Kevin Warsh’s written Senate answers suggest a narrower view of Fed independence on international finance as swap-line requests draw scrutiny.
WASHINGTON — Federal Reserve chair nominee Kevin Warsh suggested in written answers to Senate Democrats that the central bank’s statutory independence may not fully extend to international finance, a position that could matter as foreign governments seek access to U.S. dollar swap lines.
The issue has moved to the center of Warsh’s confirmation process after Treasury Secretary Scott Bessent said the United Arab Emirates recently requested a swap line from the U.S. Such arrangements are generally handled by the Fed and can provide foreign central banks access to dollars during periods of market stress.
Sen. Elizabeth Warren, D-Mass., asked Warsh whether the Fed could refuse a Treasury request to extend a swap line to a particular country and whether it must consult Treasury when opening or closing such facilities. Warsh did not directly name swap lines in his response, but drew a distinction between monetary policy and other areas of Fed work.
“Fed independence is at its peak in the operational conduct of monetary policy,” Warsh wrote, referring to interest-rate decisions. He added that Fed officials “are not entitled to the same special deference in areas affecting international finance, among other matters,” and said the Fed would work with the administration and Congress on those issues.
Warsh declined to elaborate when asked about the comments. The Treasury Department and the Fed also declined to comment, according to the report.
Swap lines can carry both financial and diplomatic significance. The Fed used them during the 2007-2008 financial crisis to help major developed economies maintain access to dollars during a liquidity crunch. The central bank generally treats the facilities as tools for market functioning, not foreign aid, though access to them is limited and can be viewed as a mark of financial standing.
The Treasury Department also has authority to use swap lines. Bessent granted Argentina access to a Treasury swap line last year during pressure on the peso, but the report noted that such use signals an urgent crisis, a condition not currently facing the UAE or other countries mentioned in recent discussions.
The Senate Banking Committee voted along party lines Wednesday to advance Warsh’s nomination to the full Senate. Senate Democrats released his written responses Tuesday; a person familiar with the matter said they had been delivered to the committee April 23, two days after his confirmation hearing.
Warsh’s answers also touched on other sensitive questions. He denied any connection to Jeffrey Epstein after Warren asked about his name appearing in Epstein-related files tied to a possible gathering in St. Barth’s in 2010. Warsh said he was on St. Barts but did not meet Epstein or Ghislaine Maxwell.
Warsh also wrote that he respects the work of inspectors general, a response that comes as a federal investigation involving cost overruns in the Fed’s building renovations is expected to give way to a review by the Fed’s inspector general. The next test for Warsh is the full Senate vote, where his comments on the boundaries of Fed independence are likely to remain part of the confirmation debate.
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