Kevin Warsh, the former Federal Reserve governor once known for fiercely opposing interest rate cuts, has done a complete 180. Now, he’s calling for urgent rate reductions — and signaling he wants Jerome Powell’s job.

In a recent interview with Fox News, Warsh declared that the Fed must both lower interest rates and aggressively shrink its massive $7.7 trillion balance sheet. He slammed the central bank's current policy mix as completely misguided and more suited to a crisis like 2008 or 2020 than today’s economy.

🗣 “The Fed has the wrong policy mix — a massive balance sheet and rates that are too high,” Warsh said, adding that the institution needs a full reboot to function properly again.

A Dramatic Shift from His Hawkish Past

From 2006 to 2011, during his time on the Fed’s Board of Governors, Warsh stood firmly against rate cuts — even as the global financial system was unraveling. He repeatedly warned of inflation that never materialized. In May 2008, just two months after the collapse of Bear Stearns and a series of rate cuts by the Fed, Warsh was still opposing further easing.

Four months later, Lehman Brothers triggered global panic, and the Fed slashed rates to zero. Warsh agreed reluctantly — but by September 2009, with inflation in negative territory and unemployment nearing 10%, he was already warning that rate hikes might be necessary. Yet the Fed didn’t raise rates again until 2015, with inflation hovering around 1.5%.

Warsh left the Fed in 2011, shortly after then-chair Ben Bernanke launched QE2. Warsh loathed quantitative easing outside of a crisis. Now, he wants the Fed to unwind its balance sheet and cut rates at the same time — a move his former self would have vehemently opposed. Still, despite inflation remaining above the Fed’s 2% target, Warsh is pushing for cuts.

Not Just Policy Shift — A Full Fed Makeover

But Warsh isn’t just calling for different policies. He’s calling for a regime change. “I think we need a new regime at the Fed,” he stated, clearly suggesting he wants to replace not just Powell — but others on the board as well. He argues the Fed’s slow reaction to pandemic-era inflation and its refusal to admit mistakes have severely damaged its credibility.

Trump Wants Rate Cutters — Warsh Wants the Job

Trump has made no secret of his desire to appoint a Fed chair who will lower interest rates. “If I think someone will keep rates where they are or do something else, I won’t appoint them,” Trump told reporters on June 27. Warsh’s public pivot on monetary policy reads like a job application — and he’s not hiding it.

This isn’t his first shot at the top job. Warsh came close in 2017 before Trump ultimately selected Powell — a decision the former president later regretted. In 2020, Trump reportedly told Warsh: “Kevin, I could’ve used you back then. Why weren’t you more aggressive when you wanted the job?”

This time, Kevin is making sure he’s heard.

Warsh Has What the Others Don’t

Other contenders for Fed Chair include Scott Bessent, Kevin Hassett, and Christopher Waller — all in favor of rate cuts. But Warsh brings something unique: direct crisis-era experience at the central bank.

During the 2008 financial crisis, he helped broker the sale of Wachovia to Wells Fargo and contributed to the design of a plan that injected billions into the nine largest U.S. banks. That hands-on experience could give him a significant edge — both in Trump’s eyes and in the eyes of the markets.



#Fed , #FederalReserve , #Powell , #TRUMP , #economy

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