Trump Names Kevin Warsh as Fed Chair Pick to Succeed Powell

President Donald Trump announced on Friday that he plans to nominate Kevin Warsh, a former Federal Reserve governor, to serve as the next chair of the central bank. The move comes as Jerome Powell's term ends on May 23, and it follows months of speculation about Trump's choice for the key economic post. Trump made the announcement on his Truth Social platform, praising Warsh's experience and fit for the role. Warsh, 55, brings a background in finance and past Fed service during the 2008 financial crisis.

Background

Kevin Warsh joined the Federal Reserve as a governor in 2006 at age 35, making him the youngest person ever appointed to that position. He served until 2011 under Chair Ben Bernanke, where he played a central role in responding to the global financial crisis. Warsh often acted as Bernanke's point person with Wall Street and members of Congress. Before the Fed, he worked as an investment banker and held positions in President George W. Bush's administration.

After leaving the Fed, Warsh became a partner at investor Stanley Druckenmiller's family office. He also took on a fellowship at Stanford University's Hoover Institution. Warsh holds a law degree from Harvard, like Powell, and lacks a formal economics background, which would make him the second straight Fed chair without one in that field. He is married to Jane Lauder, from the Estée Lauder family.

Warsh has stayed active in public discussions about monetary policy. He has spoken at events for groups like the Group of Thirty and the International Monetary Fund. His time at the Fed included support for some emergency measures but growing doubts about long-term strategies like large-scale asset purchases.

Key Details

Trump posted on Truth Social: > "I have known Kevin for many years and have full confidence that he will be remembered as one of the GREAT Fed Chairmen, possibly the finest. also, he fits the role perfectly and will never disappoint. Congratulations, Kevin!"

Warsh has praised Trump's tax cuts and deregulation as drivers of growth. In recent comments, he said the U.S. economy is set to lead other major nations thanks to these policies. He has called for the Fed to support this expansion rather than hold it back.

Warsh has long questioned the Fed's large balance sheet, now at $6.5 trillion from years of bond buying and crisis responses. He argues this buildup has blurred lines between the central bank and government spending decisions. Shrinking it, he says, could free up room for lower short-term interest rates to help consumers and businesses.

Warsh's Fed Critiques

During his governorship, Warsh backed initial crisis aid but later opposed extended rounds of Treasury and mortgage purchases aimed at lowering long-term rates. He resigned in 2011 after pushing for changes. More recently, in a Wall Street Journal piece, he wrote:

"The Fed's oversized balance sheet, intended to assist major companies during a previous crisis, can be substantially reduced. This surplus can be redirected as lower interest rates to benefit households and small and medium-sized enterprises."

Warsh has also faulted Fed rules for hurting smaller banks and slowing credit to the real economy. He views the central bank as straying from its core jobs of stable prices and maximum employment, acting more like a broad government tool.

Trump's search for a new chair involved other names like Kevin Hassett. Warsh stood out for his ties to Republicans and finance leaders, plus some distance from daily White House duties.

Confirmation Path

The Senate must confirm Warsh after a review by the banking committee, where Republicans hold a narrow two-seat edge. North Carolina Senator Thom Tillis said on Friday he opposes any nominee until a Justice Department probe into Powell wraps up. Tillis called Warsh qualified but tied his support to resolving that issue. Losing even one committee vote could block the full Senate vote.

What This Means

If confirmed this spring, Warsh would steer the Fed at a time of strong growth from tax cuts and fewer rules, but with worries over deficits and inflation risks. Markets reacted to hints of his nomination by adjusting bets on rate cuts, pushing up bond yields as traders eyed less easing ahead. Warsh has said short-term rates should drop to ease borrowing for everyday people, paired with balance sheet cuts that might lift long-term rates unless spending slows.

His push for a smaller Fed footprint could mean fewer regulations on banks, potentially boosting lending to small firms. Warsh has suggested a new agreement between the Treasury and Fed to set clear goals for the balance sheet size, aiming to clarify roles and signal stability to markets.

Critics from past discussions point to Warsh's crisis-era moves as showing uneven judgment. Some economists see him as less focused on quick support for workers compared to other options. Supporters highlight his crisis experience and calls for policy shifts to match current growth.

For investors and households, a Warsh-led Fed might prioritize shrinking emergency-era tools over aggressive rate hikes. He has argued the Fed's past actions enabled too much deficit spending, especially in the pandemic. Lower short rates could cut costs on mortgages and car loans, but long-term yields might rise if bond sales pick up without spending restraint.

Businesses, especially smaller ones, could see easier credit if rules ease. Warsh blames current policies for favoring big players. The nomination arrives amid Powell's final weeks shadowed by the DOJ review, which Tillis wants settled first. That probe's details remain unclear but could delay the handoff.

Trump has pressed for Fed policies matching his growth agenda, including lower rates. Warsh aligns on supporting expansion but parts ways by warning against easy money long-term. His hawkish past on inflation suggests caution against overheating, even as he eyes near-term cuts.

Wall Street watches closely, given Warsh's ties there. His board roles at UPS and Coupang add corporate insight. Confirmation talks could start soon, with the committee's slim margin key. If approved, Warsh would take the helm as the economy hums but faces tests from debt levels and global shifts.