Trump admitted that if his preferred Federal Reserve chair candidate Kevin Warsh had expressed a desire to raise interest rates, he would not be nominated.
Source: Jinshi Data
U.S. President Trump stated that if Kevin Warsh had expressed a willingness to raise interest rates, he would not choose Warsh as his nominee for Federal Reserve chair.
"If he comes in and says, 'I want to raise rates,' then he won't get the job, absolutely not," Trump said in an interview with NBC News on Wednesday.
He indicated that there is "no doubt" the Federal Reserve will lower interest rates because "our rates are too high," but now "we are once again a wealthy country."
When asked if Warsh understands that Trump wants him to lower the benchmark interest rate, the president replied, "I think he understands, but I feel he originally wanted to lower rates."
Trump's remarks may be referenced during Warsh's confirmation process, and the independence of the Federal Reserve is likely to become a core issue.
Republican Senator and Banking Committee member Thom Tillis has pledged to block all of Trump's nominations to the agency until the Justice Department concludes its investigation into the renovation of the central bank building.
Outgoing Powell described the investigation as a nearly unabashed attack on the Federal Reserve's ability to independently decide monetary policy. Trump administration officials deny that this is their intent, but Trump has pressured Powell for months to lower rates.
Warsh, a former Federal Reserve governor, was known as an inflation hawk but has recently expressed support for lowering interest rates.
Basent Claims President Can Intervene in the Federal Reserve
Treasury Secretary Basent declined to express an opinion on whether Trump has the authority to dismiss Federal Reserve Board members due to policy disagreements.
"I'm not a lawyer, I have no opinion," Basent said on Wednesday when asked if Trump has the constitutional power to dismiss a Federal Reserve governor solely due to policy differences. He was questioned on this matter by Democratic Congressman Ritchie Torres of New York during a House Financial Services Committee hearing.
Trump is currently attempting to dismiss Federal Reserve governor Lisa Cook on "just cause," citing allegations of her involvement in mortgage fraud, a case currently under review by the Supreme Court.
Basent was also asked whether he believes the "unitary executive theory" applies to the Federal Reserve—this refers to a school of constitutional interpretation that suggests the Founding Fathers particularly wanted the president to have broad powers over the bureaucracy. According to this theory, all powers granted to the executive branch by Article II of the Constitution belong entirely to the president.
"We have to wait for the Supreme Court's ruling," the Treasury Secretary replied, refusing to provide his own opinion. When pressed about the government's stance, he said, "There are differing opinions within the government."
When asked whether he views the Federal Reserve as an executive or legislative body, Basent said, "I think it is an independent agency."
Section 10 of the Federal Reserve Act of 1913 states that members of the Federal Reserve Board can be "removed for cause," although the statute does not specify what "cause" entails.
Basent reiterated previous criticisms of the Federal Reserve during the hearing, stating that it lost public trust during the surge in inflation following the outbreak of the pandemic. He also mentioned issues with cost overruns on construction projects but did not elaborate.
"I do believe the Federal Reserve must maintain its credibility and be above reproach, like Caesar's wife," he said.
Basent also told lawmakers on Wednesday that the president has the right to intervene in the Federal Reserve's decision-making.
He was asked by Democratic Congressman Emanuel Cleaver of Missouri whether he would advise the president to "intervene verbally and politically" in the central bank's decisions.
"That's his right… that's the right of everyone here," Basent said, clearly referring to the congressmen present at the hearing.
The panel also questioned Basent about the dollar, noting that the dollar index fell more than 9% last year. He told Democratic Congressman Bill Foster of Illinois, "We always support a strong dollar policy."
However, Basent's response contradicts Trump's public preference for a weaker dollar, as a weaker dollar can make U.S. exports more attractive to overseas buyers.
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