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00:00In our meeting, you said you would be independent because you're, quote, a tough guy.
00:05Those were your words, tough guy.
00:06And you will be able to stand up to President Trump.
00:10So let's try it again.
00:11Name one aspect of President Trump's economic agenda with which you disagree.
00:18Well, Senator, the Federal Reserve in recent years has wandered outside of its remit, wandered into other areas.
00:24I'm asking for something you disagree with Donald Trump on.
00:27If I'm confirmed, the Federal Reserve should stay in its lane.
00:31Just one.
00:32Just one little place where you disagree with Donald Trump.
00:35Well, I do have a disagreement, actually, Senator, with the President.
00:39I think even this morning he said that he thought I was out of central casting.
00:44I think central casting, I'd look older, grayer, maybe show up here with a cigar of sorts.
00:50Quite adorable.
00:52But, you know, we need a Fed chair who is independent.
00:56That's the only way we preserve the independence of the Federal Reserve.
01:01If you can't answer these questions, you don't have the courage and you don't have the independence.
01:06I agree with you on independence, Senator.
01:09I'll take that as it always will.
01:11I would be redeeming my assets before I take office.
01:13So Donald Trump has made clear that he does not want an independent Fed.
01:16In fact, he has said, and I quote, anybody that disagrees with me will never be Fed chairman.
01:23And he's made clear that you are his sock puppet, saying last week that interest rates will drop, quote, when
01:29Kevin gets in.
01:31Yeah, I think they do.
01:32Not when economic conditions change, we'll get lower rates.
01:36Not when the economy needs it.
01:38Nope.
01:38He said, when my guy, Kevin Warsh, is in there, we'll get the interest rates that I, Donald Trump, wants.
01:46So independence takes courage.
01:48Let's check out your independence and your courage.
01:51We'll start easy.
01:52Mr. Warsh, did Donald Trump lose the 2020 election?
01:57We try to keep politics, if I'm confirmed, out of the Fed.
02:00I'm just asking you a factual question.
02:02I need to know, I need to measure your independence and your courage.
02:07Senator, I believe that this body certified that election many years ago.
02:11That's not the question I'm asking.
02:13I'm asking, did Donald Trump lose in 2020?
02:15And I'm suggesting you in 2020, the Fed made a huge inflation problem, and you certified the election.
02:22So let me ask you another question.
02:24Out of monetary policy.
02:25In our meeting.
02:26So just to better understand how you think about economics, in the economic model Bernanke laid out, let's say there's
02:34an economy with decent growth and no recession.
02:37If the central bank were to cut rates from 3.5 to 1% or lower, a massive cut, that
02:43would typically push prices up, right?
02:47Senator, unlike many of my colleagues past and present, I don't believe in forward guidance.
02:54I don't believe that I should be previewing for you what a future decision might be.
02:59I think it's essential that we make decisions in the room.
03:03Mr. Warsh, I'm not asking you what decision you would make.
03:05Obviously, that's going to be up to you.
03:07I'm asking you for the framework in which you think about these things.
03:12And it seems a pretty straightforward question about what would happen if we reduced interest rates by the end of
03:20this year to 1% or less.
03:23And under the Bernanke model, and I think almost every economist or most economists would say that that will drive
03:30up prices.
03:31And so that's what I'm asking you.
03:32Would you agree that that would likely drive up prices?
03:35So, Senator, the Fed has two important monetary policy tools.
03:41One is interest rates, and the other is a balance sheet, a balance sheet that we created in the 2008
03:47financial crisis.
03:49Those tools should be working in concert, not across purposes.
03:52So it's hard for me to isolate one variable when we'd have to have a discussion on the other.
03:57But generally, let me just say, this was a pretty clear question about the framework in which these decisions are
04:09made.
04:10I have heard you talk about how AI may change that calculation.
04:17I will just say, and I think you know this, I mean, I have this, you know, the Financial Times
04:22pointed out the economists reject Kevin Warsh's claim that the AI boom will enable rate cuts.
04:29And I find it just implausible to suggest that by the end of this year, AI would produce such increases
04:40in productivity that it could reduce in a rate cut to below 1%.
04:47And you can't tell me that that would very likely increase prices.
04:51So, Senator, can I say a question because I'm about to run out of my parliamentary inquiry time.
05:00I've heard your argument the last few months about artificial intelligence has made us so productive, labor so productive, that
05:12companies don't have to raise prices.
05:15Therefore, inflation isn't a problem.
05:19Therefore, rates can be cut.
05:21Do you really believe that right now?
05:23No, that is not how I would characterize the story on AI.
05:26Okay, but you've said what I just said, haven't you?
05:30I've said that this is the most disruptive moment in modern economic history in the U.S. and the world.
05:38I've said that artificial intelligence, AI, short for American ingenuity, you have a big effect.
05:42Okay, let me stop you because the chair is going to cut me off.
05:45Oh, sorry.
05:45So, here's my worry, that a lot of the stuff about artificial intelligence making us more productive is a bunch
05:52of hype by people who want to sell stock in an IPO.
05:56Okay, I'd be careful there.
05:58Thank you, Mr. Chairman.
06:00I'll get to my five minutes in a little bit.
06:04You come back about midnight, sir.
06:06We'll go ahead and start it all over again.
06:09Brand new day, sir.
06:10Brand new day.
06:11Thank you for your patience.
06:11You're misinforming seniors about reverse mortgages.
06:14And in 2007, you said, and I quote, subprime mortgages have gotten a bad name in this environment, and in
06:20some cases, that's not just.
06:22You also said that you don't see any immediate systemic risk issues among big banks.
06:27And you said that at that time.
06:29And then just recently, and this is what I want you to address, Senator Warren has said that you told
06:34her you had no regrets during this tenure.
06:36How can we trust that your economic theory, when you were wrong then, is going to be the accurate theory
06:42we need now to help so many families and businesses that are struggling with the policies that we're dealing with
06:49now?
06:50Senator, let me address a few things.
06:52The chairman is going to cut me off when he must.
06:55But I would say this, for many years before the global financial crisis, I warned about the very real risks
07:02of Fannie Mae and Freddie Mac blowing up, which they did.
07:05I think that part of the housing market was vulnerable for many years, and not enough was done about it,
07:11even in spite of my protestations and my urging about GSE reform.
07:16It wasn't done.
07:17I think that compounded the financial crisis.
07:19Secondly, I think subprime mortgages then, subprime assets then, were indicative of prices of almost every financial asset that were
07:28mispriced.
07:29What I suggested then, and what I believe now, is that subprime mortgages were just indicative of a set of
07:36prices that were incorrect, and they all repriced.
07:39Just to give one fine example before I turn to the chairman.
07:42Perhaps no examples right now.
07:44Okay, sorry.
07:45Let's go to Senator Hagerty.
07:46I want to give you an opportunity to finish that exchange.
07:49The roaring economy is roaring like never before.
07:53So, do you agree with that statement?
07:55Is that how you see the economy, that is roaring like never roaring before?
08:00So, Senator, if I can clarify two things.
08:03One, there's a difference between the change in prices and inflation.
08:07The change in prices happen in a market economy.
08:09When inflation moves up, that's because the Fed had something to do with it.
08:12Now, on the state of the economy, I would say that the broad contours of the economy are improving.
08:19The potential of the economy, the real results of the economy are improving.
08:23But I think it can improve more.
08:25And I think in the years ahead, I think the economy's potential is strengthening.
08:29So, you know, the reality is that the economic data, understanding what you're saying about economic data being not imperfect,
08:36there was almost zero job growth in 2025.
08:40And so that looks to me like not a roaring economy.
08:43It looks like a weak economy, which is what my constituents are telling me back in Minnesota.
08:47Let me confirm, you will serve as chair of one of the most powerful economic institutions in the world.
08:58Decisions you make would move markets, affect Americans' retirement savings and ability to buy homes.
09:07It would influence the global economy.
09:12You currently serve as a lecturer at Stanford University.
09:17If you were to assign, if Professor Walsh were to assign a letter grade to the American economy today for
09:26the average working family, what grade would you assign?
09:30Senator, it was good to meet with you in your office.
09:35You know, in modern academic institutions, they give everybody A's.
09:39So it's not a fair comparison.
09:43Especially at elite universities, I know everyone gets perfect grades.
09:47Well, what grade would you give the economy?
09:51Well, if I gave a student anything other than an A, the dean would summon me to his office because
09:56I would have hurt his self-image.
09:57Well, the Americans that I talked to, particularly in the state of Georgia, who haven't had the benefit of attending
10:07some of these elite institutions, are trying to make their lives work.
10:15They're sitting around their kitchen tables trying to figure out how to put their kids through school.
10:21So, and regardless of how the markets are doing, consumer confidence is at a record low.
10:28So that's their grade on the economy.
10:31The legacy of inflation, what I think is the biggest economic policy error in 40 or 50 years, happened just
10:39a few years ago.
10:40And we're still living with the remnants of it.
10:42I think inflation is less problematic than it was a couple of years ago.
10:46But I would not try to say—
10:47But the problem of affordability continues, though.
10:50That sounds right.
10:51Because I'll be honest with you.
10:53When I hear—you know, I heard two months ago President Trump say, he said, quote,
10:57What word have you not heard over the last two weeks?
11:01Affordability.
11:01Because I've won.
11:03I've won affordability.
11:05It sounds like you would disagree with that assessment that the fight for affordability for American families is over.
11:11So I think the trend is going in the right direction.
11:14But we still have more work to do.
11:16Well, the way I would describe it, Senator, is the cumulative increase in prices starting in early 2020 until now
11:24is between 25 and 35 percent.
11:27So I understand what hardworking Americans say.
11:29It's still a struggle.
11:31That's a legacy of a past policy error.
11:34One thing that you talked about before is about, you know, just the real cost that families are facing right
11:40now.
11:40And I appreciate that you were pushing back on that comment that the president had about calling the energy prices
11:46and the fuel price increases that we're having fake inflation.
11:49Because right now Americans have paid more than $8.4 billion more in gas during the first year, the first
11:57month of this war.
11:59Fertilizer, 70 percent of respondents to the Farm Bureau survey said that fertilizer is unable to be afforded right now
12:06just given the price increases.
12:08Are you concerned that there could be real long-term effects of this war in Iran, you know, especially if
12:16we're continuing to see these challenges when it comes to fuel and fertilizer?
12:20Senator, if my reform agenda, if confirmed, stands for anything, it's for the central bank, especially the Fed chairman, to
12:28stay in its lane.
12:29I know that, but you also have to be—
12:30So I wouldn't want to wander outside of it.
12:33But you're also charged with forecasting in terms of understanding where our economy is going.
12:38So does an impact of that magnitude rise to something that the Fed should keep an eye on and be
12:44concerned about?
12:45The Fed should have an open mind towards all sorts of data.
12:49But the things that central banks can affect are things that are not one-off in nature but are persistent
12:55and find their way into the generalized price level.
12:57And that's something I wanted to ask you.
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