Connect with us

Business

How a Businessman Fleeing Fraud Charges Built a Life Offshore

Published

on

How a Businessman Fleeing Fraud Charges Built a Life Offshore

Around midday on Feb. 2, a large wave began its slow rumble toward the Aisland 1, an 800-ton deck barge floating in the waters between Dubai and Iran. On board the vessel were its residents of more than a year: a 58-year-old Italian businessman named Samuele Landi, three sailors, a cook and five cats.

Landi — the ship’s captain — was a gifted computer programmer who in a previous life had been the chief executive of Eutelia, a telecommunications company. He fancied himself an Italian Steve Jobs, though John McAfee, the cybersecurity entrepreneur turned tax fugitive, might have been a more fitting comparison. An avid skydiver and motorcycle racer, Landi liked to live on the edge: of the world, of the law and of life itself. He had made a career of exotic offshore financial schemes; now, adrift, he had become one with them.

“I will die at sea for sure,” he told Oswald Horowitz, a filmmaker who had visited him the previous December. “I’m not going back.”

The barge was Landi’s biggest adventure yet. A rusting rectangular hulk with the footprint of a large commercial aircraft, the Aisland had a deck fitted with six blue shipping containers bolted in place. These were the living quarters, equipped with solar-powered air-conditioners and a desalination system. The barge was otherwise littered with equipment: ropes, crates, fans, tanks of oil and water, a freezer containing pounds of red meat, and a sack of reinforced concrete mix for repairs. A Liberian flag flapped in the breeze.

The story of how Landi ended up living on a leaky barge some 30 miles off the shore of Dubai is a tale of self-preservation. For over a decade, Landi had been a man on the lam. He wasn’t a violent criminal; nor was he a particularly wanted individual, in the grand scheme of things. But since Eutelia was declared bankrupt in 2010 and some of its executives, including Landi, were very publicly tried and convicted of bankruptcy fraud, Landi has been a fugitive from Italian justice — and on land, his options had all but run out.

Advertisement

What distinguished Landi from a run-of-the-mill fraudster, though, was the outlandishness of his maneuvers, which exploited every loophole the globe had to offer. Landi was a libertarian who sought freedom from meddling governments and their cumbersome regulations, but in a select few nations, he found willing accomplices. Landi hid money in Switzerland, skated around extradition treaties while living comfortably in Dubai, registered companies in bespoke tax-free zones, procured diplomatic credentials from Liberia, dabbled in crypto and, finally, took to the sea, where there was no one to tell him what to do.

Landi was able to pull this off thanks to his knowledge of the offshore world, and his story makes him a perfect guide to this vast archipelago of third spaces. It also “embodies all the ways laws can be evaded through these jurisdictions, whether it’s tax laws, extradition laws, regulatory laws or taking advantage of regulatory quirks,” said Vanessa Ogle, a Yale professor working on a book about the history of the offshore world. “Once you develop a mind for it, a whole range of opportunities arises.”

While he lived on the barge, Landi was dreaming up an ambitious plan to establish a floating, modular and completely sovereign city-state in international waters near the nation of Mauritius. This much-discussed concept is known as “seasteading” — like homesteading, just wetter — and its adherents are a mix of survivalists, libertarians and wannabe pirates.

Landi’s barge was a heap, but he was able to keep it afloat in the relatively calm waters of the Persian Gulf by pumping out water and having his crew patch holes when it sprang a leak.

On that day in February, though, their repairs did not hold, and the offshore existence that Landi had built for himself was suddenly imperiled: not by the laws of nations, for once, but by the laws of nature.

Advertisement

As far as anyone can prove, Samuele Landi lived as a law-abiding private citizen in Arezzo, Italy, until his 30s, when he started working in the telecommunications industry. Landi’s first company, Plug It International, bought easy-to-remember phone numbers from the Italian government, then leased them out at a premium to dial-in fortune tellers, astrologers, weather reports and, of course, phone sex operators. Plug It was fined for misleading consumers about its fees.

In 2003, Plug It merged with another company to become Eutelia, a phone and internet provider. Eutelia was largely a family affair — there were Landis serving as managers and executives, Landis controlling shares and Landis expanding the business abroad. Samuele Landi, who served as Eutelia’s chief executive alongside two of his brothers, led the company as its shares began trading on the Milan Stock Exchange in 2004.

In 2006, the Italian financial police began auditing Eutelia’s books for possible fraud. The authorities discovered plenty — tens of millions of euros were improperly accounted for — and, in the process, found themselves immersed in the ways of the offshore financial world.

Starting as early as 2002, according to sentencing documents from Arezzo’s criminal court, Samuele Landi and five of his relatives had used a series of falsified or inaccurate invoices to siphon money from the business and into tax shelters around the world: a shell company on the Polynesian island of Niue; a UBS account in Monaco; a Romanian L.L.C. in Bucharest fully owned by a Swiss firm. The corporate vehicles they used had few or no employees, produced no tangible work and, according to prosecutors, existed primarily for the purpose of draining Eutelia’s coffers.

Circuitous international grifts aren’t uncommon — consider the revelations in the Panama Papers, the Paradise Papers and other data leaks that detailed how wealthy companies and individuals hide money through complex offshore entities. But Eutelia was a middling business in an ordinary Tuscan town, not a high-flying family office or a lawyered-up conglomerate with branches around the world.

Advertisement

Samuele Landi contested Eutelia’s insolvency. He was also antagonizing employees. In November 2009, while investigations into Eutelia were underway, employees of a Eutelia division that had been spun off occupied their offices in Rome. They camped out in their cubicles for two weeks, complaining that they hadn’t been paid in months. The workers blamed Landi — who was still in charge — for their troubles, and an image of Landi posing, pirate-style, with a cartoon-villain expression and a cutlass between his teeth became a symbol for Eutelia’s misdeeds.

Landi hit back in a manner more befitting a mob boss than a telecom executive. With 15 private guards by his side, he marched into the offices at 5 a.m. one November day, aiming to disrupt the sit-in. Wielding crowbars, the men dragged the workers out of the offices and into the lobby. A television reporter covering the occupation then called the police, who took Landi and his men away.

By the time Eutelia’s court date came around, Landi had high-tailed it for Dubai. At the time, the city-state levied no taxes on foreign citizens, had no extradition agreement with Italy and was developing a reputation as a place where criminals — and their money — could find safe haven.

These accommodations allowed Landi to establish himself quietly in the United Arab Emirates, and to move his wife and their children there.

In the city full of expatriates, Landi blended in. Professionally, he picked up where he had left off. In 2010, he registered Kryptotel, an encrypted mobile-phone software company, in Internet City, one of Dubai’s many free economic zones — gated enclaves where foreign companies enjoy special perks.

Advertisement

At Kryptotel, Landi hired Italians — among them, an old skydiving pal, according to LinkedIn. Commenting on a Facebook thread about his exploits, Landi wrote that he had sought out clients who could pay him in cryptocurrencies and would convert the digital currencies into dollars or dirhams when he needed cash.

Landi clearly had access to funds, though how much of the Eutelia loot ended up in his pockets and for how long was not clear. In the sentencing document, Italian prosecutors noted that Landi previously had access to accounts at the Banca della Svizzera Italiana in Lugano and Julius Baer, a Swiss private bank that reached a half-billion-dollar settlement in 2016 with the United States for helping rich Americans avoid tax. Additionally, Landi had power of attorney over a bank vault and other accounts.

Whatever his net worth, it was enough for a $10,000-a-month villa, a driver and car, private school for his children and trips abroad for his family.

From his villa in Dubai’s Palm Jumeirah, an archipelago of man-made islands, Landi followed the news as lawsuits against him, his family members and other Eutelia executives made their way through the Italian courts. In 2015, Arezzo’s criminal court sentenced Landi’s uncle, cousin and brother to between two and four and a half years in prison for fraudulent bankruptcy and misappropriation of funds. Their appeals failed, and the uncle died in 2016. Two other brothers took plea bargains. The surviving Landis served their time mostly under house arrest because they had no prior convictions, according to a prosecutor.

Samuele Landi’s exit, which made headlines back home, had caused tension within the family, said Paolo Casalini, a friend of Landi’s and a former editor of a local news site, Informarezzo.com, which Landi bought and took over in July 2022. “His brothers didn’t even talk to him anymore,” said Casalini, who was in regular touch with Landi over the years.

Advertisement

(Landi’s wife and sons did not respond to requests for comment; neither did the family members named in the lawsuits. His eldest daughter sent a brief statement saying her father was “a really kind person.”)

Samuele Landi was sentenced to a total of 14 years in prison in absentia for his role in Eutelia’s insolvency, but in Dubai, he was untouchable. There were hometown rumors that he had been arrested in 2017, but Casalini said Landi shrugged them off by sending a photo of himself on the beach, reading the newspaper: “Landi felt safe in Dubai,” Casalini said.

I asked if Landi seemed to miss Arezzo.

“He would say no,” Casalini said. “He said, ‘I’d only come back here for my mother.’”

On March 22, 2022, Liberia’s president, George Weah, landed in Dubai for a diplomatic visit. At the terminal, a delegation of Liberian officials was there to greet him. Standing a good half-foot taller than his peers was a man with a shiny, white, bald head: Samuele Landi.

Advertisement

Landi was there in his capacity as Liberia’s honorary consul general to Dubai. He had found yet another loophole. This appointment by Liberia — a country he was never a resident of and to which he had no connection by blood or marriage — had effectively granted him immunity from prosecution in Dubai by making him a diplomatic envoy.

He had made his first inroads in Liberia during his Eutelia days, when the firm bought a 60 percent stake worth $21 million in a Monrovia company called Netcom Liberia. For an offshore man of mystery and ill repute, a diplomatic post is a protective cloak that brings with it varying degrees of immunity, not to mention an alternative passport to travel and transact with; a new identity untethered from the past; and a noble (honorable, even) foil.

In the offshore world, this is a “time-honored strategy” going back to the 1920s, Vanessa Ogle, the historian, said. “Honorary consuls can move assets across borders,” she said. “They can have cars with diplomatic plates, the immunity and privilege of not being searched and a diplomatic pouch” to conceal documents. In 2022, the International Consortium of Investigative Journalists found 500 current and former honorary consuls had been accused of crimes or embroiled in controversy.

Many honorary consul gigs are just for show. Not Landi’s. According to three people who spent time with Landi in Dubai, he threw himself into the job, soliciting funds from wealthy Arab donors to build a hospital near Monrovia and hosting a Liberian Independence Day party at his home. He even used his consular powers to help repatriate over dozens of Liberian domestic workers who had been trafficked into Oman. (Alieu Massaquoi, Liberia’s ambassador to the United Arab Emirates, said in a WhatsApp message that he had not met Landi in person and that his office had no record of him. Massaquoi was appointed to his post in 2023, after Landi had moved offshore.)

Landi also used his time in Dubai to consult for a start-up run by an Emirati sheikh. The company, Blue Carbon, made plans to buy up large areas of Liberian forest to offset carbon emissions.

Advertisement

In May 2022, after a Liberian businessman in the United States was apprehended with a fake diplomatic credential, Liberia declared it would recall all of its diplomatic passports. That summer, the Emirates extradited an Italian drug trafficker and mobster who had been living in Dubai for years.

At this point, Landi mapped out his next move: one that took him offshore not just in a metaphorical sense, but in a physical one, too.

Landi surprised almost everybody when he moved onto the Aisland 1 on Dec. 22, 2022, with a stray cat and four kittens he had found in a box. His colleagues and friends knew nothing of his plans.

“He wanted to keep his barge a surprise,” said Casalini, who learned of Landi’s move after he posted about it online. “I’m a calm person, but my response was, ‘Are you mad?’”

It was a reasonable question. Landi had begun cryptically speaking, in interviews, about wanting to “escape the Matrix” — a metaphor from the 1999 movie for letting go of constructed social norms and false beliefs.

Advertisement

“He believed we live in a world where we are always being surveilled and manipulated — by 5G, by the Covid vaccines,” said Clément Bonnerot, a journalist with Le Monde who had interviewed Landi while he was at sea. “He identified as a hunted, persecuted man, for whom the most important thing was to be free.”

In December 2023, he told Tony Olsen, a libertarian podcaster: “If you are libertarian like we are, you want your freedom. And your freedom is finished when the freedom of others starts. This is the key point.”

Landi was adept at living at sea. He grew vegetables and made plans to bring aboard chickens and cattle. He wrote a blog, extolling the barge’s lack of mosquitoes and the stunning sunsets and posted lighthearted articles about his adventures. (These have all since been taken down.) He relied on his crew, on semiregular deliveries of food and supplies from Dubai and on his Starlink satellite connection, which allowed him to keep Kryptotel, his cellphone company, in business.

Still, Landi had no illusions about the longevity of his setup. “For the moment,” he told Olsen, the podcaster, from one of his blue containers, Dubai “is tolerating us, but we cannot stay.”

The used barge, which he said he had bought for $200,000, was falling apart, too, to the point that Landi and his men had to teach themselves aquatic welding. “From inside, there are certain dangers because you are exposed to gas,” he told Olsen. “But if you weld from outside, it’s more difficult because you’re in a scuba diving suit fighting the current and waves.”

Advertisement

On land, in the world of nation-states, Landi had reached the end of the line. And that little voice that had led him far from home, under fictitious flags, to inhabit man-made isles and extraterritorial havens, was now telling him to construct a nation of his own.

He would buy a new barge, twice as large, that he would anchor in the Saya de Malha Bank, midway between Seychelles and Mauritius. He would invite friends, family and like-minded libertarians to join him.

Landi even had an architect draw up plans. “On the top deck, he needed a spot where a Gatling gun was going to be mounted,” said Peter de Vries, a designer. “That’s one of these guns that fires 1,000 rounds a minute — very heavy-duty stuff,” he continued. “I actually got the specs for the gun.”

I asked de Vries: Was Landi scared of pirates, the state, his personal enemies?

“Probably all of the above,” de Vries replied. “The world.”

Advertisement

Nevertheless, Landi seemed as cheerful as ever. In footage that Oswald Horowitz, the filmmaker, took late in late 2023, Landi cuts the figure of a self-actualized man. His skin is not so much sunburned as glowing, his laugh is mirthful, and his demeanor determined and a little droll, as though he saw the humor in his predicament.

His endeavor might sound like lunacy to most people — a country, on a barge, in international waters, with guns? — but for a veteran of offshore affairs like Landi, it adhered to a certain logic.

The universe in which Landi had sought shelter is not so exceptional, after all. In fact, it is all around us, hiding in plain sight. We might buy a bottle of Scotch in a duty-free shop, or vacation on a cruise ship with Panama’s or Liberia’s lightly regulated flag of convenience. We might gamble in a casino or admire a da Vinci that has spent decades in an extraterritorial warehouse. Our clothes, our electronics, the computers we use for our desk jobs are likely to have been manufactured in special economic zones by global companies that behave more or less like Samuele Landi: hopping from jurisdiction to jurisdiction in order to make money and shield themselves as best they can from fiscal, regulatory, legal or environmental responsibilities.

Landi turned this ethos into a lifestyle. On the run, he made a life in the spaces above, beneath and between nations

Landi sent his last message to Horowitz on New Year’s Eve. It read: “Move or die.”

Advertisement

A month later, Landi’s barge was around 30 miles from the Dubai coast when the rogue wave hit, breaching the hull and apparently breaking the barge in two. Two members of Landi’s crew survived by clinging onto pieces of wood until a passing vessel rescued them the next day. Landi and the two remaining seafarers were not so lucky.

According to Italian news reports, Landi put out a call for help, but it didn’t come in time.

His body was found several days later, when it washed up on the beach about 40 miles up the coastline from Dubai. A relative flew out to identify the body.

In the seasteading community, Landi is remembered as a heroic figure. “Samuele Landi was the first seasteader to live in international waters for more than a year,” Joe Quirk, the president of the Seasteading Institute, a California nonprofit, wrote in an email. But the organization declined to endorse or recommend his exploits. “Barges,” Quirk wrote, “are not safe.”

Back in Arezzo, not everyone is convinced that Samuele Landi is deceased; rumors swirl about the lack of DNA evidence, and even the city’s mayor can’t quite believe that Arezzo’s most notorious exile is gone.

Advertisement

This was a man who found his way around everything: rules, taxes, borders, the law. Surely, Samuele Landi would resurface.

Sabika Shah Povia contributed reporting.

Business

Devin Nunes Departs Trump Media After 4 Years as C.E.O.

Published

on

Devin Nunes Departs Trump Media After 4 Years as C.E.O.

President Trump’s social media company, which has consistently lost money and struggled with a flagging share price, announced Tuesday that it was replacing Devin Nunes as its chief executive officer.

The announcement offered no reason for the sudden departure of Mr. Nunes, a former Republican congressman from California. Mr. Trump had tapped him to run the company, Trump Media & Technology, in late 2021.

The announcement was made in a news release by the president’s eldest son, Donald Trump Jr., who is a company board member and oversees a trust that controls his father’s 115-million-share stake in Trump Media. President Trump is not an officer or director of the company.

Mr. Nunes said in a statement on Truth Social, which is Trump Media’s flagship product, that it was an “appropriate time” for a new leader with experience in media and mergers to “steer Trump Media through its current transition phase.”

Trump Media has incurred hundreds of millions in losses, and its shares have performed poorly since the company went public by completing a merger with a cash-rich special purpose acquisition company, or SPAC, in March 2024. The stock, which ended its first day of trading around $58 a share, closed Tuesday at $9.82.

Advertisement

Shares of Trump Media trade under the symbol DJT, which are President Trump’s initials. Truth Social has emerged as the main social media platform for Mr. Trump to communicate his policy decisions and opinions to the world.

Last year, Trump Media took in $3.7 million in revenue and recorded a $712 million net loss.

In December, Trump Media announced a plan to merge with TAE Technologies, a fusion power company. The all-stock deal, which was valued at $6 billion at the time, would create one of the first publicly traded nuclear fusion companies.

Trump Media said in February that it was considering spinning off its Truth Social platform in a merger with another cash-rich SPAC, Texas Ventures Acquisition III Corp.

Mr. Nunes is being replaced on an interim basis by Kevin McGurn, who has been an adviser to Trump Media since the end of 2024. Mr. McGurn, a former executive at Hulu, the streaming service, was listed in a recent regulatory filing as the chief executive of Texas Ventures.

Advertisement

The Trump Media release announcing the management change provided no update on the merger with TAE Technologies or the proposed SPAC deal for Truth Social.

Continue Reading

Business

Netflix plans to buy historic Radford Studio Center

Published

on

Netflix plans to buy historic Radford Studio Center

Streaming entertainment giant Netflix is in negotiations to buy the historic Radford Studio Center lot in Studio City.

Netflix plans to purchase the Los Angeles studio that has been home to generations of landmark television shows, including “Gunsmoke” and “Seinfeld,” according to two people with knowledge of the pending deal who were not authorized to speak about it publicly.

The studio’s previous operator, Hackman Capital Partners, defaulted on a $1.1-billion mortgage in January. Investment bank Goldman Sachs took over the property and is in talks with Netflix to sell it for between $330 million and $400 million.

Representatives for Hackman and Netflix declined to comment on the planned sale.

Advertisement

Culver City-based Hackman Capital Partners and Square Mile Capital Management teamed up to buy the Radford Avenue property from ViacomCBS in 2021 with a winning bid of $1.85 billion, after a competitive battle for the 55-acre studio beloved by the television industry.

At the time, the staggering price tag underscored the value — and scarcity — of TV soundstages in Los Angeles as content producers scrambled for space to shoot TV shows and movies to stock their streaming services. It was one of the largest-ever real estate transactions for a TV studio complex in Los Angeles.

Since then, production has substantially declined in Southern California. L.A. continues to battle the loss of production to other states and countries, as well as the lingering effects on the industry of the pandemic and the 2023 dual writers’ and actors’ strikes. Cutbacks in spending at the major studios after a surge in streaming-fueled TV production have further damped film activity in the region.

Founded by silent film comedy legend Mack Sennett in 1928, the lot became known as “Hit City” in the decades after World War II as popular TV shows such as “Leave It to Beaver,” “Gilligan’s Island,” “The Mary Tyler Moore Show,” “The Bob Newhart Show” and “Will & Grace” were made there. The storied lot gave the Studio City neighborhood its name,

Netflix, which has a market cap of about $455 billion — more than double that of Walt Disney Co. — has maintained its dominance in the global streaming business with more than 325 million subscribers.

Advertisement

The Los Gatos-based company has production offices worldwide, including facilities in Albuquerque, Brooklyn, London, Madrid and Toronto.

Netflix had secured an $82.7-billion deal to buy Warner Bros. studios and streaming services in December, but withdrew from the bidding war in late February after Paramount Skydance offered $31 a share. As part of the switch, Netflix was paid a $2.8-billion termination fee.

Continue Reading

Business

Kevin Warsh, Trump’s Pick to Lead Fed, Faces Senate at Tricky Moment

Published

on

Kevin Warsh, Trump’s Pick to Lead Fed, Faces Senate at Tricky Moment

Kevin M. Warsh, President Trump’s pick to lead the Federal Reserve, has spent years refining his pitch for why he should get one of the most powerful economic jobs in the world.

At his confirmation hearing on Tuesday, he will have to convince Senate lawmakers that he is ready to step into the role, which has become politically explosive amid Mr. Trump’s relentless attacks on the institution and its current chair, Jerome H. Powell.

Mr. Warsh, who is scheduled to testify before the Banking Committee at 10 a.m., plans to commit to being “strictly independent” on decisions related to interest rates, according to his prepared remarks. He also plans to tell lawmakers that he is unbothered by Mr. Trump’s incessant calls for substantially lower borrowing costs. And he will use his opening statement to underscore his focus on disrupting the “status quo” at an institution he said just last year was in need of “regime change.”

“In a time that will rank among the most consequential in our nation’s history, I believe a reform-oriented Federal Reserve can make a real difference to the American people,” he plans to tell lawmakers, adding: “The stakes could scarcely be higher.”

Mr. Warsh, 56, faces significant hurdles to winning confirmation. He has broad support among Republicans, who control the Senate and can confirm him along party lines. Yet his candidacy has stalled because of an ongoing investigation by the Justice Department into Mr. Powell and his handling of the Fed’s headquarters renovations.

Advertisement

Mr. Powell’s term as chair ends May 15, but Mr. Warsh looks increasingly unlikely to be in place by then. That’s because Senator Thom Tillis of North Carolina — a Republican on the Banking Committee who has expressed support for Mr. Warsh — has vowed to block any attempt to confirm a new Fed chair until the legal threats into Mr. Powell are resolved. For Mr. Tillis, the investigation is a blatant attempt to coerce Mr. Powell into lowering rates, undermining the Fed’s independence and confirming the politicization of the Justice Department.

“I’m not going to condone bad decision-making and bad behavior,” Mr. Tillis told reporters on Monday in reference to the Justice Department’s lack of evidence of any wrongdoing.

The department has vowed to continue its investigation, despite numerous legal setbacks.

“I think ultimately, he will be confirmed,” Senator John Kennedy of Louisiana, another Republican on the committee, told reporters on Monday. “I just don’t know what decade.”

Mr. Warsh’s ascent would mark a homecoming for the Wall Street financier, who served as a Fed governor from 2006-11.

Advertisement

Since leaving the Fed, he has amassed assets worth well in excess of $100 million, according to financial disclosures submitted before his hearing. Those have drawn scrutiny because Mr. Warsh repeatedly invoked “pre-existing confidentiality agreements” to avoid disclosing the details behind several of his investments. He has said he would divest a substantial amount of his assets before taking the job.

The global financial crisis dominated Mr. Warsh’s first tenure at the Fed, thrusting him into the middle of discussions about how the central bank should respond to the threat of bank failures, turmoil in financial markets and a painful recession that followed. Mr. Warsh, then the youngest-ever member of the Board of Governors, was initially supportive of the Fed’s efforts to shore up financial markets by buying enormous quantities of government bonds and expanding its balance sheet to ease strains in financial markets and support growth by keeping market-based rates low.

But he soon soured on subsequent efforts to buy more bonds and resigned in protest. That experience has stuck with Mr. Warsh, who has made a smaller balance sheet a pillar of his plans if he takes over as chair.

Mr. Warsh would also be likely to usher in changes to how the Fed communicates its policy views, having expressed misgivings about its strategy of providing so-called forward guidance, or hints about how interest rates may change in the future to guide expectations. He has also suggested that policymakers across the Fed system should speak far less. Mr. Powell held a news conference after each rate decision, or eight a year, and delivered speeches with regularity. Mr. Trump’s pick to join the Fed last year, Stephen I. Miran, often speaks multiple times a week.

“Once policymakers reveal their economic forecast, they can become prisoners of their own words,” Mr. Warsh said in a speech last year. “Fed leaders would be well served to skip opportunities to share their latest musings. The swivel-chair problem, rhetorically waxing and waning with the latest data release, is common and counterproductive.”

Advertisement

What is far less clear is how much Mr. Warsh would heed the president’s demands for lower interest rates. Mr. Trump said he would not pick someone for chair who did not support lower borrowing costs.

Mr. Warsh sought in his opening statement to downplay the costs of a president’s voicing his opinions about rates, saying central bankers must be “strong enough to listen to a diversity of views from all corners, humble enough to be open-minded to new ideas and new economic developments, wise enough to translate imperfect data into meaningful insight and dedicated enough to make judgments faithfully and wisely.”

Earlier this year, many officials at the Fed saw a path to gradually lower rates as the impact of Mr. Trump’s tariffs faded and inflation restarted its slide back toward 2 percent after almost of year of stalling out. The war in Iran — and the energy shock it has unleashed — has upended those forecasts, however, prompting officials to turn wary about lowering rates.

Mr. Warsh will face questions on Tuesday about the economic impact of the war and how it has changed his thinking around the Fed’s ability to lower rates. While at the Fed, he was known as an inflation hawk who often argued against providing policy relief for fear that it could stoke price pressures. He also said the Fed should aspire to engage in rule-based policymaking that stems from formulas that prescribe how officials should set rates based on levels of inflation and employment.

While campaigning to be chair, Mr. Warsh embraced the need for rate cuts, arguing that there was a path for lower borrowing costs because of his plans to shrink the balance sheet, which would lift longer-term rates that then could be offset by lowering short-term ones. He also argued that higher productivity from the boom in artificial intelligence could unleash higher growth without stoking inflation, which could give the Fed more space to lower rates than otherwise would be the case.

Advertisement

In his opening statement, Mr. Warsh made clear, however, that a failure to bring down inflation, which has been stuck above the Fed’s 2 percent target for roughly five years, would strictly be the Fed’s fault, suggesting that he would shoulder the blame if he did not bring it back down during his tenure.

“Inflation is a choice, and the Fed must take responsibility for it,” he will tell lawmakers.

Megan Mineiro contributed reporting.

Continue Reading
Advertisement

Trending