Episode Overview

Theme:
This episode dives into President Trump’s recent nomination of Kevin Warsh as the next chair of the Federal Reserve. The conversation unpacks why Trump’s approach to influencing the Fed signals possible threats to its traditionally independent role, how DOJ investigations are stalling the confirmation process, and the political dynamics around the future of U.S. monetary policy.

Purpose:
To help listeners understand the stakes behind Trump’s nomination, examine the pressures and expectations on Warsh, and discuss how political interference could shape both the confirmation process and the Fed’s role moving forward.

Key Discussion Points & Insights

1. The Federal Reserve: What It Does and Why Independence Matters

• Federal Reserve 101:

  • The Fed was established over a century ago to stabilize the banking system and fight both unemployment and inflation through interest rate adjustments.
  • "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." —Scott Horsley [01:04]

• Importance of Independence:

  • Independence shields the Fed from short-term political interests favoring quick economic boosts over sound, long-term policy.
  • "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... Experience... has shown that it's best to put a little bit of distance between elected politicians... and the Fed." —Scott Horsley [02:08]

Memorable Moment:
The hosts emphasize that while the Fed is accountable to Congress, "they're not supposed to basically take instructions from the White House." —Scott Horsley [02:55]

2. Trump’s Relationships with the Fed and Jerome Powell

• Conflict History:

  • Trump has repeatedly tried to pressure Powell into lowering interest rates, calling him names and even demanding his resignation when Powell did not comply.
  • Trump's Justice Department recently launched a criminal investigation into Powell, widely perceived as political pressure to force a rate cut.
  • "Trump has just been relentless in trying to pressure Powell to lower interest rates... it's not just rhetoric from Trump. Trump’s DOJ has now kind of launched a criminal investigation into Powell, which many, many critics see as another effort to pressure Powell..." —Franco Ordonez [03:46]

• DOJ Investigation's Pretext:

  • The investigation focuses on cost overruns in the Fed's headquarters renovation, but most observers (including Powell) see it as leverage over Fed decisions.
  • "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." —Scott Horsley [06:00]

3. Senate Backlash: Defending Fed Independence

• Senator Thom Tillis’ Stand:

  • Tillis, influential on the Senate Banking Committee, declared he will not advance any Fed nominee until the DOJ investigation is transparently resolved.
  • "He also said that the independence of the Federal Reserve from political interference was non-negotiable." —Franco Ordonez [06:43]

• Potential Roadblocks for Warsh:

  • Tillis explicitly stated he would block even a qualified nominee like Warsh if the investigation remains unresolved.
  • "He will not approve any Fed nominee, including a nominee for chair, until this Justice Department matter is resolved in some transparent way..." —Scott Horsley [07:15]

4. Who is Kevin Warsh?

• Background:

  • Warsh is a traditional Republican with a background in Wall Street and prior Fed board experience under Bush and Obama.
  • Past reputation as a "hawk," focused on combating inflation, even amid high unemployment post-Great Recession.
  • "Warsh’s reputation was as someone who would really bend over backwards to keep inflation under control." —Scott Horsley [09:52]

• The Big Question: Will Warsh Resist Trump?

  • Trump says Warsh never promised to comply, but chose him for his perceived alignment.
  • "A lot of people... just are questioning whether Warsh will resist Trump." —Franco Ordonez [10:54]
  • There are concerns Warsh may be pressured to drop rates, which could risk rising inflation.
  • Trump has a history of turning on Fed chairs who show independence—exemplified by his fallout with Powell.

Memorable Moment:
"He may be calling him straight out of central casting now, but as we have covered Trump for many, many years, those relationships can sour very, very quickly." —Franco Ordonez [11:29]

5. The Limits of the Fed Chair and How Trump Tries to Stack the Board

• Fed Chair is One Vote:

  • The Fed chair alone cannot dictate policy; their influence is limited by other Board members.
  • "The Fed chair is not a king... just one vote." —Tamara Keith [12:48]

• Trump’s Attempt to Stack the Board:

  • Trump is seeking to appoint loyalists to multiple Fed seats, though with mixed success.

6. The Road Ahead: Confirmation Math and Political Stakes

• Senate Dynamics:

  • With Tillis threatening to block nominees and a divided Senate Banking Committee, Warsh’s confirmation is difficult if the DOJ probe isn’t resolved.
  • "It would be very difficult assuming the Democrats stick together and oppose the nomination..." —Scott Horsley [14:53]

• Could Pressures Change?

  • The hosts note Trump could likely “call off” the DOJ investigation, satisfying senators like Tillis, which would allow the nomination to proceed.
  • Otherwise, Powell could remain as chair on an interim basis.

Notable Quote (Trump’s Response to Tillis):
"If he doesn't approve, we'll just have to wait till somebody comes in that will approve it." —Donald Trump, relay via Scott Horsley [13:51]

Notable Quotes & Memorable Moments (with Timestamps)

• "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." —Scott Horsley [01:08]
• "The independence of the Federal Reserve from political interference was non-negotiable." —Franco Ordonez, quoting Senator Tillis [06:43]
• "He may be calling him straight out of central casting now, but ... those relationships can sour very, very quickly." —Franco Ordonez on Trump and Warsh [11:29]
• "The Fed chair is not a king... just one vote on the Federal Reserve Board." —Tamara Keith [12:48]
• "If he doesn't approve, we'll just have to wait till somebody comes in that will approve it." —Donald Trump (quoted by Scott Horsley) [13:51]

Timestamps for Important Segments

• Federal Reserve 101 & Independence: [01:00–03:14]
• Trump’s campaign to influence Powell: [03:14–04:48]
• Senator Tillis blocks confirmation over DOJ probe: [06:21–07:42]
• Kevin Warsh’s background & the independence dilemma: [09:27–11:51]
• Trump’s Senate confirmation math and outcomes: [13:15–15:34]

Conclusion

This episode provides a thorough examination of President Trump’s efforts to control the Federal Reserve through both personnel decisions and alleged political pressure. The hosts, while explaining the structural importance of an independent Fed, highlight the tense confirmation path facing Kevin Warsh and the Senate standoff fueled by political maneuvering. Through accessible explanations and punchy political anecdotes, the podcast explores how ongoing gamesmanship poses risks for U.S. economic stewardship.