Trump Picks Kevin Warsh To Lead Federal Reserve, Tapping Central Bank Critic

President Donald Trump said he will nominate Kevin Warsh to succeed Jerome Powell as chair of the Federal Reserve, putting the former Fed board member atop an institution that Trump has relentlessly attacked for failing to cut interest rates.

Warsh, 55, now a visiting fellow at Stanford University’s Hoover Institution, is an established figure in Republican economic circles whose selection to head the world’s most important central bank is likely to be well-received by GOP policymakers. He’s a former Morgan Stanley investment banker who was an adviser to President George W. Bush and has been in the mix for high-level roles in the Trump administration since the president’s first term.

“I have known Kevin for a long period of time, and have no doubt that he will go down as one of the GREAT Fed Chairmen, maybe the best,” the president posted on social media Friday. “On top of everything else, he is 'central casting,' and he will never let you down.”

Other candidates for the opening at the Fed included BlackRock executive Rick Rieder, longtime Trump economic adviser Kevin Hassett and current Fed board member Christopher Waller. Treasury Secretary Scott Bessent, who led the search process, had also been in the running but removed himself from contention.

The selection of Warsh represents Trump’s most consequential economic policy appointment of his second term and the culmination of the president’s drive to gain more influence over the central bank. He will be walking into a maze of political obstacles in the coming months. Trump regularly advocates for rates to be dramatically lower and has made clear he expects loyalty from his Fed chair.

At the same time, key Republican senators have grown increasingly vocal in their defense of the central bank’s political independence after the administration launched a criminal investigation into Powell’s testimony to Congress last year about the Fed’s costly headquarters renovations. The outgoing Fed chief — whose term as chair expires in May — has cast the probe as an effort to pressure him to lower rates.

Warsh will face questions about how he intends to handle input from Trump, who has argued that he should have a say in monetary policy.

Warsh is married to the granddaughter of cosmetics magnate Estée Lauder, and his father-in-law — billionaire businessperson and GOP megadonor Ronald Lauder — is a friend and former classmate of the president.

The former Fed official was on the short list to be Trump’s chair in the president’s first term, before the president chose Powell. In 2018, Warsh told POLITICO that borrowing costs were not a subject that Trump “delicately danced around” in the interview process the first time around.

“The president has a view about asset prices and stock markets,” he said. “He has a view based on his long history in his prior life as a developer and real estate mogul of the role of interest rates.”

In some respects, Warsh is an unusual pick for the president. During his time at the central bank, he was known for being more hawkish about the dangers posed by inflation. That position is consistent with higher rates rather than the lower rates Trump has called for.

Indeed, when markets began pricing in a Warsh chairship, after the president suggested he was leaning toward keeping Hassett at the White House, bond yields rose as investors lowered their bets for rate cuts.

Despite that reputation, Warsh has said that Powell should have moved to lower short-term interest rates to bring down borrowing costs for everyday consumers. He has suggested that rate cuts could come alongside an effort to reduce the central bank’s massive holdings of U.S. government debt — an effort that could lead to higher long-term rates if Congress does not rein in ballooning deficits.

“Economic growth in the U.S. is poised to boom, but it’s being held down by bad economic policies coming from the central bank,” Warsh said in an appearance on former Trump adviser Larry Kudlow’s Fox Business program last summer. “Interest rates should be lower. The balance sheet should be smaller.”

In this sense, Warsh is in sync with Bessent, who has also expressed skepticism both about the Fed’s influence on markets and the size of the federal government. Both men have worked with Stanley Druckenmiller. Warsh is currently a partner at the legendary investor’s family office.

The size of the Fed’s financial holdings has been a major concern of Warsh’s since even before he stepped down as a Fed governor in 2011.

He was a key figure in managing the central bank’s response to the 2008 global financial crisis. Then-Chair Ben Bernanke, in his book “The Courage to Act,” described Warsh as one of his most frequent companions in meetings and on conference calls.

But later in his career at the Fed, Warsh began pushing back on Bernanke’s decision to continue significant purchases of both Treasury bonds and bundled mortgages to push down long-term interest rates. In one instance, he voted with the chair on a second round of asset purchases — and then wrote an op-ed the next week expressing reservations about the policy. A few months later, he resigned from the central bank.

Bernanke said in his book that he held no grudges against Warsh, adding that his former colleague had voiced reservations even before the vote.

More recently, he floated the prospect of a new Treasury-Fed accord — which provides the basis for the central bank’s independence — that would allow the Treasury secretary and central bank chief to “describe to markets plainly and with deliberation, ‘This is our objective for the size of the Fed’s balance sheet.’”

In a speech to the Group of Thirty and the International Monetary Fund, he said the Fed’s huge debt holdings have made it harder to identify “the line between the central bank and the ostensible fiscal authority” of Congress and the White House.

In addition to his work at the Hoover Institution and with Druckenmiller, Warsh holds board seats at UPS and the Korean e-commerce company Coupang.