Kevin Warsh appeared before a Senate committee Tuesday for his confirmation hearing as Federal Reserve chairman, enduring a line of questioning from Senator Elizabeth Warren that focused on whether he would be an independent actor or a presidential sock puppet, a term Senator John Kennedy then prompted him to define for the record. Warsh said he would be neither the president’s human sock puppet nor anyone else’s, that he was honored by the nomination, and that he would be an independent chairman if confirmed.
Scott Shellady, market specialist for the Market Day Report and host of the Cow Guy Close on RFD-TV, joined Dan Proft on Chicago’s Morning Answer to assess the Warsh nomination and offer his economic outlook as the Iran conflict and its oil market disruptions move past the sixty-day mark.
Shellady said he is not a fan of outgoing chairman Jerome Powell, whom he described as primarily a lawyer rather than an economist, and said Warsh brings the kind of numbers-focused, level-headed approach the job requires along with an impeccable professional resume. He said Powell will be remembered above all for his use of the word transitory to describe the inflation surge that turned out to be anything but, and that Warsh represents a meaningful upgrade in both analytical rigor and practical market understanding.
He offered his own modest proposal for Fed reform, suggesting that the entire economics staff of the Federal Reserve, several hundred people whose function is to gather data, synthesize it, and produce rate recommendations, could be replaced by artificial intelligence at significant cost savings and with the added benefit of removing institutional bias against whoever happens to be president. He nominated himself as DOGE chairman for Federal Reserve operations, a role he said could begin with eliminating the staff that produces work AI can replicate and end with asking serious questions about a four-billion-dollar headquarters renovation project whose scale he said is difficult to justify for any institution whose core function is setting interest rates.
On Trump’s comments to CNBC about large companies including Apple and Amazon that have not yet sought tariff refunds to which the Supreme Court has said they are entitled, Shellady said the more straightforward explanation than corporate political calculation is a pure cost-benefit analysis. Figuring out precisely how much of any price increase over the past eighteen months was attributable to tariffs versus other cost factors, then calculating what each customer is owed and processing the refunds, is an enormous administrative undertaking that could easily cost more than the refunds themselves. He said a company like Apple would rationally conclude it is simpler to absorb the cost and move on than to enter a protracted dispute with the government over the precise figures, and that Tim Cook, whatever one thinks of him, is smart enough to do that math.
On the economic outlook, Shellady said the markets appear to have priced in a resolution of the Iran conflict by the end of May, and he warned that if the current stalemate persists significantly beyond that expectation, the oil price shock will transition from an inflationary problem to a recessionary one. He does not expect the United States to enter a recession, describing the American economy as probably the strongest in the world right now, with corporate earnings season producing results in the twelve to nineteen percent growth range. But he said price pressures from sustained elevated oil prices will act as a persistent tax on the bottom seventy percent of the economy, keeping CPI and PPI stubbornly elevated in a way that complicates both the Fed’s rate decisions and consumer confidence.
He cautioned against expecting a clean binary resolution to the Iran conflict regardless of military or diplomatic developments, drawing on a research piece given to him the previous day about Japan in August 1945. The Japanese military command wanted to keep fighting even after the Hiroshima bombing and continued to resist after Nagasaki three days later, with the emperor ultimately having to override his own cabinet to accept terms. The parallel he drew is that with ninety million people in Iran and a hardened ideological core in the IRGC, there will be continued violence and instability even after any formal cessation of hostilities, and the process of normalization will resemble a gradual cooling rather than a decisive moment. He said oil futures markets show improvement by September, which he takes as a reasonable base case for when prices begin moving meaningfully lower, and noted that the Kissinger-era negotiations to end the OPEC oil embargo after the Yom Kippur War took four to five months, offering a historical reference point for current expectations.
He closed by noting that American energy independence fundamentally changes the country’s exposure to a prolonged Gulf disruption compared to any previous historical analogy. The United States is an energy exporter with the largest petrochemical supply in the world, and Energy Secretary Chris Wright’s barely concealed smile at every mention of elevated oil prices reflects the straightforward reality that the American energy sector is thriving under current conditions. Wright walked that enthusiasm back slightly after reportedly being reprimanded for saying he expected oil prices to remain high into the midterms, but Shellady said the underlying point stands, and that the ships streaming toward the Gulf of America to load up on American crude are the clearest evidence of how differently the current disruption lands on the United States compared to every previous Middle East energy crisis.