02:00:45] I think those reporters either need better sources or better journalistic standards.
[02:00:51] Did you ask for a correction?
[02:00:53] There are things in the newspaper that I see all the time that don't strike my ear as correct.
[02:00:57] So, it is in your opinion that the president then is lying when he said he did not ask you.
[02:01:03] Uh, I can only repeat to you, Senator, what I said to several of your colleagues.
[02:01:08] So, you did not you right now under sworn testimony are saying just to right now that the president of the United States in that job interview did not ask you to cut interest rates.
[02:01:17] The president never asked me to commit to interest rate cuts at any particular meeting over the period of my tenure at the Fed.
[02:01:24] He didn't ask for it.
[02:01:26] He didn't demand it.
[02:01:28] He didn't require it.
[02:01:31] And nor would I have ever done so.
[02:01:32] So, if these reporters come back and say to do another follow-up on this and they confirm what they heard, what will your response be?
[02:01:39] Well, my response would be what I suggest to you a few moments ago.
[02:01:41] I suggest to you a few moments ago.
[02:01:44] As I read that story in real time, I remember thinking they either need better journalistic standards or better sources.
[02:01:48] So, you know, here's my problem.
[02:01:51] Uh, Mr. Chair and colleagues, I, you know, and and Mr. Wars, I think you're incredibly qualified.
[02:01:55] A lot of us are actually worried about the integrity of the Federal Reserve.
[02:01:58] We're worried about what this means for the economic markets and we're worried about what's g this means for inflation.
[02:02:05] We're worried about your independence.
[02:02:07] And now we're hearing direct contradictions whether or not you were directly asked by the president to cut interest rates and you're saying no and he's saying yes.
[02:02:16] And I think for a lot of us there's a question now of credibility.
[02:02:20] And I think there's a real reason why uh many of us are not voting no.
[02:02:22] As a matter of fact, until you verbally spoke to Mr. Kennedy and answered his question that he did not answer ask the president did not ask you uh to cut interest rates.
[02:02:34] This was not even going to be brought up.
[02:02:35] So there's definitely right now a true question about who is lying here.
[02:02:39] It's either you or it's the president.
[02:02:41] I yield back.
[02:02:43] Or it's the president.
[02:02:43] I yield back.
[02:02:45] Senator, if I might respond.
[02:02:46] Certainly.
[02:02:49] Uh thank you.
[02:02:49] Uh I take my responsibility to be an independent leader of the Federal Reserve very seriously if confirmed by this body.
[02:02:53] I take the integrity of the office and my personal integrity very seriously.
[02:03:03] And um uh I I stand by every word I said.
[02:03:08] The president never asked me to commit to any such thing, nor would I ever do so.
[02:03:13] Mr. Banks.
[02:03:16] No sir.
[02:03:18] Thank you, Mr. Chairman.
[02:03:18] Governor Worish, congrats on your nomination.
[02:03:20] Uh, as we spoke about uh during our meeting in my office, I strongly support your nomination and look forward to voting for you to be the next chairman of the Federal Reser Reserve and it can't happen soon enough.
[02:03:33] Um, one policy area that we strongly agree on is the threat that China poses to America's economy.
[02:03:38] In fact, you've written publicly that China is deliberately positioning its financial system to rival US leadership
[02:03:45] financial system to rival US leadership and actively working to elevate its currency on the global stage.
[02:03:50] Can you talk for a minute minute about how the Federal Reserve reinforces the strength of the US dollar as the world's uh reserve currency in the face of that challenge?
[02:03:59] Sure. Uh Senator, it's great great to see you again.
[02:04:03] We talked about some of these issues of the G2 rivalry, the rivalry between the US and China in your office.
[02:04:10] Uh if confirmed as chairman of the Federal Reserve, I will then have to say that it's the Treasury Secretary's business to talk about the dollar.
[02:04:17] It's the Fed chairman's business to talk about interest rates.
[02:04:18] Um but I think I can say this quite comfortably.
[02:04:24] Uh the dollar is the is the lynchpin of the global economy.
[02:04:30] The United States and the Federal Reserve is a beneficiary of the strength of the dollar.
[02:04:36] The US financial system is the most important financial system in the world and the central bank's been charged with really important responsibilities and overseeing it and supervising it.
[02:04:46] Overseeing it and supervising it.
[02:04:48] Um, there are risks to the US position in the world, including economic.
[02:04:51] The economic statecraft agenda led by Secretary Bess.
[02:04:54] Secretary Rubio is an important one.
[02:04:56] On that, the Fed will play a supporting role in ensuring that the financial system is as safe as it can be.
[02:05:03] And work with them because it's outside of the conduct of monetary policy to ensure the US is on its front foot.
[02:05:10] And in a position of strength during this period of um rivalry between the US and uh another nation around the world.
[02:05:17] Uh another nation around the world.
[02:05:17] What, what are some of those?
[02:05:18] I understand uh the role of the Treasury Department versus the Fed, but what are the most important steps that the Fed can take to reinforce confidence in the US dollar?
[02:05:26] Uh deliver stable prices, Senator.
[02:05:29] Uh deliver an economy that uh improves from here even further, where uh real take-home pay moves up.
[02:05:36] Where inflation falls, and the US economic growth potential is the best in the world.
[02:05:44] I mentioned earlier, Senator, something that I really do believe.
[02:05:46] Um, AI is a
[02:05:49] That I really do believe. AI is a testament to American ingenuity.
[02:05:52] The United States is the best positioned country in the world to take advantage of it.
[02:05:57] So that the US economy, US workers benefit from it.
[02:06:00] That the US is in a better position than anyone else, but it's filled with challenges.
[02:06:03] Geopolitical challenges, technology challenges.
[02:06:07] So the sooner that we can hit the ground running on reform agenda, the better.
[02:06:11] The better.
[02:06:14] You wrote in an op-ed in 2021 in the Wall Street Journal that I recommend everyone reads.
[02:06:17] It's one of the reasons that I wholeheartedly support you because of what you it says a lot about you in this op-ed.
[02:06:18] But you talked about how the PRC is actively promoting its digital yuan currency with the explicit goal of creating an alternative payment system that sidesteps US sanctions.
[02:06:20] You've been very clear that China is not playing by the rules.
[02:06:21] China is buying over 80% of Iran's sanctioned oil and Chinese currency through Chinese banks completely outside Swift.
[02:06:50] Banks completely outside Swift.
[02:06:52] The Iranian government says it is charging ships to transit the Strait of Hormuz.
[02:06:55] And collects payments via crypto and Chinese currency.
[02:06:59] What tools does the Federal Reserve have to defend the dollar's role as countries route payments through the Chinese financial systems to do business with Iran and other adversaries?
[02:07:07] Yeah, Senator, thank you.
[02:07:10] Um, as we talked about before, monetary policy is independent.
[02:07:14] But outside of monetary policy, the Federal Reserve can be working hand-in-hand with the rest of the government.
[02:07:19] Um, the Federal Reserve is independent inside of government, not independent of government.
[02:07:25] Um what the US can do with respect to the dollar is have a more robust uh payment system.
[02:07:36] The Fed has a number of payment systems that most financial participants in the world use.
[02:07:40] I would say they all are in need of substantial reform.
[02:07:42] Uh there's a system called Fed now which some describe as Fed yesterday.
[02:07:47] There's a series of new technologies that the Fed
[02:07:51] Series of new technologies that the Fed needs to oversee and needs to architect.
[02:07:54] Needs to oversee and needs to architect so that the payment system in the US is the safest, most efficient, most capable in the world.
[02:08:02] Otherwise, we'll be losing to adversaries around the world in being the lynchpin of the global economy.
[02:08:07] Thank you.
[02:08:09] Your leadership is so important and it's important right now.
[02:08:11] We need you on the job right now, not later, right now.
[02:08:15] So, I look forward to voting for you quickly and seeing you confirmed and getting you on the job.
[02:08:21] With that, I yield back.
[02:08:22] Thank you, sir.
[02:08:24] Senator Blunt Rochester.
[02:08:26] Thank you, Mr. Chairman and Ranking Member Warren.
[02:08:28] Uh also, thank you, Mr. Wars, um for taking the time also to meet with me uh earlier this week.
[02:08:34] Um, I share many of the concerns of different committee members about us kind of putting the cart before the horse.
[02:08:41] Um, and in one regard it is the whole issue of independence of the Fed.
[02:08:46] And I know you have made commitments.
[02:08:52] And I know you have made commitments both in your testimony and here today with us in the process of watching the president try to fire Chairman Pal as well as Governor Lisa Cook.
[02:09:02] Um, it really raises a lot of red flags for us.
[02:09:08] Um, even Justice Kavanaaugh said that no president has fired a sitting governor in the 112-year history of the Fed, which was structured to be independent of day-to-day politics and that it would weaken, if not shatter, the independence of the Federal Reserve.
[02:09:24] There are a lot of questions here today as well about both ethics and whether or not all the paperwork is in and uh even uh Senator Warren's question about you know selling of the assets and whether they will be transparent is something that's important again to um ensure confidence.
[02:09:43] And so I I I shared some of those concerns with you in person when we met and I share them here for the record.
[02:09:48] I did have a question.
[02:09:50] I want to focus on
[02:09:52] I did have a question.
[02:09:52] I want to focus on AI, but I did have a question beforehand.
[02:09:54] AI, but I did have a question beforehand that I wanted to clarify.
[02:09:56] Um, you mentioned your desire for reform as well as regime change at the Fed.
[02:09:59] Can could you just clarify?
[02:10:02] You didn't mean removing the regional bank presidents whose five-year terms were just re-restated and re-uped in December.
[02:10:06] Whose five-year terms were just re-restated and re-uped in December.
[02:10:12] Uh, Senator, I meant policy regime change.
[02:10:14] Got it.
[02:10:15] So, for the record, we're not looking at regime change for those 12 board presidents.
[02:10:20] Um, I want to jump to AI because it's probably one of the number one issues that I hear about in my state.
[02:10:23] I'm former Secretary of Labor in Delaware.
[02:10:26] This is something that I asked um, Chair Pal when he was here as well about a lot has happened in a year.
[02:10:31] Um and one of the things you have characterized this as the most productivity enhancing wave of our lifetimes past, present and future.
[02:10:37] Um you has described it you have described it as structurally disinflationary and that central bankers must make a
[02:10:54] And that central bankers must make a bet.
[02:10:58] Um, I, I, I'm in the camp with Senator Kennedy.
[02:11:02] I'm concerned about us making a bet on something that we know you've said it.
[02:11:05] Uh, Chairman Pal said it.
[02:11:07] We don't have the data to even understand yet.
[02:11:10] And so my, my first question is what happens for policy if that surge doesn't materialize as expected.
[02:11:19] Yeah.
[02:11:19] So, Senator, I enjoy, I enjoyed our discussion.
[02:11:22] Um, I think the, the essential elements of a new policy for the Federal Reserve is to get access to better data and to dig deeper into the productivity possibilities that can come out of this new investment wave.
[02:11:37] Uh, today we call it artificial intelligence.
[02:11:42] Uh, two years from now we're going to call it business capex.
[02:11:46] And three years from now we're going to call it just ordinary business.
[02:11:47] I think it has two important effects on the conduct of policy.
[02:11:50] I don't claim to have
[02:11:55] Conduct of policy.
[02:11:56] I don't claim to have perfect knowledge of how any of these are going to go, but I do have an intuition the pace of change is accelerating.
[02:12:01] I'm sorry, Senator, go ahead.
[02:12:03] I was just going to ask how much of your view on interest rates depends on those productivity those productivity gains showing up quickly?
[02:12:12] Yeah, so I think it has two elements.
[02:12:14] One is the increase in capital expenditures to build data centers and the rest that will have an effect on demand.
[02:12:21] That will increase demand my guess is a few ten of 1%.
[02:12:27] But on the supply side of the economy to increase the potential output of the economy that could be considerably bigger.
[02:12:33] We don't know that.
[02:12:36] We can't bank on that.
[02:12:38] But considerable work needs to be done by the Federal Reserve in evaluating this productivity wave.
[02:12:43] As I said before, monetary policy works with long and variable lags.
[02:12:47] So, you have to make some informed judgments.
[02:12:49] And unlike other people in office, if the judgments are wrong, you've got to call the flag on yourself and correct them.
[02:12:55] Well, I think there's been a lot of conversation here about concerns that in your record, in your history, you have been hawkish on inflation rates, um, and keeping them low.
[02:13:11] And now we're looking at AI.
[02:13:14] What I don't want to see is us use AI as an excuse.
[02:13:16] Yes.
[02:13:19] For making good policy.
[02:13:20] Too much depends on it.
[02:13:22] Too many families' lives depend on it.
[02:13:24] And in our conversation, I also talked about the fact that I know main Wall Street is going to be okay.
[02:13:28] But who we're concerned about as well is Main Street.
[02:13:31] Thank you. I yield back.
[02:13:34] Thank you, Senator. Senator Kramer, you are recognized.
[02:13:37] Thank you, Mr. Chairman. Um, thank you, Mr. Wors, for being here.
[02:13:39] Thanks for stepping in the gap.
[02:13:40] Thank you.
[02:13:41] Um, in fact, I'm a little bit curious as to why you even want to do this.
[02:13:48] I'm thinking I don't know. I think I I don't know.
[02:13:50] Anyway, um, congratulations on on on the choice.
[02:13:52] By the way, with regard to independence, real quickly I
[02:13:55] With regard to independence, very quickly I find it curious.
[02:13:58] In fact, I've often found that curious that people expect somebody who's appointed by an elected official has to be confirmed by a hundred other elected officials would somehow not have a philosophy.
[02:14:11] That's that's what I hear sometimes.
[02:14:14] It's like, why don't we, speaking of AI, we should just have an AI fed chairman.
[02:14:18] That way it'd be completely neutral, right?
[02:14:20] Other than the people that put all the information in in the algorithms.
[02:14:24] Anyway, that said, um I think we should not forget that that it would be common for a president who believes in that believes that interest rates should be lower to want to nominate somebody who has expressed that maybe interest rates could be a little lower as opposed to the quid pro quo that's being accused of today.
[02:14:44] So, um I'm I'm just grateful you're willing to do it.
[02:14:47] By the way, the other thing about independence that strikes me with regard to the Fed, do you have any idea how often an interest rate decision by the Fed
[02:14:57] Is the Fed's rate decision a 12 to zero or a 10 to zero vote?
[02:15:02] Do you have a sense of it?
[02:15:02] I do.
[02:15:06] Uh, Senator, um, uh, I'd say over the last 15 years, decisions have been unanimous or near unanimous.
[02:15:11] Uh, as I said to one of your colleagues earlier, I prefer clean memos and messier meetings.
[02:15:16] And there's nothing wrong with a divergence of opinion.
[02:15:18] These are very hard calls.
[02:15:20] Thank you.
[02:15:23] I I I I I don't know when diversity became a bad thing in a room of thinkers, particularly with staggered terms.
[02:15:30] The other thing, none of this was in my mind that long ago, but the other thing that strikes me is you do have a lot of experience.
[02:15:37] This is your 20th anniversary or at least your second anniversary.
[02:15:43] Have have your has has have your thoughts changed much or evolved over those 20 years of experience in various categories areas not to mention your research and your intellectual and academic writings.
[02:15:53] I mean have you evolved a little bit?
[02:15:55] Absolutely.
[02:15:55] I I'll make three points if
[02:15:57] Absolutely.
[02:15:57] I'll make three points if I can.
[02:16:00] One is um it is essential for the chair of this organization be open-minded to new ideas.
[02:16:04] The world is moving fast.
[02:16:07] uh the mistake that's common in the economics profession which uh Secretary Schultz once described to me when I was telling him that I was thinking about pursuing further studies.
[02:16:17] He said um it's fine to get a PhD but make sure that's not the last day you were learning.
[02:16:22] Too many people in the profession go back to the what they learned 30 or 40 years ago.
[02:16:27] Uh we've got to be open-minded.
[02:16:29] the world's changing and the facts are changing to the characterization I heard from uh some of your colleagues about did my opinions change my opinions change when the facts change.
[02:16:37] uh when interest rates are at zero and the balance sheet is growing and the economy is booming well relative to that I will say I sounded hawkish.
[02:16:48] in 2018 when the Federal Reserve uh pushed to raise rates into a financial market meltdown and economic weakening I said that was a mistake.
[02:16:57] That was dovish.
[02:16:59] That was dovish.
[02:16:59] I expect to have a divergence of views.
[02:17:01] I expect to have a divergence of views based on the facts on the ground.
[02:17:03] And if I could just answer one other question.
[02:17:05] I could just answer one other question you asked about why I want to do this job.
[02:17:08] Um I would say I've lived the American dream.
[02:17:11] I've been the luckiest, most blessed, fortunate person with the greatest teachers.
[02:17:16] Was a kid from upstate New York in public schools and I had an opportunity to serve after 911.
[02:17:20] I was walking with a friend of mine who happens to be in this room away from a a building near the site of the tragedy.
[02:17:27] I was walking up Fifth Avenue and I thought to myself, what am I doing?
[02:17:34] And so I committed myself to public service.
[02:17:36] Then I did 10 and a half years of public service.
[02:17:38] I've been grateful for 15 years in the private sector where I've been able to practice my discipline, think a new about things.
[02:17:47] And the call to service struck again.
[02:17:49] I'm honored to serve if this uh if this body will confirm me.
[02:17:53] Excellent.
[02:17:53] Um you know, I I do find it curious that so many people seem to be hung up on the fact that you you've been
[02:17:59] I'm hung up on the fact that you've been successful even while doing in between boats of public service, probably a better way to put it.
[02:18:06] I'm not wealthy, never have been wealthy, and I'm not sure I have much potential to be wealthy, but I have nothing against people who are.
[02:18:13] Um, that said, real quickly, I do want to talk a little bit about debanking.
[02:18:16] Um, that hasn't been talked about a whole lot.
[02:18:19] But speaking of institutions that are dug in, I think there's a, a, you know, out of the 22,000 people, there are a lot of them that sort of still believe that reputational risk should be a factor.
[02:18:30] That reputational risk should could be based on out-of-favor, you know, industries.
[02:18:34] Can you give me a sense of how you plan to attack that, if you will?
[02:18:39] Politics have no place not just in monetary policy, but in supervision and regulation.
[02:18:43] If central bankers should stand for anything, it's to resist fads, resist trends, call balls and strikes.
[02:18:49] That's exactly what I would intend to do.
[02:18:52] I lean hard. Yes, Mr. Chairman.
[02:18:56] Thank you, sir.
[02:18:57] Senator Also Brooks.
[02:18:59] Thank you. Good afternoon, Mr. Walsh.
[02:18:59] Uh, and thank you for meeting with me.
[02:19:01] Uh, and thank you for meeting with me last week.
[02:19:04] Uh, in August of 2025, last week.
[02:19:07] Uh, in August of 2025, President Trump tried to fire Fed Governor Lisa Cook for unsubstantiated allegations widely believed to be politically motivated.
[02:19:13] Thankfully, both a federal district court and the district uh the DC circuit court of appeals ruled in favor of Governor Cook, preventing her from being fired while the investigation proceeds.
[02:19:27] This is a landmark test uh for independence.
[02:19:30] Now, Supreme Court Justice Brett Kavanaaugh said allowing Cook's firing to go forward would weaken, if not shatter, the independence of the Federal Reserve.
[02:19:39] So, I would like to ask you, will you commit to defending Governor Cook's tenure as Chairman Powell has done?
[02:19:47] >> Uh, Senator, it was a pleasure to meet you in your office and spend time with you.
[02:19:51] As I said to you, then I'll repeat here to the broader committee.
[02:19:57] Um, if I stand for anything, it's the Fed should stay in its lane.
[02:19:58] Uh, as I understand that matter, it's pending before the
[02:20:02] That matter, it's pending before the United States Supreme Court.
[02:20:04] I think it's inappropriate for me to weigh in on that, especially because uh, in the event that I am confirmed, I could be a party to that matter.
[02:20:12] Well, I disagree with M. Mr. Worsh.
[02:20:14] I disagree with you.
[02:20:16] This is your future colleague who was confirmed by both this committee and this Senate um, to serve her country.
[02:20:20] Chairman Powell has defended her tenure and your answer to this is you will not defend her.
[02:20:25] Is that correct?
[02:20:27] Uh, no Senator, that that's not my answer.
[02:20:29] My answer is there's a pending case before the Supreme Court, the results of which I think we're going to hear about soon.
[02:20:35] If confirmed by this body, I will follow uh the Constitution, the Supreme Court law, and the best of the Fed's traditions.
[02:20:43] Well, let me ask you this then.
[02:20:45] Do you agree or disagree with Justice Kavanaaugh on the Supreme Court who said that her firing would weaken, if not shatter, the Fed's independence?
[02:20:52] Do you agree with Justice Kavanaaugh?
[02:20:57] So, um, I took a constitutional law class, but I wouldn't say I'm worthy of being a Supreme Court justice.
[02:21:00] What I what I can
[02:21:03] Supreme Court justice.
[02:21:05] What I can say is, defended independence means everything to me.
[02:21:06] And that's exactly what I would try to do if I'm confirmed.
[02:21:10] Well, I'd like to move on to the criminal investigation of uh, Chairman Powell.
[02:21:15] The Trump administration could have taken many offramps to end what is a ridiculous exercise.
[02:21:20] Instead, they have doubled down.
[02:21:22] US Attorney for the District of Columbia, Janine Piro, sent prosecutors to the Fed last week to continue this circus and they were turned away.
[02:21:30] Chairman Powell has said that the administration's investigation is not about any testimony or the renovations of a building, calling these arguments pretext.
[02:21:39] And he said that the threat of criminal charges is a consequence of the Federal Reserve setting interest rates based on its best assessment of what will serve the public rather than following the preferences of the president.
[02:21:51] So, do you dispute Chairman Powell's assertion that the investigations are pretext for policy disagreement?
[02:21:59] Senator, as I said with respect the other case, this is also pending before the courts.
[02:22:01] I have a ton of confidence
[02:22:03] The courts.
[02:22:06] I have a ton of confidence in the court's ability to make a final resolution.
[02:22:08] I'd abide by any judgment of the courts and would follow that judgment and the best and the best of the.
[02:22:12] Difficult.
[02:22:14] Let me let me just so let me just ask you another question instead.
[02:22:18] Just a few days ago, bless his heart, President Trump called Chairman Powell a stubborn, incompetent person who he said suffers from Trump derangement syndrome.
[02:22:26] Now, can you say before this committee that you disagree with this characterization?
[02:22:31] Yeah, my disagreements with Chairman Pal are about uh policy, not about personality or personnel.
[02:22:37] Okay.
[02:22:38] Let me ask you another question about um the president.
[02:22:40] Now, my my colleague a moment ago said to you that the president you said the president has never asked you about lowering interest rates and you said he never specifically is the word you use uh demanded that you um that you decrease interest rates.
[02:22:54] Well, did the president generally suggest this to you as well?
[02:23:00] You know, in my in my recitation to your colleagues, I wasn't trying to be clever.
[02:23:01] The president never generally or
[02:23:04] Clever. The president never generally or specifically uh instructed me, suggested I should commit to any interest rate path whatsoever.
[02:23:12] Okay, let me go to another point.
[02:23:14] So, if the Senate does not confirm you by May 15th, the president may inject more financial chaos into our economy by illegally attempting to remove Chairman Powell and installing someone else until your confirmation.
[02:23:27] Now, the law is quite clear here.
[02:23:27] If there is a vacancy, the current chairman continues to serve as chair pro tem until the Senate confirms a replacement.
[02:23:36] But the Trump administration is gearing up to fight this assertion.
[02:23:38] And I expect every financial leader and reporter is watching your words right now, which can move markets.
[02:23:45] So, I'd like to give you an opportunity to reassure them.
[02:23:47] Do you agree that the law requires the current Fed chair to continue serving as interim chair while this replacement is confirmed?
[02:23:56] So, I haven't been advised on that.
[02:23:58] I will say this.
[02:24:00] Um, I was a summer associate for eight weeks at a law firm and that was the extent of my legal career.
[02:24:04] Uh, I'm certainly not
[02:24:06] Legal career.
[02:24:08] Uh, I'm certainly not capable of defining whether the vacancy act applies to the Federal Reserve or not.
[02:24:11] All right. Thank you.
[02:24:13] Yes, ma'am. Senator Bernie Marino.
[02:24:17] Mr. Chairman, thank you for the honor of going last.
[02:24:20] I know that's normally reserved for people with much more status than I have, so I appreciate that very much.
[02:24:27] Uh, Mr. Chairman, I'm going to read something here for a second.
[02:24:29] Mr. Chairman, it's clear that Mr. Walsh is tremendously accomplished.
[02:24:34] He is committed to strong capital standards, effective supervision, and meaningful market discipline.
[02:24:43] He knows unequivocally that the Fed must be independent, not ideological, and nonpartisan.
[02:24:50] And for this reason, I am proud to support his nomination.
[02:24:53] I I wish I had said those words, but those are the words of Senator Chuck Schumer when he voted to confirm you, in fact, introduced you.
[02:25:02] So, I would like to enter that into the record.
[02:25:05] As as they say, there's nothing wrong with that.
[02:25:08] Say, there's nothing wrong with that.
[02:25:09] Uh, but it looks like Democrats used to love you at one point.
[02:25:12] What changed?
[02:25:14] The Senator, I don't know.
[02:25:16] You didn't catch the Seinfeld reference, so it's just proof that you did not watch the show.
[02:25:19] All right. Uh, let me ask you some quick rapid-fired questions.
[02:25:24] I know uh people have enjoyed being here this long, but maybe not others.
[02:25:28] The a lot has been said and I and I think it's important on the plight of working Americans when it comes to being able to afford the basic elements of what it means to be uh somebody here who's successful in the working class.
[02:25:39] Are working-class Americans better off or worse off than they were three years ago?
[02:25:44] uh the aggregate statistics show improvement, but I want to I do want to suggest um with better Fed policy, I think the improvement can be stronger.
[02:25:54] think the improvement can be stronger.
[02:25:56] No. No. Clearly, but and we're not done and we have a long way to go.
[02:25:58] But if you're somebody who's a average working American today in 2026, you're better off than you were three years ago because three years ago you were getting demolished by
[02:26:09] We're getting demolished by generationally high inflation.
[02:26:10] Is that generationally high inflation?
[02:26:14] Is that true?
[02:26:14] Uh, the trajectory on inflation is improving, but there's more work to do.
[02:26:18] And one of the key parts of why I'm supporting you is because a total and complete focus and understanding that the interest rate tool is the tool that allows you to help working Americans much more than the balance sheet tool.
[02:26:30] Would you agree?
[02:26:31] Yes, Sam, I do.
[02:26:33] All right, perfect.
[02:26:33] Let's move on to central bank digital currencies.
[02:26:35] Do you agree that the Federal Reserve has no legal right to issue a central bank digital currency?
[02:26:41] Uh, Senator, I agree that they they don't have the right and I think it would be a bad policy choice.
[02:26:48] So, let me just put an exclamation mark on that.
[02:26:50] Under your chairmanship of the Federal Reserve, you will not have the Federal Reserve explore any way move towards a central bank digital currency.
[02:26:59] If it's within the power of the chairman of the Federal Reserve, I agree with that statement.
[02:27:03] Perfect.
[02:27:03] Let's let's shift over to uh AI.
[02:27:05] A lot has been said about that and and I I worry that some of my colleagues
[02:27:09] And I worry that some of my colleagues don't feel that this is quote unquote real or happening as quick as it is.
[02:27:13] It is happening insanely fast.
[02:27:17] In fact, would you agree that it could lead to an employment shock, especially for entry-level white-collar jobs?
[02:27:25] Uh Senator, I agree with you on the pace of the technology revolution.
[02:27:27] I've had to update my own priors versus six or 12 months ago as I've seen the rate of improvement of the models.
[02:27:34] Um, so the way I describe it is this.
[02:27:38] I am more confident that there will be improved output than I am certain about when the effects of that would be on the labor market.
[02:27:47] I basically believe in the following good economic tenant which is described as the lump of labor fallacy.
[02:27:55] And we tend to think in economics there's only a fixed number of jobs and we've got to fill them in every day possible.
[02:28:01] The labor force, the structure of the labor market changes.
[02:28:05] The jobs that will be created two or three years from now, some of which are unimaginable.
[02:28:09] From now, some of which are unimaginable to us today.
[02:28:11] But the lag between the improvement in output and the effect on the labor markets, that's got to be central to the Fed's thinking given the pace of innovation in this cycle.
[02:28:20] And this this concept of uh price stability plus maximum employment that maximum employment piece is problematic when policymakers open our borders and let tens of millions of people come into this country illegally.
[02:28:33] Is that not correct?
[02:28:36] No, I'm going to I'm going to let let you guys handle immigration policy.
[02:28:39] I'm going to have plenty of money if adding 10 to 20 30 million people into the country when you're trying to have make certain that everybody here has a job is problematic.
[02:28:47] Correct.
[02:28:49] The central bank takes the labor market is as it is and that's a function of policies you and the administration put in place.
[02:28:55] It's not our place to be opining on that.
[02:28:57] Okay.
[02:28:59] And let me just uh add one last thing and more to your wife.
[02:29:02] How did you get so lucky to have a guy that's so romantic that that on Valentine's Day of 26 of 2006, he brings you to a Senate
[02:29:09] 26 of 2006, he brings you to a Senate hearing.
[02:29:11] I mean, you set a high bar for all of us.
[02:29:13] Look, uh I'm going to ruin the suspense, everybody.
[02:29:14] You're going to be confirmed.
[02:29:16] You're going to be the Federal Reserve chairman and most importantly, you're going to do an incredible job.
[02:29:19] And I'm honored to be able to have been part of that process and will vote for you resoundingly.
[02:29:25] Thank you, Senator.
[02:29:27] Well, that concludes the question and answer portion of today's hearing.
[02:29:31] I'd like to thank our nominee for testifying before the committee today and thank you for your willingness to serve our country.
[02:29:36] For senators, all follow-on questions for the record must be submitted by tomorrow, April 22nd at noon.
[02:29:44] And for you, the witness, please respond by Thursday, April 23rd, 100 p.m. to the written questions you receive in order to facilitate this committee promptly processing this nomination.
[02:29:59] When it comes with that, this hearing is adjourned.
[02:30:00] Thank you.
[02:30:02] Thank you, sir.