What Walsh said doesn't matter! The nomination hearing is just a "formality" and will very likely be approved.

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Bloomberg columnist John Authers believes that whatever Walsh says at the Senate confirmation hearing will not materially change the final outcome—he is highly likely to be confirmed smoothly and take charge of the Federal Reserve.

The biggest obstacle currently standing in the way of Walsh’s confirmation process has nothing to do with him personally. Senator Thom Tillis has made it clear that if the investigation into current Chair Powell regarding Fed renovation expenses is not dropped, he will block the nomination process. It is widely expected that this impasse will eventually be resolved, and the hearing itself is unlikely to alter this trajectory.

Meanwhile, Walsh’s opening statement, which was leaked early on Monday, shows he will criticize the Fed for “stretching its hard-won credibility to the edge of its statutory responsibilities, and perhaps beyond,” after the financial crisis, arguing that monetary policy independence should not extend to all of the Fed’s functions.

Authers regards these remarks as a skillful political balancing act—sufficient to reassure the markets, while also sending goodwill signals to Trump. However, truly important issues for investors, such as the future trajectory of the Fed’s balance sheet, were not mentioned at all in Walsh’s five-page opening statement.

The hearing is more form than substance; the result is already determined

Authers points out that the reason the Walsh confirmation hearing isn’t treated as a major market event is at its core: the key variables that decide whether he will take office are not present at the hearing itself. Tillis’s stance depends on the outcome of the Powell case, not on any testimony from Walsh. The market’s basic assumption is that this political hurdle will eventually be cleared and Walsh will obtain one of the most powerful positions in the global economy.

Regarding the Fed’s role, Walsh’s opening statement has preliminarily set boundaries: independence for monetary policy is paramount, but the Fed’s functions in public fund management, bank supervision, and international finance do not enjoy the same special exemption status. He warns that if the Fed “strays into the realm of fiscal and social policy,” its independence faces the greatest risk, and the Fed “should not serve as an all-purpose agency of the U.S. government.”

Authers further cites historical examples to illustrate that confirmation hearings have never been reliable windows for predicting a Fed chair’s future policy directions. In Ben Bernanke’s 2005 confirmation hearing, terms like “quantitative easing,” “balance sheet,” “subprime,” “CDO,” and “Lehman” never appeared—yet these issues almost dominated his entire tenure later on.

Even earlier examples prove the same point: Alan Greenspan was once a disciple of Ayn Rand, an opponent of central banks, yet during his tenure enacted numerous interventionist policies. There has always been a significant gap between a nominee’s record and their actual actions in office.

On key issues, Walsh will not make substantive statements

Walsh has a clear stance on the Fed’s balance sheet. He has publicly advocated multiple times for reducing its size, believing the Fed should gradually sell off the massive bond holdings accumulated during the financial crisis and the pandemic. Should this stance be implemented, it would mean tighter market liquidity, rising bond yields, and noteworthy market impacts.

However, in Walsh’s five-page opening statement, there was no mention at all of the balance sheet or quantitative easing. Authers is not surprised by this. He judges that Walsh is skillful enough not to make any substantive commitments on the most sensitive current financial topics during the hearing; likewise, senators are unlikely to press him on the core challenges he will be forced to face in the coming four years.

The hearing may still have its moments, but for investors betting on his policy trajectory, the real answers may only be revealed after he officially takes office.

Risk Notice and DisclaimerMarkets involve risk; investment requires caution. This article does not constitute personal investment advice, nor does it take into account the individual investment objectives, financial situation, or needs of any specific user. Users should consider whether any opinions, views, or conclusions in this article fit their particular situations. Investments based on this are at their own risk. ```