Trump Taps Kevin Warsh for Fed Chair

Kevin Warsh is no stranger to the Federal Reserve, having served as a governor from 2006 to 2011. Appointed by President George W. Bush, he was the youngest person ever named to the central bank's board at age 35 and acted as its primary liaison to Wall Street during the 2008 financial crisis. Before his first Fed tenure, Warsh worked in the mergers and acquisitions department at Morgan Stanley and later as a key economic advisor in the Bush White House, serving as Special Assistant to the President for Economic Policy. Historically an inflation "hawk," Warsh became a vocal critic of the Fed's large-scale bond-buying programs, known as quantitative easing (QE). He resigned from the board in 2011 amid disagreement over a second round of QE and has since argued the policy creates a "moral hazard" by enabling excessive government spending. A central tenet of Warsh's philosophy is the need to shrink the Fed's massive balance sheet, which swelled from under $1 trillion before the 2008 crisis to a peak near $9 trillion. He contends that its large footprint distorts capital allocation in the economy. His current support for rate cuts hinges on the argument that productivity gains from artificial intelligence can naturally suppress inflation, similar to the tech-driven boom of the 1990s. This view suggests the economy can grow faster without overheating, allowing for lower interest rates. Warsh's strategy may involve pairing interest rate cuts with continued "quantitative tightening"—the process of reducing the Fed's asset holdings. This approach aims to offset the inflationary pressure of lower rates by removing excess liquidity from the financial system. Outside of public service, Warsh is a distinguished visiting fellow at Stanford's Hoover Institution and a partner at Duquesne Family Office, the investment firm of billionaire Stanley Druckenmiller. He was also a finalist for the Fed Chair position in 2017 when Trump ultimately selected Jerome Powell.