Fed Chair Kevin Warsh set to face new headaches with Democrats in control: Got no support

Democrats’ sweeping midterm victory, and particularly their coming control of the US Senate, strengthen the Federal Reserve against President Trump’s efforts to meddle with it, with the Senate’s control over appointments a major guardrail against Trump landing any more allies at the central bank.It could also mean new headaches for Chairman Kevin Warsh, with key oversight committees now in the hands of Democrats, and in the case of the Senate Banking Committee, with Democratic Sen.Elizabeth Warren, of Massachusetts, a harsh Warsh critic, likely replacing Trump ally and Warsh supporter Tim Scott of South Carolina as the panel’s chair.Warsh “got no support for his chairmanship from Democrats … Hostile questioning could put Warsh’s rhetoric to the test,” as he pursues a quieter and less publicly transparent form of central banking, economists from Monetary Policy Analytics, the firm of former Fed Governor Larry Meyer, wrote about the fallout of a Democratic Senate win.Democrats, having campaigned heavily on cost-of-living issues, have incentive to push Warsh on the central bank’s inflation mandate, while the panel will have broad room to investigate issues they regard as important — such as, in Warren’s case, Warsh’s opaque disposition of hundreds of millions of dollars in assets as he ascended to the Fed’s top job.For Trump, the new dynamics on Capitol Hill directly stymie his effort to put more allies on the Fed’s seven-member board, three of whom were appointed by former President Joe Biden.

Former Chair Jerome Powell, appointed to consecutive terms by Trump and Biden but now at odds with the president, remains on the board as well.The president has called the configuration “hostile” and “partisan,” and argued the Fed needs to drastically cut interest rates that policymakers — including Warsh — have instead been raising to control high inflation.Trump’s effort to fire Governor Lisa Cook remains ongoing, with a White House a...