Senator Elizabeth Warren directly accused Federal Reserve Chairman Kevin Warsh of corruption during his testimony before the Senate Banking Committee on Wednesday. Warren, a Massachusetts Democrat, raised concerns about Warsh's divestment of over $100 million in assets prior to taking office and questioned the source of those funds.
"Chair Warsh, who wrote that check?" Warren asked, referencing a payment made days before Warsh was sworn in. She pressed for details, inquiring if the funds came from a billionaire with business interests involving the Fed or from investor Stanley Druckenmiller. Warsh responded that he had complied with all Office of Government Ethics requirements, a response Warren deemed insufficient.
The exchange became heated as Warren pushed for answers regarding Fed Vice Chair of Supervision Michelle Bowman's attendance at an invite-only Bank of America dinner during a period when public discussion of monetary policy is restricted. Warsh stated he would leave the matter to the Fed's Office of Inspector General, while Warren urged an investigation into Bowman.
"How can you be chair and not ask your vice chair whether or not she violated the blackout period, violated the law?" Warren questioned. Warsh replied that he believed it would be inappropriate to prejudge facts.
Warren also suggested Warsh was aligned with President Trump's agenda, implying he was "in President Trump's pocket" despite the Fed holding interest rates steady in its last meeting, contrary to Trump's stated desire for lower rates.
Later in the hearing, Republican Senator Mike Rounds provided Warsh an opportunity to directly address some of the accusations. When asked if anyone had given him $100 million, Warsh responded with a simple "No."
During his testimony, Warsh also highlighted the significant impact of artificial intelligence on the U.S. and global economy, calling it the most "consequential change in my adult lifetime." He acknowledged the challenges AI presents but expressed optimism about the U.S.'s ability to benefit, predicting long-term improvements in American productivity, real wages, and employment. However, he cautioned that AI could lead to price increases in the short term, which he characterized as a one-time adjustment rather than inflation.
Warsh's remarks on Monday before the House Financial Services Committee also focused on the Fed's commitment to reducing inflation. While he did not provide specific guidance on future interest rate paths, his generally hawkish stance suggests a preference for rate increases over cuts.