Trump Picks Kevin Warsh to Replace Jerome Powell as Federal Reserve Chair

Wall Street Veteran Returns to Central Bank Leadership

President Donald Trump said Friday that he will nominate former Federal Reserve official Kevin Warsh to be the next chair of the Fed, a pick likely to result in sharp changes to the powerful agency that could bring it closer to the White House and reduce its longtime independence from day-to-day politics. The appointment, which requires Senate confirmation, amounts to a return trip for Warsh, 55, who was a member of the Fed's board from 2006 to 2011. He was the youngest governor in history when he was appointed at age 35.

From 1995 to 2002, Warsh worked for Morgan Stanley in New York City, rising to executive director in the company's mergers and acquisitions department. During his tenure he worked in mergers and acquisitions and was executive director when he left the firm in 2002 to serve in the Bush White House. Having worked at Morgan Stanley, he provided crucial insight into the real condition of Wall Street, and well before the panic he told his Fed colleagues that the financial system was vastly undercapitalized.

The nomination ends a competitive derby that at one point included 11 candidates. They spanned from former and current Fed officials to prominent economists and Wall Street pros in an interview process led by Treasury Secretary Scott Bessent.

Political Pressure and Independence Concerns

Trump's decision to nominate Warsh comes at one of the most precarious moments for the U.S. central bank in decades — with inflation not fully defeated, government borrowing escalating and the Fed itself facing unusually direct political pressure over how it conducts monetary policy. Trump and other administration officials have floated ideas ranging from tighter White House oversight to changes in how the central bank sets rates, including forcing the chair to consult with the president on rate decisions.

Most recently, the Justice Department subpoenaed Powell regarding the construction project. In an uncharacteristically blunt response, Powell charged the move was a "pretext" to push the Fed into following Trump's orders and ease policy further. Sen. Thom Tillis, R-N.C., has also threatened to vote against the confirmation of any Fed nominee until the Justice Department resolves its investigation of the central bank, which is seen as part of the president's pressure campaign.

"It is difficult to trust that any Chair of the Federal Reserve selected by this president will be able to act with the independence required of the position," Sen. Mark Warner, D-Va., said in a statement. "This administration will levy charges against any leader who makes interest rate decisions based on facts and the needs of our economy rather than Trump's personal preferences."

Warsh's Evolving Economic Philosophy

For his part, Warsh in a CNBC interview last summer called for "regime change" at the Fed. "The credibility deficit lies with the incumbents that are at the Fed, in my view," he said during the July interview. For most of his public career, Warsh has been considered a "hawk" on monetary policy, meaning he was generally in favor of higher interest rates, focused more on keeping inflation in check than on making money cheaper to fuel economic activity. Since emerging as a possible successor for Powell, however, Warsh has changed his tune. The Fed's "hesitancy to cut rates, I think, is actually ... quite a mark against them," Warsh said on CNBC in July, criticizing the current slate of Fed policymakers.

In a November Wall Street Journal opinion piece, Warsh said the Fed's "bloated balance sheet" has contributed to the economic malaise affecting many Americans, allowing borrowing to be "too easy" for Wall Street while "credit on Main Street is too tight." Warsh has recently argued for lower interest rates, a view that aligns with Mr. Trump's push for the Fed to ease borrowing costs. "On policy decisions, Warsh's recent comments suggest he could support lower policy rates, possibly counterbalanced by a smaller balance sheet," the Deutsche Bank analysts said.

Challenges Ahead for the New Fed Chair

If confirmed by the Senate, Warsh would face challenges in pushing interest rates much lower. The chair is just one member of the Fed's 19-person rate-setting committee, with 12 of those officials voting on each rate decision. Warsh's latest perspective wouldn't solely dictate monetary policy, given that the Fed chair doesn't set interest rates unilaterally. Decisions on the federal funds rate, which affects borrowing costs for consumers and businesses, are set by a majority vote among the 12 members of the Federal Open Market Committee (FOMC). As a result, other FOMC members may seek to demonstrate the Fed's independence by resisting pressure to cut rates, experts said.

Powell's term as Fed chair expires in May. Warsh will undoubtedly face questions during his confirmation hearing about whether he's willing to buck pressure from the president. The central bank's credibility with global markets will