Trump Nominates Warsh for Next Fed Head01/30 06:23

   President Donald Trump said Friday that he will nominate former Federal 
Reserve official Kevin Warsh to be the next chair of the Fed, a pick likely to 
result in sharp changes to the powerful agency that could bring it closer to 
the White House and reduce its longtime independence from day-to-day politics.

   WASHINGTON (AP) -- President Donald Trump said Friday that he will nominate 
former Federal Reserve official Kevin Warsh to be the next chair of the Fed, a 
pick likely to result in sharp changes to the powerful agency that could bring 
it closer to the White House and reduce its longtime independence from 
day-to-day politics.

   Warsh would replace current chair Jerome Powell when his term expires in 
May. Trump chose Powell to lead the Fed in 2017 but this year has relentlessly 
assailed him for not cutting interest rates quickly enough.

   "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," Trump posted on 
his Truth Social site. "On top of everything else, he is 'central casting,' and 
he will never let you down."

   The appointment, which requires Senate confirmation, amounts to a return 
trip for Warsh, 55, who was a member of the Fed's board from 2006 to 2011. He 
was the youngest governor in history when he was appointed at age 35. He is 
currently a fellow at the right-leaning Hoover Institution and a lecturer at 
the Stanford Graduate School of Business.

   In some ways, Warsh is an unlikely choice for the Republican president 
because he has long been a hawk in Fed parlance, or someone who typically 
supports higher interest rates to control inflation. Trump has said the Fed's 
key rate should be as low as 1%, far below its current level of about 3.6%, a 
stance few economists endorse.

   During his time as governor, Warsh objected to some of the low-interest rate 
policies that the Fed pursued during and after the 2008-09 Great Recession. He 
also often expressed concern at that time that inflation would soon accelerate, 
even though it remained at rock-bottom levels for many years after that 
recession ended.

   But more recently, however, in speeches and opinion columns, Warsh has said 
he supports lower rates.

   Controlling the Fed

   Warsh's appointment would be a major step toward Trump asserting more 
control over the Fed, one of the few remaining independent federal agencies. 
While all presidents influence Fed policy through appointments, Trump's 
rhetorical attacks on the central bank have raised concerns about its status as 
an independent institution.

   The announcement comes after an extended and unusually public search that 
underscored the importance of the decision to Trump and the potential impact it 
could have on the economy. The chair of the Federal Reserve is one of the most 
powerful economic officials in the world, tasked with combating inflation in 
the United States while also supporting maximum employment. The Fed is also the 
nation's top banking regulator.

   The Fed's rate decisions, over time, influence borrowing costs throughout 
the economy, including for mortgages, car loans and credit cards.

   For now, Warsh would fill a seat on the Fed's governing board that was 
temporarily occupied by Stephen Miran, a White House adviser who Trump 
appointed in September. Once on the board, Trump could then elevate Warsh to 
the chair position when Powell's term ends in May.

   Trump's economic policies

   Since Trump's reelection, Warsh has expressed support for the president's 
economic policies, despite a history as a more conventional, pro-free trade 
Republican.

   In a January 2025 column in The Wall Street Journal, Warsh wrote that "the 
Trump administration's strong deregulatory policies, if implemented, would be 
disinflationary. Cutbacks in government spending -- inspired by the Department 
of Government Efficiency -- would also materially reduce inflationary 
pressures." Lower inflation would allow the Fed to deliver the rate cuts the 
president wants.

   Since his first term, Trump has broken with several decades of precedent 
under which presidents have avoided publicly calling for rate cuts, out of 
respect for the Fed's status as an independent agency.

   Trump has also sought to exert more control over the Fed. In August he tried 
to fire Lisa Cook, one of seven governors on the Fed's board, in an effort to 
secure a majority of the board. He has appointed three other members, including 
two in his first term.

   Cook, however, sued to keep her job, and the Supreme Court, in a hearing 
last week, appeared inclined to let her keep her job while her suit is resolved.

   Economic research has found that independent central banks have better track 
records of controlling inflation. Elected officials, like Trump, often demand 
lower interest rates to juice growth and hiring, which can fuel higher prices.

   Trump had said he would appoint a Fed chair who will cut interest rates, 
which he says will reduce the borrowing costs of the federal government's huge 
$38 trillion debt pile. Trump also wants lower rates to boost moribund home 
sales, which have been held back partly by higher mortgage costs. Yet the Fed 
doesn't directly set longer-term interest rates for things like home and car 
purchases.

   Potential challenges and pushback

   If confirmed by the Senate, Warsh would face challenges in pushing interest 
rates much lower. The chair is just one member of the Fed's 19-person 
rate-setting committee, with 12 of those officials voting on each rate 
decision. The committee is already split between those worried about persistent 
inflation, who'd like to keep rates unchanged, and those who think that recent 
upticks in unemployment point to a stumbling economy that needs lower interest 
rates to bolster hiring.

   Financial markets could also push back. If the Fed cuts its short-term rate 
too aggressively and is seen as doing so for political reasons, then Wall 
Street investors could sell Treasury bonds out of fear that inflation would 
rise. Such sales would push up longer-term interest rates, including mortgage 
rates, and backfire on Warsh.

   Trump considered appointing Warsh as Fed chair during his first term, though 
ultimately he went with Powell. Warsh's father-in-law is Ronald Lauder, heir to 
the Estee Lauder cosmetics fortune and a longtime donor and confidant of 
Trump's.

   Who is Warsh?

   Prior to serving on the Fed's board in 2006, Warsh was an economic aide in 
George W. Bush's Republican administration and was an investment banker at 
Morgan Stanley.

   Warsh worked closely with then-Chair Ben Bernanke in 2008-09 during the 
central bank's efforts to combat the financial crisis and the Great Recession. 
Bernanke later wrote in his memoirs that Warsh was "one of my closest advisers 
and confidants" and added that his "political and markets savvy and many 
contacts on Wall Street would prove invaluable."

   Warsh, however, raised concerns in 2008, as the economy tumbled into a deep 
recession, that further interest rate cuts by the Fed could spur inflation. Yet 
even after the Fed cut its rate to nearly zero, inflation stayed low.

   And he objected in meetings in 2011 to the Fed's decision to purchase $600 
billion of Treasury bonds, an effort to lower long-term interest rates, though 
he ultimately voted in favor of the decision at Bernanke's behest.

   In recent months, Warsh has become much more critical of the Fed, calling 
for "regime change" and assailing Powell for engaging on issues like climate 
change and diversity, equity and inclusion, which Warsh said are outside the 
Fed's mandate.

   His more critical approach suggests that if he does ascend to the position 
of chair, it would amount to a sharp transition at the Fed.

   In a July interview on CNBC, Warsh said Fed policy "has been broken for 
quite a long time."

   "The central bank that sits there today is radically different than the 
central bank I joined in 2006," he added. By allowing inflation to surge in 
2021-22, the Fed "brought about the greatest mistake in macroeconomic policy in 
45 years, that divided the country."