Trump nominates Warsh to run US central bank
US President Donald Trump chose former Federal Reserve Governor Kevin Warsh to head the US central bank when Jerome Powell’s term as leader ended in May, giving frequent critics of the Fed a chance to implement the idea of monetary policy “regime change”.
“I have known Kevin for a long time and I have no doubt that he will be one of the GREAT Fed Governors, perhaps the best. Above all, he is the ‘central player and will never let you down,'” Trump said, explaining his latest move to leave his mark on the Fed, which he has persistently criticized for not lowering interest rates fast enough.
U.S. stock index futures pared losses after Trump picked Warsh, who markets perceived as someone who would support lower rates but stop short of the more aggressive easing associated with some of the other potential candidates.
Trump announced his nomination, which must be confirmed by the US Senate, in a post on social media.
The Fed has long been seen as a stabilizing force in global financial markets, in part because of its perceived independence from politics.
Trump’s escalating efforts to test that independence, including the Justice Department’s decision to launch a criminal investigation of Powell earlier this month, have set the stage for a difficult Senate confirmation process for any successor.
Republican US Senator Thom Tillis said he would not support any of Trump’s Fed nominees as part of the ongoing investigation, while Republican Senator Lisa Murkowski also called for an investigation into the department’s actions.
It also opened the door to the possibility that Powell, who has called the criminal investigation an excuse to pressure the Fed to set monetary policy the way the president wants, could choose to remain a governor at the Fed even after his term as central bank chief ends in order to protect the Fed from political takeover.
The nomination caps a months-long process, with Warsh, White House economic adviser Kevin Hassett and other top candidates including Fed governor Christopher Waller and Wall Street’s Rick Rieder making regular television appearances to showcase their thoughts on the economy.
Trump also tried to challenge Fed Governor Lisa Cook in a battle before the Supreme Court; If this challenge is successful, it would be the first time a president has fired a U.S. central bank policymaker.
While Warsh is not a White House insider, he has been a confidant of the president and a guest at the president’s Florida mansion, and appears poised to push through many of Trump’s priorities as Trump’s “shadow” Fed chief until Powell’s term ends in mid-May.
Warsh, a lawyer and distinguished visiting fellow in economics at Stanford University’s Hoover Institution, said he believes the president was right to pressure the central bank for steep interest rate cuts and criticized the Fed for underestimating the inflation-reducing potential of artificial intelligence-powered “productivity growth.”
Warsh, 55, was nearly elected to the post before being handed over to Powell in Trump’s first term, and has since maintained a steady public profile through speeches and articles that take Powell and his colleagues to task over their management of the Fed’s balance sheet, interest rates and other actions.
He will now take charge of an institution that he says must shrink its footprint in the economy and change the way it manages monetary policy.
After studying law, Warsh worked for several years at Morgan Stanley, where he handled mergers and acquisitions.
He entered politics in 2002, working under then-President George W. Bush and advising him on capital flow and securities-related issues.
Bush nominated Warsh to be chairman of the Federal Reserve in 2006, and at just 35 years old, he became the youngest board member in the history of the Federal Reserve.
Former Fed chairman Ben Bernanke wrote in his memoirs that Warsh’s young age drew criticism, but his political skills, market savvy and many connections on Wall Street were valuable.
Warsh is the son-in-law of Ronald Lauder, a close and longtime friend of Trump who is president of the World Jewish Congress.
With DPA and AP
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