Kevin Warsh is the Federal Reserve’s next chair

Donald Trump has announced his nomination of Kevin Warsh to be the next chair of the Federal Reserve. The chair of the Fed is one of the most powerful roles in the US government, with enormous influence over the world’s largest economy. Trump’s nominee must be confirmed by the Senate.

Warsh, 55, a former Federal Reserve governor with strong connections to Wall Street, previously interviewed for the chair position in 2017, which was awarded to Powell, whose term concludes in May.

Trump waged an extraordinary campaign to influence policymaking at the Fed by repeatedly calling for rate cuts, and Kevin has also been a vocal critic of the U.S. central bank. He has echoed Trump’s criticism of the Fed for being too slow to cut interest rates.

Trump announced that “he has known Kevin for a long period of time, and has no doubt that he will go down as one of the GREAT Fed Chairmen, maybe the best. On top of everything else, he is ‘central casting,’ and he will never let you down.”

Trump shared a detailed message on his usual platform, and from his post, the following information is particularly relevant for understanding Kevin better –

• Kevin currently serves as the Shepard Family Distinguished Visiting Fellow in Economics at the Hoover Institution and as a Lecturer at Stanford’s Graduate School of Business. He is a partner at Duquesne Family Office LLC with Stanley Druckenmiller.
• He has conducted extensive research in the field of Economics and Finance. Kevin issued an Independent Report to the Bank of England proposing reforms in the conduct of Monetary Policy in the United Kingdom. Parliament adopted the Report’s recommendations.
• Kevin Warsh became the youngest Fed Governor, ever, at 35, and served as a Member of the Board of Governors of the Federal Reserve System from 2006 until 2011, as the Federal Reserve’s Representative to the G-20, and as the Board’s Emissary to the Emerging and Advanced Economies in Asia.
• Before his appointment to the Board, from 2002 until 2006, Kevin served as Special Assistant to the President for Economic Policy and Executive Secretary of the White House National Economic Council.

I have been following Kevin Warsh’s lectures, delivered on various occasions, and to me, he seems to be an idealist rather than an economist who understands the pulse of the economy.

But because the world loves the so-called “independent thoughts”, whether on political issues or monetary policy, he has always been in the news.

It is altogether a different matter whether those independent thoughts could be executed and are practical. So, there is a long way to go.

For example, Kevin argued that the current Fed policy of ‘data dependence’ has little real value and also slammed its near-term forecasting. But he never suggested an alternative way.

Let us see how he will put his well-known remark into practice when he made a joke of Jerome Powell, saying, “The central bank should find new comfort in working without applause and without the audience at the edge of its seats.”

However, I am sure that, as chair, he will almost certainly push for lower interest rates, but he is unlikely to make much progress in shifting the Fed’s operating framework or shrinking its balance sheet.

We should not forget that Jerome Powell still has the right to remain on the board and help set the Fed’s monetary policy direction.

And yes, the looming Supreme Court decision on whether Trump can remove board members will be pivotal.