Original ｜Odaily Star Daily（@OdailyChina）

Author｜Golem（@web3_golem）



At 10 PM Beijing time on April 21, Federal Reserve Chair nominee Kevin Warsh attended the Senate Banking Committee confirmation hearing, where he faced questioning from the committee. According to a report by The Wall Street Journal, topics included his commitment to monetary policy and the independence of the Federal Reserve.

During the hearing, when confronted with the issue of Federal Reserve independence, Warsh stated that he would be independent of Trump, and that Trump had never asked him to commit to any specific interest rate decisions. He further argued that even if Trump requested it, he would never agree. Aside from such statements, Warsh avoided answering questions related to Trump. On monetary policy, Warsh criticized the Federal Reserve's structure and argued that institutional reforms in policy-making are needed, but he had very few specific statements regarding monetary policy, only mentioning that the Federal Reserve needed to gradually and prudently reduce its balance sheet, without making any clear statements about interest rate cuts.

This may also be Warsh's intention, as his opening statement, which was obtained in advance by Bloomberg, was nearly 2,000 words long, far exceeding the approximately 850 to 900 words of the initial testimonies of Powell and former chair Yellen. However, initial expressions about the direction of monetary policy were still minimal. Warsh's action aligns with his consistent stance that Federal Reserve officials should not express opinions on interest rates ahead of time.

However, for investors paying attention to this hearing, any expectations might be disappointed. From the content and outcome perspective, the substantial significance of this hearing is limited. Bloomberg columnist John Authers even characterized it before the hearing as a "political performance greater than substance," and ultimately, whether Warsh's nomination can be smoothly confirmed by the Senate depends on the political maneuvering outside of the hearing, rather than on any words spoken by Warsh on stage.

Stubborn Trump and Innocent Warsh

Previously, Odaily Star Daily analyzed that the importance of this hearing lies in the fact that it may determine whether Powell will stay or leave after his term expires on May 15. If Warsh's nomination is not confirmed by the Senate this time, Powell is very likely to continue to serve as the interim chair of the Federal Reserve after his term expires. (Related reading:Powell's retention probability skyrockets to 98%, is Trump's "firing order" just hot air?)

However, the result is that after this hearing, the market still cannot determine whether Warsh's nomination for Federal Reserve chair will be confirmed by the Senate as scheduled, as the main figure obstructing Warsh's nomination, Thom Tillis, has not engaged in effective dialogue with Warsh.

Thom Tillis previously publicly stated that if Trump does not abandon the investigation into Powell, he will not support Warsh's nomination process being handed over to the Senate for a vote. During the April 21 hearing, Thom Tillis even did not ask Warsh any questions but instead used a set of slides to show the justification for cost overruns in the renovation project of the Federal Reserve building. In the end, he expressed that his dissatisfaction was not directed at Warsh, calling him "exceptionally qualified and impeccable," but he still needs the investigation to end in order to support Warsh's confirmation.

So, the content of the hearing can no longer determine anything. Ultimately, whether Trump can successfully part ways with Powell hinges on whether the Senate confirms Warsh's nomination in a timely manner, and whether Warsh's nomination can proceed smoothly, once again goes back to whether Trump is willing to give up the investigation into Powell.

On April 21, Trump also addressed the Federal Reserve and interest rate issues in a recent interview. He stated that if the new Federal Reserve chair (Warsh) does not cut interest rates quickly, he will feel disappointed, but he must also ascertain the reasons behind the cost overruns at the Federal Reserve building. Pressuring the new Federal Reserve chair Warsh to lower interest rates and investigating Powell are parallel efforts; Trump shows no signs of backing down.

As John Authers said, the real game takes place outside the hearing, and Warsh might even be "collateral damage." Either Thom Tillis must make a concession, or Warsh must use interest rate cuts as leverage to persuade Trump to abandon the investigation into Powell, allowing him to take charge of the Federal Reserve sooner. Warsh's relationship with Trump is not ordinary; Warsh's father-in-law Ronald Steven Lauder is the sole heir to the international cosmetics giant Estée Lauder and also a major donor to the Republican Party and Trump’s college classmate. Therefore, if Warsh truly wants to take charge of the Federal Reserve early, he might be able to persuade Trump to drop the investigation.

Otherwise, if this deadlock continues until Powell’s term expires, and Trump chooses to fire Powell to resolve it, as analyzed previously by Odaily Star Daily, the outcome may also favor Powell. It is worth mentioning that according to the monitoring by the Odaily Seer Prophet Channel, the probability of Powell leaving as Federal Reserve chair after his term expires remains at 2%. However, a closer look at the settlement rules of that event contract reveals that if Powell's resignation or dismissal is announced before the market's end date, the market will be settled to "Yes" immediately, regardless of when the announced resignation or dismissal takes effect.

Market settlement rules regarding whether Powell will leave as Federal Reserve chair after his term expires

In other words, as long as Trump announces Powell's firing, this event will be settled. Although Powell can file a lawsuit to make the president's dismissal legally effective during the litigation period, the lawsuit is also a lengthy process. Therefore, the rule that "the market will be immediately settled to Yes regardless of when the announced resignation or dismissal takes effect" becomes a loophole. (Odaily note: The above is solely the author's personal judgment and does not constitute any advice)

Warsh: Digital assets are part of the American financial services industry

However, for the cryptocurrency industry, the content of this hearing still holds some substance. Previously, it was disclosed in the market that Warsh holds a series of assets including cryptocurrencies, Polymarket, and SpaceX stocks, which is seen as a sign of Warsh's friendly attitude towards the cryptocurrency industry.

During the hearing, when questioned about his financial disclosure worth over $100 million and potential conflicts of interest, Warsh assured that if his nomination was approved, he would divest those related assets before taking office. However, he further stated that digital assets are part of the American financial services industry, affirming the legitimacy and importance of the cryptocurrency industry in the United States. Although he only briefly mentioned it, it is definitely good news that someone who is about to assume the most powerful position in the global economy indicates he is pro-cryptocurrency.

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