Walsh's hearing made a strong statement that he would never be a Trump “twire puppet” and vowed to the Fed's independence

Original title: "Vosh hearings stress the independence of the Federal Reserve, stating that it will never become a "wire puppet" of Trump, and never be asked to make a reduction commitment "

Original by: Li Dan

Original source:See you on Wall Street

On Tuesday, 21 United States Eastern Time, the United States Senate Banking Commission held hearings on the nomination of the Chairman of the Fed. In the face of interrogations by bipartisan senators, the nominee, Walsh, emphasized the independence of monetary policy and stated that the United States Federal Reserve would not be subject to United States President Trump ' s orders to undertake multifaceted reforms。

In a pre-prepared opening speech, Walsh promised to “ensure that strict independence is always maintained in the implementation of monetary policy”, while stating that “the independence of the Fed depends primarily on the Fed itself” and that the Fed should adhere to its terms of reference by extending its functional reach to areas of fiscal and social policy where it lacks statutory authority, “its independence is at greatest risk”。

“The independence of monetary policy is crucial. I believe that the operational independence of monetary policy is not particularly threatened when elected officials — whether the President, senators or deputies — express their views on interest rates.”

As it was considered that the Fed should adhere to its functional boundaries, Walsh stated that he was not in a position to comment on the dismissal of Federal Reserve Commissioner Lisa Cook. It was noted that the central focus of the case was on the extent to which the President had the authority to exert his influence over an independent body, the Federal Reserve。

Nick Timiraos, a journalist with the name of the New Federal Reserve News Agency, commented that, in presenting his “reform” claims at the hearings, Walsh largely upheld the point he had repeatedly emphasized over the past few years - – That is, replacing the Federal Reserve model used to forecast inflation, reducing the frequency of external communication and gradually reducing its balance sheet to $6.7 trillion over time。

According to Timiraos, the key to the confirmation of Walsh ' s nomination is not whether he can get enough support votes, but who will first compromise on the criminal investigation against Federal Reserve Chairman Powell, whether Trump or Republican Senator Thilis。

Timiraos notes that during the two-and-a-half-hour hearing, several points were highlighted:

• Walsh avoided all proposals aimed at demarcating him from Trump
• Walsh promised to work to preserve the Fed ' s independence, but cleverly avoided the most difficult tests, such as refusing to take any position on Trump ' s attempt to dismiss Councilor Cook or on Powell ' s criminal investigation against the Fed ' s head office return
• Walsh’s arguments about independence may not be forthcoming within the Fed, as his main argument is that the difficulties the Fed has experienced in recent times are entirely attributable to itself。

Timiraos also mentioned that Walsh did not call for a reduction in interest rates, but did not weaken the reasons behind the reduction. He argued that the Fed should focus on core inflation and cited indicators such as the “end-of-pipe average” for removing anomalies. These indicators show that inflation levels are actually closer to the Federal Reserve target of 2 per cent. Walsh also refuted the current view held by many Fed officials that tariffs had pushed up recent inflation data. He did not, however, declare the fight against inflation, but stated that “the trend towards inflation is improving, but more remains to be done”

walsh says trump never asked, and he would never agree, to a reduction in interest rates;

During the question-and-answer session at the hearing, when Congressman John Kennedy asked whether Walsh would become the Trump's “wire puppet”, Walsh answered, “No way.”;

Congressman Ruben Gallego cited a report from the Wall Street Journal, according to which Trump had previously pressured Walsh to reduce his interest rate after receiving confirmation of his nomination, suggesting that someone was lying, either Trump or Walsh。

Walsh challenged the report and stated that the author of the report needed “to find more reliable sources or follow stricter guidelines for the press profession”. He said, "I am responsible for every word I say. The President never asked me to make any such commitment, and I will never do so.”

Congressman Jack Reed asked Walsh if he would submit to Trump's request for a cut. Trump had indicated that he would not select a person who did not support the reduction as the Chairman of the Fed. Walsh replied that he had not made any commitments to Trump。

According to Senator Elizabeth Warren, Walsh is “very inappropriate” for the Fed's chairmanship. She repeatedly asked if Trump had lost the 2020 elections. Walsh refused to answer the question, saying: “If I get confirmation of my appointment, we will try to exclude political considerations from the Fed.”

Warren repeatedly asked Walsh to disclose more details of his approximately $100 million assets in his name, indicating whether they included entities involving the Trond extended family or investments related to the convicted Epstein。

WALSH REITERATED THAT HE HAD WORKED WITH THE GOVERNMENT ETHICS OFFICE (OGE) TO STRIP OFF THE PERSONAL ASSETS IN QUESTION. HE HAD AGREED THAT THE CONFIRMATION OF THE NOMINATION WOULD “SELL ALL MY FINANCIAL ASSETS”, WITHOUT PROVIDING ANY SPECIFIC DETAILS。

There are too few meetings a year

Walsh foreshadowed that, should his nomination be confirmed, he would like to see a thorough and multifaceted reform of the Fed, including “changes in the system of policy implementation” and the creation of a completely new “inflation framework”. Walsh argued that the Fed needed a new inflation framework, but did not reveal the form in which the new framework he envisaged would take。

“We need a new framework, a new tool;” said Walsh to Tim Scott, Chairman of the Senate Banking Commission; and I would add, Mr. Chairman, that we need a new way of communicating.” & nbsp;

In terms of communication, Walsh indicated that he believed that there was an “overcommunication” of Federal Reserve officials on the issue of interest rates — reflected in quarterly economic forecasts. In that forecast, officials were asked to forecast anonymously the level of interest rates they considered appropriate. This also includes the so-called interest-point array。

Since then, it has been asked how many monetary policy meetings will be held each year, if confirmed as the Chairman of the Federal Reserve. He indicated that the Federal Reserve Act provided for a minimum of four times a year, which was clearly too few. “Four meetings (meetings) are clearly insufficient and it is therefore appropriate to hold more meetings than this.”

As to whether there would be a continuation of the press conference following the monetary policy conference, Walsh did not give a clear response, saying, “If a press conference were to be held, I think it would be incumbent upon me to listen to the journalists' immediate concerns and questions.” But he reiterated his earlier criticism that the Fed officials had spoken too much。

AI COULD RAISE ECONOMIC PRODUCTIVITY WITHOUT CAUSING INFLATION AND CREATE SPACE FOR INTEREST RATE REDUCTION

Congressman Van Hollen expressed concern about the changing position of Walsh on the issue of whether interest rates would be favourable, saying, “I am concerned that your position on interest rates seems to be swaying with political convenience rather than based on sound economic judgement”, and asked Walsh why interest rates were inclined to fall while inflation remained high。

WALSH SAID THAT IF THE PACE OF POTENTIAL ECONOMIC GROWTH ACCELERATES - WITH THE DEVELOPMENT OF ARTIFICIAL INTELLIGENCE (AI), FOR EXAMPLE, INFLATION MAY BE LESS WORRYING, CREATING SPACE FOR INTEREST RATE REDUCTIONS。

ACCORDING TO THE MEDIA, WHILE NO DIRECT REFERENCE TO THE TERM “PRODUCTIVITY” WAS MADE IN WALSH'S RESPONSE, THIS WAS AT THE HEART OF HIS ARGUMENT. HOWEVER, MANY ECONOMISTS ARE SCEPTICAL ABOUT THE ARGUMENT THAT SUCH AI CAN HELP REDUCE INFLATION, NOTING THAT AT LEAST IN THE SHORT TERM, AI MAY HELP PUSH INFLATION FURTHER FORWARD。

WALSH EXPLAINED HIS THINKING ABOUT HOW AI WILL INFLUENCE THE ECONOMY. HE POINTED OUT, ON THE ONE HAND, THAT THE HUGE AMOUNT OF CAPITAL INVESTED BY ENTERPRISES IN AI INFRASTRUCTURE WOULD BOOST DEMAND IN THE SHORT TERM, THEREBY INDIRECTLY PUSHING INFLATION. ON THE OTHER HAND, IN THE LONG RUN, AI TECHNOLOGY ITSELF HAS THE POTENTIAL TO ENHANCE THE PRODUCTIVE POTENTIAL OF THE ECONOMY, THEREBY CONTRIBUTING TO FASTER ECONOMIC GROWTH WITHOUT CAUSING INFLATION。

WHEN ASKED ABOUT AI-RELATED TOPICS, WALSH SAID: “WE ARE AT ONE OF THE MOST SUBVERSIVE MOMENTS IN THE MODERN ECONOMIC HISTORY OF THE UNITED STATES AND THE WORLD AT LARGE.”

SENATOR JOHN F. KENNEDY HAS DEEPLY QUESTIONED THIS. HE STATED THAT THE PROMISES THAT AI WOULD BRING ABOUT A SIGNIFICANT INCREASE IN PRODUCTIVITY WERE, IN HIS VIEW, NOTHING MORE THAN THE “SCRAMBLING” THAT SOME PEOPLE HAD MADE IN ORDER TO FORCE THE FORTHCOMING IPO。

THE FED “CANNOT BLAME” US “K” EXPANSION

DURING THE HEARING, WALSH ARGUED THAT THE FED “CANNOT BLAME” FOR THE INCREASE IN WEALTH INEQUALITY – NOW KNOWN AS THE “K-TYPE ECONOMY” PHENOMENON – AND THAT THE FED’S LARGE BALANCE SHEETS HAD INCREASED ITS INFLUENCE ON THE ECONOMY。

In response to a question from Congressman Raphael Warnock, he said: “I think that the Fed is responsible for this division between the `owners of financial assets' and the `unpossessed' of what you described — after all, the Fed's balance sheet has expanded from $800 billion when I first entered office in 2006 to a magnitude higher today.”

He went on to say, “If the Fed had maintained a smaller balance sheet size at the time I thought interest rates could have been lower, inflation could have been better and the economy could have been stronger.”

Woshes can't give the Fed the right size of its balance sheet. However, he stated that the balance sheet should have been reduced in size and that the Fed should not continue to hold long-term national debt。

IN FEBRUARY OF THIS YEAR, XINHUA QUOTED MEDIA REPORTS THAT INEQUALITY IN WEALTH IN AMERICAN SOCIETY CONTINUES TO GROW, THAT STRUCTURAL CRACKS ARE INCREASING AND THAT THE “K” ECONOMY IS BECOMING MORE VISIBLE. XINHUA MENTIONED THAT DATA SHOWED THAT IN THE THIRD QUARTER OF 2025, THE SHARE OF NET ASSETS OWNED BY THE RICHEST PEOPLE IN THE COUNTRY, ACCOUNTING FOR 1 PER CENT OF THE UNITED STATES POPULATION, HAD RISEN TO ALMOST 32 PER CENT, A RECORD HIGH, WHILE HALF OF THE POPULATION WITH INCOMES WERE BEHIND ONLY 2.5 PER CENT OF THE NATIONAL WEALTH。

Encrypted currency should be integrated into the financial system

Congressman Cynthia Lummis asked Walsh whether he believed that encrypted assets should be included in the financial system, so that consumers could enjoy richer investment options and better consumer protection。

Walsh gave a positive answer to this: “Data assets have been deeply integrated and form part of our financial sector, so my answer is yes.”

WALSH ADDED THAT THE FED WAS NOT ENTITLED TO ISSUE DIGITAL CURRENCY, WHICH WOULD BE A BAD POLICY CHOICE. INDEED, THE FED SHOULD NOT USE THE CENTRAL BANK DIGITAL CURRENCY (CBDC)。

Congressman Tillis insists that the Department of Justice does not support nominations until the investigation into Powell is closed

During the hearing, the key Senator, Thom Tillis, stated that he would not question the views of Walsh, but would take the opportunity to explain why he had blocked the nomination of the Federal Reserve Chairman. Tilis had previously promised to block any Fed nomination until the United States Department of Justice withdrew its criminal investigation against Powell。

The Department of Justice's investigation focused on the multi-billion dollar renovation of the Federal Reserve's Washington headquarters building and the testimony of Powell to the Senate Banking Commission last year in this regard. Tilis displayed a series of posters detailing the beginning and end of the Fed ' s renovation work. He pointed out that while the project price overrun was “unfortunate”, it seemed “compliant and justified”。

Tilis said to Walsh, "Let's get rid of this investigation, so I can turn to your nomination."