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President Donald Trump named his nominee for chairman of the Federal Reserve on Friday morning, and it’s favorite Kevin Warsh.
Warsh has been among the frontrunners to replace current chairman Jerome Powell for months, especially after Trump said he was impressed by “the two Kevins” (Warsh and Kevin Hassett, director of the United States National Economic Council) during the interview process. Trump confirmed Warsh’s nomination to lead the central bank on Truth Social on Friday, writing that he “has known Kevin for a long time, and (has) no doubt he will go down as one of the GREAT Fed Chairmen (sic), maybe the best.”
Warsh has the credentials that the market wants to see at the top of the central bank: He knows the inner workings of the central bank courtesy of a post on the Board of Governors from 2006 to 2011, and he was a key player inside then-Chairman Ben Bernanke as the country navigated a financial crisis.
He knows Washington, having been brought into the fold by President George Bush in 2002, when he served as special assistant to the president for economic policy and as executive secretary of the National Economic Council.
He also has the experience in the private sector that Trump favors. (Scott Bessent, pre-Treasury secretary, is the CEO of the global hedge fund Key Square Capital Management). Between 1995 and 2002, Warsh worked Morgan Stanleyhis last role was vice president and executive director.
But what does Warsh know outside of his CV?
His plans for the Fed echo the rhetoric Bessent pushed for a while (the duo occupied the same circle on Wall Street for years): The Fed should take a more back-seat approach. Investors may not like it early on; they’re used to checking more updates on the Fed’s thinking courtesy of press conferences, public appearances, the Beige Book, and tools like dotplot.
Having been introduced to the Fed under Bernanke, Warsh is also likely to follow in his mentor’s footsteps when it comes to leadership. While Powell received praise for his ability to take care of many cats in the Federal Open Market Committee (FOMC) to a consensus, the Harvard and Stanford alumni can instead build strategies in a small group of allies, before expanding his thinking to a wider group.
As for the current content of Warsh, in 2002 he married Jane Lauder, granddaughter of Estée Lauder and an heir to the beauty empire. Perhaps unusually for Washington’s elite, they invested time and money in improving the longevity of the pet-inspired cockapoo named Thaddeus. In November, Lauder’s (called one of the It’s fortune Most Powerful Woman) investment firm, TAW Ventures, led the funding round for British fresh dog food brand Marleybones.
Big picture approach
With Warsh at the podium after the upcoming FOMC meetings, the narrative is set to change. Trump has made it clear that his nominee will be dovish, meaning the incoming chairman will likely have a more bullish outlook.
Warsh criticized Powell’s wait-and-see approach, writing in a WSJ op-ed Late last year the Fed had to “reject its forecast of stagflation for the next couple of years, saying that subpar growth and inflation of 40% above target is the best that can be done.” The Fed nominee is a US stalwart in the same vein as JPMorgan CEO Jamie Dimon (who, incidentally, supported by Warsh), which believes that the country will continue to post strong growth in the goodwill of the entrepreneurial spirit-AI is an important example.
Economists also suggest that the Fed has become overextended in the short term, moving interest rate expectations on a daily basis when, in fact, the an often forgotten third aspect of the Fed’s mandate is to “moderate long-term interest rates.” Warsh’s press conferences can instead focus on broader macroeconomic topics or headwinds, rather than leaving analysts to speculate about the meaning of minor changes in spoken language.
Traditional way of communication
Warsh is not bright; he enjoys fuss-free fine dining while reading the newspaper and is more often found on the sidelines of economic conferences than on stage. The other candidates got more media interviews, but Warsh held back.
Indeed, the main question about Warsh’s candidacy is whether he can convince the markets of his political independence and, by extension, the autonomy of the central bank. Trump’s ongoing pressure campaign has many fearing that he will appoint a Yes Man, who will sail through the confirmation process in the Republican-controlled Senate, and push rates to unhealthy levels to appease the president, harming the economy as a result. (Fed watchers already got a taste of what a Trump 2.0 appointee could do at the FOMC, following last year’s confirmation of White House economic adviser Stephen Miran, who has been pushing for base rate cuts as a Fed governor ever since).
Powell’s advice to his successor was to avoid politics as much as possible, and Warsh made it clear that he wanted the Fed to limit public exposure (the source said luck they are only too happy to oblige).
“Fed leaders would be well served to skip opportunities to share their latest predictions,” Warsh said earlier last year, adding that members have become “prisoners of their own words.” This is a signal that the Fed may be returning to its “never apologize, never explain” roots, perhaps uncomfortable for markets in the short term, but potentially easing tensions in the White House in the longer term.
