Kevin Warsh, President Donald Trump's nominee to lead the Federal Reserve, appeared before the Senate Banking Committee on Tuesday, April 21, 2026, for his confirmation hearing. A central theme of Warsh's testimony was his strong advocacy for significantly reducing the Federal Reserve's balance sheet, which currently stands at approximately $6.7 trillion.
Warsh, who previously served as a Federal Reserve governor from 2006 to 2011, contended that the expansion of the Fed's balance sheet from $900 billion in 2008 to a peak of nearly $9 trillion in 2022 was a mistake. He stated that the large balance sheet has become an "ordinary, recurring force" that has been "quite unhelpful" and contributes to the Fed's involvement in politics. Warsh believes that a smaller balance sheet could lead to lower interest rates, better inflation outcomes, and a stronger economy.
During the hearing, Warsh outlined his vision for a "regime change" in the conduct of monetary policy, particularly concerning inflation and the balance sheet. He asserted that the Fed has not fully addressed policy failures from the pandemic era, citing a 3.3% year-over-year U.S. inflation rate, which significantly exceeds the Fed's 2% target. Warsh, historically known as an inflation hawk, has also signaled openness to rate cuts, arguing in a November 2025 Wall Street Journal essay that artificial intelligence could act as a disinflationary force.
Warsh emphasized the importance of maintaining the Fed's independence in setting monetary policy, stating in his prepared testimony, "I believe that monetary policy independence is earned by steering clear of distractions." He also indicated a willingness to coordinate with the Treasury Department to achieve a smaller balance sheet, though he did not provide specific steps for the reduction, emphasizing a cautious and transparent approach.
The Fed's balance sheet reduction, known as quantitative tightening (QT), officially concluded in December 2025, with the balance sheet having decreased from its peak of approximately $9 trillion in May 2022 to about $6.5 trillion by late 2025. As of April 2026, the Fed is purchasing approximately $40 billion per month in T-bills through the April tax season. Analysts have warned that draining liquidity too quickly could destabilize equity markets.
Democratic senators on the committee focused on Warsh's financial profile, noting his net worth exceeding $100 million and investments in crypto-related ventures, which could pose conflicts with existing Fed ethics rules. Warsh's confirmation process faces a tight deadline, with current Fed Chair Jerome Powell's term expiring on May 15, 2026.