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President Donald Trump named his nominee to chair the Federal Reserve on Friday morning, and it’s the likely front-runner, Kevin Warsh.
Warsh was among the frontrunners to replace current chairman Jerome Powell for several months, especially after Trump said he was impressed by « the two Kevins » (Warsh and Kevin Hassett, director of the US National Economic Council) during the interview process. Trump confirmed Warsh’s nomination to head the Fed on Truth Social on Friday, writing that he « has known Kevin for a long time and had no doubt he would go down as one of the GREAT Fed Chairs (sic), maybe the best. »
Warsh has the credentials markets want to see at the top of the Fed: He knows the inner workings of the Fed, having served on the Board of Governors from 2006 to 2011 and was a key player in then-Chairman Ben Bernanke’s inner circle as the nation navigated the financial crisis.
He is familiar with Washington, having been recruited by President George Bush in 2002 to serve as Special Assistant to the President on Economic Policy and Executive Secretary of the National Economic Council.
He also has experience in the private sector, which Trump favors. (Scott Bessent, Treasury Secretary, was CEO of global hedge fund Key Square Capital Management). In the years 1995–2002, Warsh worked Morgan Stanleyhis last role is vice president and executive director.
But what is known about Warsh beyond the CV?
His plans for the Fed mirror Bessent’s rhetoric, which Bessent has been pushing for some time (the two lived in the same Wall Street circle for years): The Fed should take a more backseat approach. Investors may not like this early on; they are used to studying many updates on the Fed’s thinking thanks to 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 leadership footsteps. While Powell is praised for her ability to shepherd the many cats of the Federal Open Market Committee (FOMC) toward consensus, the Harvard and Stanford alumni can instead strategize with a smaller group of allies before expanding their thinking to a larger group.
As for Warsh’s current inner circle, in 2002 he married Jane Lauder, granddaughter of Estée Lauder and heir to the beauty empire. Perhaps unusually for Washington’s elite, they are investing both time and money into improving pet longevity — inspired by a cockapoo named Thaddeus. In November, Lauder’s (designated as one Fortune The most powerful women) investment company TAW Ventures led the financing round for the British fresh dog food brand Marleybones.
A big picture approach
When Warsh is on the podium after the upcoming FOMC meetings, the story will change. Trump has made it clear that his nominee will be a no-brainer, meaning the incoming president is likely to have a more positive outlook.
Warsh has criticized Powell’s wait-and-see approach, writing a WSJ op-ed late last year that the Fed should « abandon its forecast of stagflation over the next couple of years, as if deficit growth and 40 percent above-target inflation were the best that could be done. » The Fed candidate is emerging in the United States in the same way as JPMorgan CEO Jamie Dimon (who, by the way has supported Warsh), believing that the nation will continue to grow strongly thanks to its entrepreneurial spirit – artificial intelligence being a key example.
Economists have also suggested that the Fed is too stuck in the short term, changing interest rate expectations on a daily basis, when in fact An often-overlooked third aspect of the Fed’s mandate is to « moderate long-term interest rates. » Instead, Warsh’s press conferences may focus on broader macroeconomic issues or headwinds, rather than leaving analysts to speculate on the meaning of small changes in colloquial language.
A traditional way of communication
Warsh is not flashy; he enjoys casual fine dining while reading the newspaper, and is often found on the sidelines of business conferences rather than on stage. The other candidates had received numerous media interviews, but Warsh held back.
In fact, the key question for Warsh’s candidacy is whether he can convince the market of his political independence and, by extension, the central bank’s autonomy. Trump’s sustained pressure campaign has many fearing he will nominate a Yes man who will sail through the confirmation process in the Republican-controlled Senate and cut interest rates to unhealthy levels to appease the president, which will hurt the economy. (Fed watchers have already gotten a taste of how a Trump 2.0 appointee might behave on the FOMC after last year’s confirmation of White House economic adviser Stephen Miran, who has since pushed for lower interest rates as Fed governor).
Powell’s advice to his successor is to avoid politics as much as possible, and Warsh has made it clear that he wants the Fed to moderate its publicity (something the sources said Luck they are only too happy to oblige).
« Fed leaders would do well to miss opportunities to share their latest ideas, » Warsh said early last year, adding that members were becoming « prisoners of their own words. » It’s a signal that the Fed may be returning to its « never apologize, never explain » roots, which may be unsettling to markets in the short term but potentially ease tensions with the White House in the longer term.
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