Would Kevin Warsh, Trump’s pick to head the Fed, protect its independence?
Warsh’s recent policy pivots have raised questions from some lawmakers and economists about what he really believes is the best policy path forward and what he will do if the president presses him to pursue something out of step with the economic data, says The New York Times. During his time as a Fed governor from 2006 to 2011, Warsh warned against cutting interest rates — including during the Great Recession — only to embrace rate cuts once Trump returned to office.
Warsh is a Stanford University graduate who earned his law degree from Harvard and married into the Lauder cosmetics family. He worked in investment banking at Morgan Stanley and served in the George W. Bush White House as a special assistant to the president for economic policy.
He then served on the Federal Reserve Board of Governors and “was instrumental in helping then-Chair Ben Bernanke navigate the 2008 financial crisis,” says PBS.
Warsh left the Fed in 2011 in part because he opposed the central bank bond purchases that were intended to lower long-term interest rates and encourage bank lending, says the Times. Since then, he’s worked with billionaire investor Stanley Druckenmiller and serves as a senior fellow at the Hoover Institution.
“Warsh is a serious guy with a long track record and a deep experience,” says Aaron Klein, a senior fellow in economic studies at the Brookings Institution. “Warsh was the Fed board’s interlocutor with the markets during the financial crisis.”
“Kevin has the credentials, credibility and horsepower to be an excellent Fed chair, and I think that will be clear to everyone in the confirmation process and then as he actually executes the job,” says Randal Quarles, the Fed’s former vice chair for supervision, who first worked with Warsh during the George W. Bush administration.
“Many on Wall Street backed Warsh, thinking he would be more independent than the runner-up, White House adviser Kevin Hassett,” says Greg Ip of The Wall Street Journal. They “suspect Warsh said what was needed to get the job, and after a suitable interval in office, will be his own man.”
“Warsh’s political skills helped him land the job and might also help him manage the mercurial president,” says Ip. “But Trump isn’t likely to sit by if Warsh disappoints him, judging by his treatment of Powell, whom he appointed in 2018.”
A separate WSJ article says Trump joked during a speech Saturday night that he would sue Warsh if he didn’t lower interest rates.
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