Kevin Warsh’s Senate hearing: What to expect

Federal Reserve chair nominee Kevin Warsh travels to Capitol Hill on Tuesday to convince lawmakers he can carry out a presidential push for lower interest rates while remaining free of political constraints in setting policy.

In a much-anticipated hearing before the Senate Banking Committee, the former Fed governor will face questioning over a variety of subjects, from monetary policy to banking regulation to his own complicated personal finances

None likely will be more important than establishing the boundaries between the Fed’s decision-making and politics.

“He has a tricky communication question,” said Bill English, a professor at the Yale School of Management and the Fed’s director of monetary affairs from 2010-15, a period that overlapped with Warsh’s time there.

“I suspect that the way he’ll handle that is by being clear that his views are that rates can likely go lower, maybe a fair amount lower,” English said. “But at the same time, when asked directly about independence, be clear that he values independence. He thinks that independence is important and that a less independent Fed in the medium and long term would be a bad thing for the country.”

Political independence has been a key question surrounding the search for a successor to current Chair Jerome Powell.

In remarks he’s scheduled to deliver to the committee at the hearing’s start, Warsh issued a qualified endorsement of Fed independence.

“So let me be clear: monetary policy independence is essential. Monetary policymakers must act in the nation’s interest, their decisions the product of analytic rigor, meaningful deliberation, and unclouded decision-making,” he said in prepared text.

However, he noted that he doesn’t believe independence is endangered when the central bank’s actions are questioned by elected leaders, and said “the Fed must stay in its lane” and not veer into “fiscal and social policies where it has neither authority nor expertise.”

Warsh likely will face a bevy of questions about his political allegiance to President Donald Trump, who made no secret that a willingness to lower interest rates was a litmus test for his nominee. Trump nominated Warsh in late January, following a lengthy search process that included nearly a dozen candidates.

Congressional Democrats, including ranking member Sen. Elizabeth Warren, D-Mass., are expected to push the nominee on the independence question, as well as raise questions over his finances.

If confirmed, Warsh would easily be the wealthiest Fed chair in the central bank’s 113-year history. Disclosures filed ahead of the hearing indicate he would have to divest himself of a significant level of holdings to be in compliance with what have become strict Fed rules on where senior officials are allowed to invest.

Warren met with Warsh on Thursday and left with “deep concerns that if he is confirmed, he will be Donald…