WASHINGTON (AP) — The U.S. Senate on Wednesday approved Kevin Warsh To lead the Federal Reserve System. President Donald Trump chose the former Fed director to replace Jerome Powell, believing that Warsh could deliver the economic boom the president had promised voters.
Warsh will take over a fractured central bank grappling with the economic fallout from the war with Iran that began on February 28th between the United States and Israel. The conflict has sent energy prices soaring, making it harder for the Fed to reduce inflation to its 2% target.
But President Trump has called for lower interest rates, rather than the higher rates needed to curb inflation. Mr. Warsh, who characterized himself as an inflation hawk early in his career, has recently echoed Mr. Trump’s views, arguing that artificial intelligence and other technologies can boost productivity and economic growth without causing inflation.
Mr. Trump has consistently attacked Mr. Powell for rejecting the steep interest rates he believes would boost the economy. And his Justice Department had launched an investigation into the Fed that was widely seen as aimed at ousting Mr. Powell. Warsh’s confirmation was delayed due to legal battles. Sen. Thom Tillis, R-North Carolina, said he would oppose Mr. Warsh until the Justice Department shuts down its investigation, which it finally did last month.
In an unusual move, Powell said he would remain on the Fed board indefinitely. After Mr. Warsh takes over as chairman, Mr. Powell’s term as chairman will end, but his term as a Fed board member will not expire until 2028, citing President Trump’s “unprecedented” attack on the central bank’s independence.
Mr. Powell’s continued presence could make things awkward for Mr. Warsh. That’s especially true when trying to convince other Fed officials to cut rates.
President Trump said Warsh comes from “central casting,” revealing much about the president’s own views on the 56-year-old’s appearance and traditional heritage. Warsh has many traps for traditional picks to lead. the world’s most important central bankBut President Trump has said the new chairman needs to lower the benchmark interest rate to suit the White House’s preferences, and he is doing so at an admittedly unusual time for the Fed.
Cutting interest rates to the extent President Trump seeks could temporarily boost growth, but it also risks overheating the economy at a time when inflation is already rising and affordability is a top concern for many Americans.
Warsh was the runner-up for the Federal Reserve chair position, which was confirmed by the Senate to President Trump in 2017. Powell He will lead the central bank. Trump later said he received bad advice about Powell.
Warsh holds degrees from Stanford University and Harvard Law School. He is also married to Jane Lauder, the daughter of billionaire cosmetics heir Ronald Lauder, who is a major donor to the Republican Party.
Senate Democrats are Blame Warsh For failing to fully disclose details of his assets, which amount to at least $100 million. His investments include stakes in Polymarket and SpaceX, but he did not disclose the size of his holdings. He has promised to sell all of these assets within 90 days of taking office.
At age 35, Warsh is the youngest of the Fed’s seven board members, a post he held from 2006 to 2011. He previously served as an economic aide in the Republican administration of George W. Bush and was an investment banker at Morgan Stanley.
Warsh worked closely with then-Chairman Ben Bernanke from 2008 to 2009 during the central bank’s efforts to combat the financial crisis and Great Recession. Mr. Bernanke later wrote in his memoirs that Mr. Warsh was “one of my closest advisors and confidants,” adding that Mr. Warsh’s “savvy political and market knowledge and many contacts on Wall Street will prove invaluable.”
Still, Mr. Warsh appeared to be misguided at a key moment about the depth of the challenges facing the U.S. economy, as mortgage defaults and layoffs increased during the Great Recession. He wanted the Fed to keep benchmark interest rates high at a time when the economy was at risk of deflation and collapse.
Warsh caused concern In 2008, it was thought that further rate cuts by the Fed could spur inflation. But even after the Fed cut interest rates to near zero, inflation remained low.
At a meeting in 2011, he opposed the Fed’s decision to buy $600 billion in government bonds aimed at lowering long-term interest rates, but ultimately voted in favor of the decision at Bernanke’s request.
Mr. Warsh has also at times acted like a pre-Trump Republican, calling in a 2010 speech to end “creeping protectionism” as opposed to “pro-growth policies.” Trump has since overhauled Republican doctrine by declaring an economic emergency and unilaterally imposing import taxes last year, pushing for a massive hike in import taxes.
Warsh is a visiting economics fellow at the Hoover Institution, a conservative think tank at Stanford University. He is also a lecturer at the Stanford Graduate School of Business and a partner in the Duquesne Family Office, which manages the assets of billionaire investor Stanley Druckenmiller.
In what appeared to be an aggressive campaign against the Fed post, Mr. Warsh criticized the Fed in an interview, calling for “systemic change” and criticizing Mr. Powell’s work on issues such as climate change, diversity, equity and inclusion, which Mr. Warsh said were outside the scope of the Fed’s mandate.
Warsh said in an interview with CNBC last year that Fed policy “has been broken for quite some time.”
“The central bank that is there today is fundamentally different from the central bank that I joined in 2006,” he added. By allowing inflation to skyrocket in 2021 and 2022, the Fed “made the biggest macroeconomic policy error in 45 years, dividing the country.”
