Dove faction. Thoughtful. chameleon.
These are just some of the terms used to describe Kevin Warsh, whom President Donald Trump has nominated to be the next chairman of the Federal Reserve, the United States’ central bank.
Recommended stories
list of 4 itemsend of list
If approved by the U.S. Senate, Warsh, a former Fed director, will replace Jerome Powell, whose term ends in May. President Trump announced Warsh as his nominee on Friday.
“I’ve known Kevin for a long time and I have no doubt that he will go down as one of the great Fed Chairs, perhaps one of the best,” Trump wrote on his Truth Social website. “Above all he is ‘core casting’ and will never let you down.”
Mr. Trump has repeatedly criticized Mr. Powell over the past year for not lowering interest rates at the pace and level he wanted. Warsh is expected to offer a smoother experience, at least initially.
It’s also because he comes from a Republican milieu. His father-in-law is Ronald Lauder, heir to the Estée Lauder cosmetics fortune and a longtime donor and ally of President Trump.
Warsh is also currently a research fellow at the right-wing Hoover Institution think tank at Stanford University, where he also lectures as a visiting scholar.
But more importantly, critics say Mr. Warsh has shown sympathy for Mr. Trump’s policies. Mr. Warsh has long supported high interest rates to curb inflation, but recently he has spoken out in favor of lowering interest rates in line with the president’s views.
History of “Shapeshift”
It is this flexibility that has prompted the mixed reactions to Warsh’s nomination.
“He’s a very good chameleon,” said Skanda Amarnath, executive director of the policy research organization Employ America. “He comes across as well-informed and intelligent, but when you unpack what he says, there’s not a lot to it.”
Mr. Amarnath’s criticism is based on years of observing Mr. Warsh’s policy stances.
Mr. Warsh, 55, joined the Federal Reserve Board in 2006 at the age of 35 after serving on former President George W. Bush’s National Economic Council. He remained at the Fed until 2011, during which time he worked with then-Chairman Ben Bernanke to address the 2008-2009 global financial crisis.
The crisis led to the collapse of financial services companies such as Lehman Brothers and Bear Stearns. Mr. Warsh was particularly opposed to some of the Fed’s low interest rate policies at the time to head off the effects of the crash.
During that period, Amarnath said, he “spent most of his time worrying about inflation.” “Even in August 2008, he was talking about inflation when Lehman Brothers went bankrupt. He was completely behind the curve on that.”
Mr. Amarnath said Mr. Warsh seemed to downplay the unemployment rate even then, even though it was heading toward 10%. Currently, the US unemployment rate is a healthy 4.4%.
Mr. Warsh began softening his stance on inflation in 2017, when Mr. Trump began his first term as president. Mr. Amarnath told Al Jazeera that Mr. Warsh’s seemingly partisan nature left him with “some concerns” about what would happen if another financial crisis were to occur.
“His track record speaks to someone who is highly partisan and politically minded and who makes a mockery of data dependence,” he said. “The way things change will depend on who takes office.”
“Political” record
But some experts are more optimistic about Warsh’s potential to lead the Federal Reserve.
Robert Rogowski, an economist and professor of trade and economic diplomacy at Georgetown University, is among those who think Warsh is “a solid, if not brilliant, person.”
“He’s obviously very bright and has a solid track record in this field,” he said.
That said, Rogowski acknowledged that Warsh could be seen as a political opportunist. “His background seems to be a little bit political; he was a financial hawk under the Democratic administration, and he’s been promoted by President Trump to be a financial dove in Trump.”
Still, Rogowski said he’s not too worried about Warsh’s decline as President Trump aggressively pushes for rate cuts.
Although the Fed chair is a very powerful role, he only represents one vote on the seven-member board and cannot override a majority vote. And while Warsh “may sound like Trump,” Rogowski believes he will ultimately veto Trump’s “extreme and extremely harmful” interest rate cuts.
“He’s smart enough and I hope he’s honorable enough to be financially trained and driven,” Rogowski said.
President Trump has called on the Federal Reserve to significantly lower interest rates from current levels (approximately 3.75%) to 1%.
Rogowski said Warsh recognizes that such a policy move could result in a “medium-term inflationary disaster” and, in turn, “immediately catastrophic dollar depreciation and a five-alarm setback in the global trading system.”
Rachel Ziemba, a senior fellow at the Center for a New American Security think tank, said President Trump’s trade policies will already pose a major challenge to the next Federal Reserve chairman.
Ziemba said President Trump is pursuing aggressive international trade policies and immigration crackdowns that could shake up the entire U.S. economy. Currently, economic growth is “fair” but there is little job growth, he added.
“A rate cut is unlikely to solve these problems,” Ziemba told Al Jazeera.
For now, it remains unclear whether Warsh will ultimately take the position. He will face a Senate confirmation hearing in the coming months, where President Trump’s policies could pose a hurdle.
At least one Republican senator, Thom Tillis, has already said he will not endorse Trump for the Fed seat until the president drops the criminal investigation into Powell.
The investigation, announced this month, was widely seen as President Trump’s latest attempt to blackmail the Federal Reserve into complying with his demands.
