Washington: What to Watch Now

Supreme Court Justice Clarence Thomas administered the oath of office to Kevin Warsh in a White House ceremony on May 22, officially swearing in Warsh as the 17th Federal Reserve chair. Here are some key things to keep in mind as Warsh takes the helm:

• Fed independence. While President Donald J. Trump has been relentless for more than a year in calling for the Fed to cut interest rates, he struck a different tone during comments at the ceremony. "I want Kevin to be totally independent," the president said. "I want him to be independent and just do a great job. Don't look at me, don't look at anybody, just do your own thing and do a great job."
• Little support for rate cuts. Warsh, who served as a Fed governor from 2006 to 2011, returns to the central bank at a delicate time. Inflation has been creeping upward and the voting members of the rate-setting Federal Open Market Committee (FOMC) do not seem inclined to support rate cuts anytime soon. In fact, some members have indicated that they think a rate hike may end up being the Fed's next monetary policy move. Warsh is likely to take time to build consensus at the Fed rather than push for aggressive action soon.
• Powell stays, Miran departs. With former Chair Jerome Powell taking the unusual step of remaining on the seven-member Board of Governors, Stephen Miran formally resigned from the board so that Warsh could fill that seat. Miran, who joined the board last September to fill the remaining few months of an unexpired term, had dissented from every FOMC vote since, always in favor of steeper rate cuts. His departure means that the Fed has lost its biggest rate-cut champion, further complicating Warsh's ability to push for lower interest rates anytime soon.
• Next meeting in June. Warsh's first meeting as chair will be June 16 and 17, and while the FOMC is expected to leave rates unchanged, Warsh's first comments on the central bank's deliberations are likely to be closely scrutinized, particularly when it comes to his vision for the Fed's communications. He has said that he thinks the Fed overcommunicates and that he may not hold a news conference after each Fed meeting, as Jerome Powell has done since 2019. He has also said he plans to reduce the Fed's balance sheet, though that is likely to be a slow process so as not to rattle the markets.

Senators abruptly left town for the annual Memorial Day recess on May 21 without voting on the $72 billion immigration enforcement bill, punting the debate to early June and ensuring that Congress won't make the president's June 1 deadline for sending him the bill. The package provides three years' worth of funding for U.S. Immigration and Customs Enforcement (ICE) and Customs and Border Protection (CBP)—agencies that were not funded by the U.S. Department of Homeland Security funding agreement reached earlier this spring. The package also would allocate $1 billion for security for the under-construction White House ballroom, but that provision was expected to be dropped from the bill after some Republican senators balked at the cost and political optics.

But another snag cropped up. The process by which the bill was being considered, known as "budget reconciliation," includes unlimited votes on amendments. It's the same process Republicans used last summer to pass the so-called One Big Beautiful Bill Act. Under the parliamentary rules, the minority party can force votes on an unlimited number of politically difficult issues before a final vote on the funding bill itself. Republican leaders realized last week that Democrats were going to force votes on the recently announced $1.776 billion "Anti-Weaponization Fund," which allows individuals to apply for monetary relief if they believe they were unfairly targeted by the federal government. With several Republicans poised to vote in support of restrictions on the fund, Senate leaders pulled the bill from the Senate floor and will use the Memorial Day recess week to try to address concerns. When lawmakers return to Washington on June 1, they are likely to see a revised version of the package, which will still need to pass both the Senate and the House of Representatives.

On May 20, the House approved a revised housing bill, the 21st Century ROAD to Housing Act, by a huge 396-13 bipartisan vote. The House version amends a Senate bill which passed that chamber by 89-10 in March. It seeks to increase housing supply by reducing regulatory red tape. A key sticking point was over limiting institutional investors' ability to buy up large numbers of single-family homes. The version passed by the House last week strikes a compromise with the Senate on that issue, leaving in the Senate's tougher language but stripping out a provision that would have required builders of rental properties to sell those homes within seven years. President Trump, after initially calling on the House to pass the Senate bill without changes, has now endorsed the House version. But Senators Tim Scott (R-S.C.) and Elizabeth Warren (D-Mass.), who worked together on the Senate version, issued a statement last week saying "there is more work to be done" on the latest version, making it uncertain when the Senate might give final approval to the bill.

Peirce announced that she will leave the SEC in November to join the Regent University School of Law in Virginia as an associate professor. Pierce joined the SEC in 2018 and has led its crypto task force since last year. Fans dubbed her "Crypto Mom" for her opposition to enforcement actions against digital asset firms under the Biden administration and her enthusiasm for cryptocurrency generally. Her departure will leave only Chair Paul Atkins and Republican Commissioner Mark Uyeda at the agency, which is supposed to have five members, including two Democrats. While the agency can technically operate with just two commissioners, pressure from Capitol Hill to fill the vacant seats is likely to increase in the months ahead. A similar situation exists at the Commodity Futures Trading Commission (CFTC), which currently has vacancies for four out of its five commissioner seats.

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