AILSA CHANG, HOST:
President Trump has announced he plans to nominate Kevin Warsh to succeed Jerome Powell as chair of the Federal Reserve. This announcement follows a monthslong feud between the president and Powell. The Fed, of course, has the power to adjust interest rates to fight both unemployment and inflation. And the Fed is designed to be insulated from political pressure, but President Trump has ignored those guardrails and has pushed hard for lower interest rates.
So what might Kevin Warsh look like as the chair of the Fed? Well, Gene Sperling, the former director of the National Economic Council, joins us now for his perspective. Welcome back to ALL THINGS CONSIDERED.
GENE SPERLING: Well, thank you. Thanks for having me.
CHANG: So I know this search has been going on for months, but just tell us what you know about Kevin Warsh. Like, why do you think they landed on him specifically?
SPERLING: Well, I know Kevin Warsh. I like him. He's unquestionably qualified for the job. But Kevin is most known for being even more hawkish than Jerome Powell. So he has chosen somebody whose reputation, when he was a member of the Federal Reserve Board between 2006 and 2011, was for someone who was even more concerned about inflation, who was even less likely to be for cutting rates if there was any inflation risk.
So this is the curious part. Which Kevin Warsh is going to show up - the one who clearly expressed to President Trump that he'd be willing to cut rates, or the Kevin Warsh many of us know, who, again, is probably even more hawkish and more concerned about inflation than Jerome Powell?
CHANG: I suppose the next question that follows is, do you expect Warsh to be someone who can withstand any political pressure President Trump might impose on him?
SPERLING: I think that it's going to be a real test for him because, does he just happen to agree with President Trump momentarily, or is he going to be sensitive to the fact that if he doesn't cut rates enough, that President Trump could be saying he double-crossed him?
CHANG: But before Kevin Warsh can even get the job, he has to first be confirmed by the U.S. Senate, of course. How much resistance do you expect on his confirmation?
SPERLING: Well, it's very interesting that right at this moment, he probably cannot be confirmed because he needs to go through the Senate Finance Committee, and they only have a one-vote margin. And right now a Republican senator, Tillis from North Carolina, has said he will not approve of Kevin Warsh as a protest against President Trump using the Justice Department as a way of intimidating Jerome Powell by suggesting that he did something criminally wrong in the reconstruction of the Federal Reserve building. So if that is not resolved, it is not clear how Kevin Warsh gets through.
CHANG: OK. And let's assume that Kevin Warsh does get confirmed. Whether or not he's independently minded and can resist the political pressure that President Trump might impose on him, he is, of course, ultimately, only one vote on a board with 12 members, right? So can he even singlehandedly dictate interest rates anyway?
SPERLING: If you look at the last decision just this week by the Federal Reserve, the vote was 10 to 2. So 12 people vote for monetary policy. And the Federal Reserve Chair is very powerful in setting the agenda. They can be the one who tries to bring coalitions together, but they are one of 12 votes.
CHANG: Exactly.
SPERLING: My guess is that it's not going to be interest rate policy, per se, that's going to define Kevin Warsh's legacy. What's going to define his legacy is, at a moment where the Federal Reserve Independence was at risk, was being questioned, did he come on and protect it?
CHANG: Gene Sperling, former director of the National Economic Council, thank you so much for joining us today.
SPERLING: My pleasure. Thanks for having me. Transcript provided by NPR, Copyright NPR.
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