The NPR Politics Podcast - Trump’s efforts to control the Fed may jeopardize new chair’s confirmation

Episode Date: February 2, 2026

President Trump has nominated Kevin Warsh to replace Federal Reserve Chair Jerome Powell when Powell’s term ends in May. We discuss Trump’s efforts to undermine the independence of the Federal Reserve and how that may impede Warsh’s confirmation vote. This episode: senior White House correspondent Tamara Keith, White House correspondent Franco Ordoñez, and chief economics correspondent Scott Horsley.This podcast was produced by Casey Morell and Bria Suggs, and edited by Rachel Baye.Our executive producer is Muthoni Muturi.Listen to every episode of the NPR Politics Podcast sponsor-free, unlock access to bonus episodes with more from the NPR Politics team, and support public media when you sign up for The NPR Politics Podcast+ at plus.npr.org/politics.Learn more about sponsor message choices: podcastchoices.com/adchoicesNPR Privacy Policy

Hey there, it's the NPR Politics Podcast for Monday, February 2, 2020. I'm Tamara Keith. I cover the White House. I'm Frank O'Donias. I also cover the White House. And NPR's chief economics correspondent, Scott Horsley, is also here. Welcome back, Scott. Great to be with you. Yeah. And we are recording this podcast at 104 p.m. Eastern Time. Today on the show, President Trump has named his choice to replace Jerome Powell as chair of the Federal Reserve. What do you need to know about his pick, Kevin Warsh, and what stands between him and Senate confirmation. But, Scott, before we get into Warsh, let's do a little Federal Reserve 101, if you will. Remind us what the Fed actually does.

Yeah, the Federal Reserve was set up by Congress more than a century ago after a series of bank panics. It was set up to sort of be the lender of last resort. It has some regulatory functions overseeing banks in the country. But the thing that most people know the Fed for is that it adjusts interest rates, either up or down, in an effort to promote maximum employment and stable prices. That is, it's trying to fight unemployment and inflation. The Federal Reserve raises interest rates when they get nervous that inflation is too high. They tend to lower interest rates when they're worried that unemployment is rising, and it's a way to goose the economy. and in setting up this institution, Congress deliberately created the Fed to be independent of political pressure from the White House.

And we've used the phrase independence a lot in the last year. But can you just explain why it's important for the Federal Reserve to be insulated from politics? Right. So in general, elected politicians would prefer to have interest rates low to kind of goose the economy before. for the next election and have people feeling good about where things are and make it cheaper for people, families and businesses to borrow money. But that can have long-term adverse consequences. It can lead to more inflation in the long run. So sometimes the Fed in doing what's in the long-term interest of the economy has to make decisions that are unpopular in the short term, like keeping interest rates high to counteract inflation. And so experience not only in this country but around the world has shown that it's best to put a little bit of distance between elected politicians who

always want to do what's best in the short run or who usually want to do what's best in the short run so that the Fed can make decisions that are best in the best interest of the economy in the long run. And we talk about that as Fed independence. It doesn't mean that they're completely untethered to the political system. The Fed has to answer to Congress. The Fed chairman goes before congressional committees twice a year and has to issue reports and so forth. But they're not supposed to basically take instructions from the White House. So, Franco, President Trump has been very vocal about his desire for the Fed to lower interest rates. He doesn't seem to be all that into the idea of Federal Reserve Independence.

Can you just like take us through the last year of Trump-Fed relations? Yeah, I think if Trump had his way, Powell would definitely be taking instructions from Trump. and Powell's obviously not been doing that. And because of that, their relationship has been not good, very not good. I mean, it's been a really tough year. I mean, Trump has just been relentless in trying to pressure Powell to lower interest rates. And he's calling him names like too late Powell. He's calling him a moron for what Trump claims are keeping, you know, the rates, quote, artificially high. Trump's called for his resignation. And more recently, it's not just rhetoric from Trump.

Trump's DOJ has now, you know, kind of launched a criminal investigation into Powell, which many, many critics see as another effort to pressure Powell to lower the rates. And Powell himself has said this is an effort to pressure him to lower rates. And Trump has gone after members of the Federal Reserve's Board of Governors, like Lisa Cook, you know, in an effort to, replace her with more friendly governors, which is another example of how Trump is trying to put pressure on the Fed to lower interest rates. And the case involving Lisa Cook was before the U.S. Supreme Court. Can we talk just a little bit more about this investigation that was launched by the Justice Department? We heard about it, I think, because Jerome Powell put out an essentially unprecedented video criticizing the investigation. That's right.

So the Federal Reserve is in the midst of a big renovation of its headquarters building here in Washington, and there have been some significant cost overruns on that project. It was supposed to cost $1.9 billion. It looks like it's going to cost more like $2.5 billion. Now, the Fed says that's large because they discovered some unexpected problems, more asbestos than they thought they were going to have. There's water under the building they have to deal with. It just turned into a bigger construction project. The other thing is that the estimates were done in 2019 and in the years since then, building costs of all kinds have gone up a lot. So it is costing a lot more money than they expected to pay when they started. And Jerome Powell was grilled about that before a Senate committee last year. And

the DOJ is ostensibly investigating discrepancies between what Jerome Powell said during that Senate hearing and what the records show about the renovation project. But again, Powell himself has said that's all just a pretext. This is a way to try to bully. and intimidate the Fed into doing the president's bidding on interest rates. And I think most independent observers do think that it's more the latter than a serious investigation of any real wrongdoing. And Franco, that leads us to Senator Tom Tillis, a Republican from North Carolina, who is retiring after this term. And he has been quite vocal in defending Fed independence. And so when Warsh's name was announced, he made his position very clear.

You know, he actually called Warsh, a qualified nominee with, you know, quote, deep understanding of monetary policy. But he also said that the independence of the Federal Reserve from political interference was non-negotiable. And that speaks to what Scott is saying. And Tillis's view and many critics' views that this, you know, criminal investigation of the Fed as seen as political interference and, you know, legal maneuvering and doesn't have, you know, any real basis. And Senator Tillis had said, we should say, he sits on the powerful Senate Banking Committee, which will have to vote on any Fed nominee. And he said he will not approve any Fed nominee, including a nominee for chair, until this Justice Department matter is resolved in some transparent way.

And so even though he doesn't have any real qualms with Kevin Warsh as an individual, Tillus is willing to block his ascension to the Fed chairmanship unless this DOJ case is resolved. All right. Well, we're going to take a quick break. And we'll have more on the politics of this in a moment. And we're back. And just a reminder that if you don't want to miss any of our political analysis, make sure to hit that follow button in your favorite podcast app. We've been talking about the Federal Reserve. President Trump has named Kevin Warsh to take over as chairman of the Fed when Jerome Powell's term ends in May.

So, Scott, what should we know about Warsh? Well, Warsh is a sort of traditional Republican. He worked in the George W. Bush administration. He has experience at the Federal Reserve. He was on the board of governors during the Bush and part of the Obama administrations. He had a background on Wall Street. his reputation, the last time he served on the Fed Board, was as a hawk. That means he was particularly concerned about runaway inflation. Even during the aftermath of the Great Recession, when

unemployment crept up towards 10 percent, Kevin Worse was very concerned that some of the aggressive steps the Federal Reserve was taking to address that, and the rest of the government was taking to address that might lead to runaway inflation. Now, those fears at the time turned out to be unfounded. But Warsh's reputation was as someone who would really bend over backwards to keep inflation under control. So it's kind of interesting to now have President Trump picking him to push in the opposite direction, that is, for lower interest rates, even if that might run the risk of letting inflation become more entrenched. Franco, has the president talked about this at all, talked about whether Warsh is going to do what he wants?

Yeah, Trump says they have talked about it, but that Warsh has never, you know, committed to doing specifically what Trump wants. But, you know, look, Trump's not going to pick someone who he doesn't have a strong sense that he is going to do this. And I think that's kind of one of the challenges that Warsh faces because a lot of people just are questioning whether, you know, whether Warsh will resist Trump. I mean, Scott's talking about. his history and certainly his history speaks to independence, but I think there are huge, huge questions that critics are, you know, watching, Congress is watching is how independent can he be? Can he fight off Trump's campaign for lowering interest rates? If Warsh does go in and lower interest rates, is it going to be enough or at least is it going to be as much as Trump wants? And I think, you know, it's very, very likely that Trump eventually is not going to be happy. He may be calling them, you know, straight out of central casting now. But as we have covered Trump for many, many years, those relationships can sour very, very quickly.

Yeah, Trump nominated Jerome Powell back in his first term as president to be Fed chair. And I think he might use that same central casting language to talk about him. And, of course, they ran afoul of one another when Powell didn't do Trump's bidding during his first term in office. either. I think almost anyone who got this nod would have to face some tough questions during their confirmation hearing about how much independence they could exercise because Trump has said very clearly he thinks the Fed should follow his instructions when it comes to interest rates, that he would only nominate someone who agreed with him on the need for lower interest rates. You know, there's an economist at the White House, Kevin Hassett, the other Kevin who was very much

in the running for this post. And I think the sense on Capitol Hill was that Kevin Hassett might have been even closer to the president and therefore less likely to exercise some independence. That may have ultimately sort of torpedoed Kevin Hassett's chances of the job. Yeah. And I guess we should mention that the Fed chair is not a king. Like the Fed chair is just one vote on the Federal Reserve Board. So that, you know, that mitigates the ability of the president or anyone else to to make it be so, I guess. That's right. And that's why Trump has has tried to stack the deck in other ways by installing other loyalists on the board. He has not been entirely successful at that, but he hasn't given up the effort.

So let's talk about the Senate. Warsh will require Senate confirmation. Franco, as we mentioned earlier in the show, North Carolina Republican Senator Tom Tillis said he won't vote on any federal reserve chair nominee until the Justice Department drops its investigation into Powell and the Fed. What has President Trump said about this? Yeah, Trump was asked about this last week in the Oval Office here at the White House. And Trump essentially called Tillis an obstructionist. Actually, here is a little bit of what he said. You know, that kind of thinking is why he's no longer a senator.

You know, he's going to be out of office. It's too bad. I always liked Senator Tillis, actually. But he did some things that were not smart. And whatever, I mean, you know, if he doesn't approve, we'll just have to wait till somebody comes in that approval approval approval, right? Now, Tillis is going to be retiring at the end of his term. That end of his term is not for, you know, practically a year. So a very curious statement to wait that long. I just don't see Trump doing that. But, you know, as we've been talking, this criminal investigation, you know,

I would not be surprised if all of a sudden we hear that it's no longer happening, that, you know, something was resolved. And I think if that is lifted, that would likely satisfy Tillis and the Warsh nomination could move forward. Scott, can you do a little of the math for us? If Tillis isn't persuaded, can Warsh make it through? I think it would be very difficult, assuming the Democrats stick together and oppose the nomination, either because they're concerned about Fed independence or in some cases they might have concerns about Warsh personally. But yeah, it'd be hard to get out of the banking committee without a vote of one of the Republicans. The Republicans have a very narrow majority on that committee, just as they have a narrow majority in the Senate

at large. But as Franco points out, you know, the president can call off this Justice Department investigation with a phone call if that's what he wants to do. And the alternative is leaving Jerome Powell as chairman, because while Powell's term expires in May, until there's a new chairman confirmed, he can stay on as chairman. So, you know, that's the option that Trump would be entertaining if he decides to just wait Senator Tillis out. Okay, let's leave it there for today. Scott, thank you so much for joining us. Great to be with y'all. I'm Tamara Keith. I cover the White House. I'm Frank O'Ordonias. I also cover the White House. And thank you for listening to the NPR Politics Podcast.