Banking and Finance Law Daily Wrap Up, OVERSIGHT AND INVESTIGATION—Warren, CEI raise questions about Fed nominee Warsh ahead of confirmation hearing, (Apr 16, 2026)

By Justin Marcus Smith, J.D.

Senator Warren is pursuing Fed documents pertinent to the 2008 financial crisis.

Senator Elizabeth Warren (D-Mass), as Ranking Member of the Committee on Banking, Housing, and Urban Affairs, directed a letter dated April 14, 2026, to Federal Reserve Board Chair Jerome Powell requesting all records produced or received by Kevin Warsh in his capacity as a member of the Fed from 2006 to 2011. Sen. Warren wants to ask Warsh in the upcoming Fed Nominee confirmation hearing about his involvement with, in her view, the Fed’s failure to appropriately scrutinize the subprime mortgage market in the lead-up to the 2008 financial crisis and related Fed bailouts of large financial institutions.

Contemporaneously, a Competitive Enterprise Institute (CEI) paper and accompanying blog article urged the Senate to exercise its responsibility to advise the Executive Branch in connection with Fed independence and related interest rate policy choices. The paper highlighted policy conundrums in light of inflation remaining above the 2% target while the national debt heads to $40 trillion. The CEI paper emphasized Fed independence and interest rates, but it also urged the Senate to explore other topics, including how to manage the Fed balance sheet and asset purchases after the asset expansion that occurred in response to 2008 and the COVID-19 pandemic.

Warren letter. Sen. Warren’s letter expressed particular dismay about events surrounding the 2008 financial crisis, in particular:

• JPMorgan Chase’s takeover of Bear Stearns with $28 billion in Fed financing;

• Morgan Stanley and Goldman Sachs 2008 emergency conversions from investment banks to bank holding companies involving billions of dollars from Fed lending facilities; and,

• AIG receipt of an $85 billion Fed loan.

The letter emphasized that Warsh’s tenure at the Fed coincided with “one of the worst financial crises our nation has ever experienced.” Warren proposed that Warsh, in his role as Fed Governor, “failed to take seriously the risks posed by the subprime mortgage market and played a central role in helping to arrange numerous multibillion-dollar, taxpayer-funded capital infusions to financial institutions involved in the crisis.” Warren said it is essential that the Senate Banking Committee “fully understand” the purported failures.

Warren’s letter accordingly gave the Fed until April 24, 2026, to produce all Fed internal communications and communications with other government agencies and private institutions produced or received by Warsh from 2006 to 2011. The letter further specified “documents related to Mr. Warsh’s ethics waiver to deal with Morgan Stanley directly” and any other records pertinent to Fed oversight of the financial institutions within its jurisdiction and the bailouts of large financial institutions in mitigating the 2008 financial crisis.

An accompanying press release by Warren’s office characterized Warsh as unwilling to answer previous inquiries. Warren already sent a letter to Warsh dated March 26 asking what he learned from the 2008 financial crisis (see Banking and Finance Law Daily, Mar. 27, 2026). Warren also sent a letter to Warsh in February seeking his views on the Department of Justice criminal investigation of Fed Governor Lisa Cook and Fed Chair Powell (see Banking and Finance Law Daily, Feb. 2, 2026). Warren has also asked Warsh to explain what, if any, ties he had with the late Jeffrey Epstein (see Banking and Finance Law Daily, Mar. 20, 2026).

CEI concerns. The Competitive Enterprise Institute (CEI), meanwhile, issued a paper by Steve Swedberg, John Berlau, and Ryan Young raising concerns about Federal Reserve independence and inflation control in the event the Senate confirms Warsh.

Although the authors acknowledged Warsh is “well qualified” for the chairmanship, they expressed concern whether he will carry out President Trump’s goal of lowering interest rates and pursuing expansionary monetary policy in a difficult context where the prevailing inflation rate, above 2%, would ordinarily call for the Fed to tighten monetary policy.

The CEI authors suggested the most important issue facing the Fed is independence. They proposed that the level of interest rates is not as important as who makes the decision. If the Fed loses credibility, “[t]his can result in higher interest rates for government debt and higher long-run inflation.”

The authors accordingly urged the Senate to explore how Warsh will respond to pressure from the Executive Branch to lower interest rates. To that end, the authors suggested the Senate should explore:

• how Warsh will respond when the President applies pressure to lower interest rates;

• whether Warsh has institutional reforms in mind to safeguard Fed independence, including:

Reducing the Fed’s dual mandate to a single mandate to keep inflation low; or reducing the attack surface for placement of political pressure on Fed discretion by binding the Fed to a non-discretionary policy rule, like the Taylor rule, or Gross Domestic Product targeting.

As for interest rate policy, the authors referenced the prolonged period of monetary accommodation after 2008, followed by rapid policy changes since the end of 2022. In light of that history, the authors questioned the degree to which the Fed is following a durable empirical framework to set interest rates in lieu of exercising Federal Open Market Committee (FOMC) discretion. The CEI authors urged the Senate to question Warsh on:

• what macroeconomic developments would justify lower interest rates;

• what “objective benchmarks” the FOMC should refer to in deciding whether monetary policy is too loose or too tight;

• what lessons should be drawn from the prolonged period of low rates after 2008; and

• whether fiscal concerns will eclipse sound monetary policy in connection with the growing interest servicing burden of the national debt.

The CEI paper also outlined a variety of other questions the Senate might pose in connection with:

• rule-based policy for setting interest rates;

• the Fed’s dual mandate;

• forward guidance;

• Fed-Treasury coordination;

• reducing the Fed balance sheet;

• the Fed’s role as a banking regulator;

• central bank digital currencies; and,

• the FedNow “real time” payment facilitation service.

Companies: Competitive Enterprise Institute

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