Warsh is not an economist who judges policy by the state of the economy. From what I have read he is more focused on institutions and the full array of public policies that affect the economy, of which monetary policy is but one. The fact that he believes that the policy rate as well as market rates should be down around 3% now should leave no doubt in which direction he will take the Fed and FOMC. In short, he's a political pick, not a financial or economic expert. Just a reminder: the best Fed Chairs were experts themselves: Volker, Greenspan, Bernanke, Yellen. If his history tells his story, he probably won't make that list. And the nation will be the worse for it.
IMO, the major problem with ANY Trump appointee for ANY position is his DEMAND of loyalty pledges to him, and him alone. Those pledges would supersede any/all historical postures and sentiments of those appointees.
In the case of the Fed, perhaps the most important INDEPENDENT agency, this as you state, is problematic. Any pledge of total allegiance to Trump renders the Fed Chair a puppet to the irrational whims and disastrous decisions of an authoritarian dictator.
This could render America an equivalent of a banana republic.
I don’t think that thinking of him as a hawk or a dove is productive. As Paul Krugman I think rightly put it, Warsh is a lapdog.
Thomas Hoenig was a hawk. I had disagreements about his views, but they were transparent and principled. But Warsh is not a hawk. He’s also not a dove. He’s, first, second and last, a Republican. His views on monetary policy quite clearly depend not on economic conditions, but on the party that occupies the White House. And his public remarks in 2010 were entirely incoherent. They declared that the Fed should take its cues from market reactions. But not like… what markets actually say, but what Warsh imagines they should say. Which is why in 2010 he was yelling for tighter money because he thought that markets should be warning of coming inflation (even though they were actually doing entirely the opposite). Which makes him entirely unsuited for the role.
Neil Dutta agrees with you he made a comment that of all the mentioned candidates that Trump picked the worst candidate based at his time at the Fed. Also, makes one wonder if he sold his soul to the president based on his prior hawkishness.
This is a great summary of historical insights into Warsh to help develop a thesis on how he may govern the Fed if he makes it thru the senate confirmation hearings. I spent alot of time this weekend looking at his 'talk' to go along with my exploration of Bessent. I believe that there could be two main things that got him nominated by Trump (and Bessent) and you highlight the subtle one here...1) he believes the Fed funds rate is too high/restrictive and will work to bring it down to 2-3%, 2) he believes the Fed should get out of the way and let the treasury, President and Congress drive the economy with their larger, more appropriate fiscal mechanisms. I believe this second item you highlight in this post is critical to Bessent and Trump as they want to set policy and direction without interference. I expect his talk of reducing the balance sheet will be similar to Bessent's negative view of Yellen issuing T-bills instead of duration but when Bessent took Yellen's chair it was quickly apparent to him that 'oh, that is the right thing to do given the circumstances'...I expect Warsh to have the same 'findings' if/when he takes the chair and will continue the 'not QE, QE'. We shall see but the Senate confirmation hearings will be fun to listen to!
I propose the fed should have a strategic yacht reserve so the next time unemployment rises unacceptably every billionaire would get a yacht sized in proportion to their wealth
Warsh’s father-in-law is a fellow billionaire friend of the President. It is not a stretch, given the President’s cabinet choices, to believe that having a father-in-law who is a multi-billionaire friend of the President played a role in the choice. Just sayin!
Ronald Lauder is also responsible for suggesting to his buddy Trump that acquisition of Greenland should be a US objective. As Fed Chair, Lauder son-in-law Warsh may play large role in deciding in which Fed district Greenland should be placed. New York (2nd district) would seem logical unless Trump is angry at New York Fed President Williams for not following Warsh's lead.
The 'hawk' label is a conveniently fictional confirmation fig leaf lending cover for adding a compliant policy stooge to aid and abet further US dollar debasement.
Great to get your thoughts. Warsh strikes me as conceited, not the kind of guy who, as Chairman, will defer to the consensus if he can avoid it. But has the Chair ever dissented on a Committee decision? It's very speculative, but how will the pressure for consensus affect decision-making when the Chair's views differ from those of the other members? Don't you expect considerable deference to the Chair?
Seems to me that QE only made the rich even richer and screwed over middle and lower classes keeping them farther away from owning assets. Pretending that government selecting winners and losers by arbitrarily bidding up asset prices to the moon is somehow benefiting the "economy" is not convincing. Congress for all it's flaws at least have some responsibility to represent the people. Warsh pointing these obvious common sense talking points is smeared as careless. Most people would benefit from wage-price spiral and asset price collapse because it would give them a chance to get ahead.
The bottom line to me is that the Warsh like Powell and Yellen before him simply doesn't understand the monetary system and have the interest rate thing 100% backwards. In other words the belief low rates will lead to inflation (not true) and higher rates will bring it down (also not true).
"That should disqualify him from ever being called a dove". Indeed, it should disqualify him from ever setting foot near the fed ever again, much less as chair.
"By the way, that’s what central casting for a Fed Chair looks like". 😂
"That approach didn’t shift the consensus at the Fed in 2010, and it is unlikely to do so in 2026 either". 🤞🤞🤞 We can only hope. 🤞🤞🤞 One thing we know for sure is that Trumpkopf doesn't plan to stop with the chair - he wants to replace the whole board with sycophants.
In summary, Kevin Warsh is utterly incompetent. He's the least worst of two Kevins. At least we don't have to be subjected to the other Kevin's perpetual smirk.
It should be a contentious confirmation hearing, but I'll bet GOP senators will lob nothing but puff balls at him.
Warsh is not an economist who judges policy by the state of the economy. From what I have read he is more focused on institutions and the full array of public policies that affect the economy, of which monetary policy is but one. The fact that he believes that the policy rate as well as market rates should be down around 3% now should leave no doubt in which direction he will take the Fed and FOMC. In short, he's a political pick, not a financial or economic expert. Just a reminder: the best Fed Chairs were experts themselves: Volker, Greenspan, Bernanke, Yellen. If his history tells his story, he probably won't make that list. And the nation will be the worse for it.
Love this piece, Claudia!
IMO, the major problem with ANY Trump appointee for ANY position is his DEMAND of loyalty pledges to him, and him alone. Those pledges would supersede any/all historical postures and sentiments of those appointees.
In the case of the Fed, perhaps the most important INDEPENDENT agency, this as you state, is problematic. Any pledge of total allegiance to Trump renders the Fed Chair a puppet to the irrational whims and disastrous decisions of an authoritarian dictator.
This could render America an equivalent of a banana republic.
I don’t think that thinking of him as a hawk or a dove is productive. As Paul Krugman I think rightly put it, Warsh is a lapdog.
Thomas Hoenig was a hawk. I had disagreements about his views, but they were transparent and principled. But Warsh is not a hawk. He’s also not a dove. He’s, first, second and last, a Republican. His views on monetary policy quite clearly depend not on economic conditions, but on the party that occupies the White House. And his public remarks in 2010 were entirely incoherent. They declared that the Fed should take its cues from market reactions. But not like… what markets actually say, but what Warsh imagines they should say. Which is why in 2010 he was yelling for tighter money because he thought that markets should be warning of coming inflation (even though they were actually doing entirely the opposite). Which makes him entirely unsuited for the role.
Neil Dutta agrees with you he made a comment that of all the mentioned candidates that Trump picked the worst candidate based at his time at the Fed. Also, makes one wonder if he sold his soul to the president based on his prior hawkishness.
This is a great summary of historical insights into Warsh to help develop a thesis on how he may govern the Fed if he makes it thru the senate confirmation hearings. I spent alot of time this weekend looking at his 'talk' to go along with my exploration of Bessent. I believe that there could be two main things that got him nominated by Trump (and Bessent) and you highlight the subtle one here...1) he believes the Fed funds rate is too high/restrictive and will work to bring it down to 2-3%, 2) he believes the Fed should get out of the way and let the treasury, President and Congress drive the economy with their larger, more appropriate fiscal mechanisms. I believe this second item you highlight in this post is critical to Bessent and Trump as they want to set policy and direction without interference. I expect his talk of reducing the balance sheet will be similar to Bessent's negative view of Yellen issuing T-bills instead of duration but when Bessent took Yellen's chair it was quickly apparent to him that 'oh, that is the right thing to do given the circumstances'...I expect Warsh to have the same 'findings' if/when he takes the chair and will continue the 'not QE, QE'. We shall see but the Senate confirmation hearings will be fun to listen to!
As a layperson, I've been struggling to understand the implications of Warsh's nomination. This helped a lot! Thanks!!
I propose the fed should have a strategic yacht reserve so the next time unemployment rises unacceptably every billionaire would get a yacht sized in proportion to their wealth
Thanks for a very even-handed assessment. I just sent you a Warsh cartoon from 2007.
Warsh’s father-in-law is a fellow billionaire friend of the President. It is not a stretch, given the President’s cabinet choices, to believe that having a father-in-law who is a multi-billionaire friend of the President played a role in the choice. Just sayin!
Ronald Lauder is also responsible for suggesting to his buddy Trump that acquisition of Greenland should be a US objective. As Fed Chair, Lauder son-in-law Warsh may play large role in deciding in which Fed district Greenland should be placed. New York (2nd district) would seem logical unless Trump is angry at New York Fed President Williams for not following Warsh's lead.
Especially if he "invests" a few million in $KingMAGAcoin.
The 'hawk' label is a conveniently fictional confirmation fig leaf lending cover for adding a compliant policy stooge to aid and abet further US dollar debasement.
The short version. Warsh is another Trump toady, a political hack who will do the bidding of the oligarchs pulling his strings.
Really?
Great to get your thoughts. Warsh strikes me as conceited, not the kind of guy who, as Chairman, will defer to the consensus if he can avoid it. But has the Chair ever dissented on a Committee decision? It's very speculative, but how will the pressure for consensus affect decision-making when the Chair's views differ from those of the other members? Don't you expect considerable deference to the Chair?
It’s very rare for the Chair to formally be in the dissent but it’s happened. Normally, the Chair would pull the vote.
Seems to me that QE only made the rich even richer and screwed over middle and lower classes keeping them farther away from owning assets. Pretending that government selecting winners and losers by arbitrarily bidding up asset prices to the moon is somehow benefiting the "economy" is not convincing. Congress for all it's flaws at least have some responsibility to represent the people. Warsh pointing these obvious common sense talking points is smeared as careless. Most people would benefit from wage-price spiral and asset price collapse because it would give them a chance to get ahead.
The bottom line to me is that the Warsh like Powell and Yellen before him simply doesn't understand the monetary system and have the interest rate thing 100% backwards. In other words the belief low rates will lead to inflation (not true) and higher rates will bring it down (also not true).
The Warsh Paradox: https://www.dropbox.com/scl/fi/8jcd8vcde9uo5619drvz2/The-Warsh-Paradox.pdf?rlkey=i63pwia2v6dkky2jxozuakayi&st=hv32kx6t&dl=0
"That should disqualify him from ever being called a dove". Indeed, it should disqualify him from ever setting foot near the fed ever again, much less as chair.
"By the way, that’s what central casting for a Fed Chair looks like". 😂
"That approach didn’t shift the consensus at the Fed in 2010, and it is unlikely to do so in 2026 either". 🤞🤞🤞 We can only hope. 🤞🤞🤞 One thing we know for sure is that Trumpkopf doesn't plan to stop with the chair - he wants to replace the whole board with sycophants.
In summary, Kevin Warsh is utterly incompetent. He's the least worst of two Kevins. At least we don't have to be subjected to the other Kevin's perpetual smirk.
It should be a contentious confirmation hearing, but I'll bet GOP senators will lob nothing but puff balls at him.
GOP Senators confirmed Hegseth and RFK Jr. After this, the entire confirmation process can be seen as nothing other than a sick joke.