The Federal Reserve has turned into the country's most dangerous economic wild card. It acts as if it knows everything, breaks all barriers, and disregards the harm done, as if it doesn't care.
Just like Trump, it jumps from crisis to crisis, refusing to clean up the mess and continues to expand its powers without any accountability. And now, with Trump back in the Oval, the scrutiny of this central bank is more important than ever.
Kevin Warsh, former governor of the Federal Reserve System from 2006 to 2011 and now a researcher at the Hoover Institution, revealed everything on April 25 in a speech at a meeting of the Group of Thirty and the International Monetary Fund.
Warsh said that the Fed has completely lost its way. 'The Fed has acted more like a general government agency than a narrow central bank,' he said. He accused the institution of straying from its core mission and dragging the economy along.
The Fed fuels spending and kills price stability.
Kevin said that the Federal Reserve fueled irresponsible spending that exploded after the pandemic. He said, 'I can hardly justify the Fed for the country's financial waste.' And it helped! It supported government spending during crises but remained silent during recovery.
Instead of calling for caution when the economy began to heat up again, it simply continued to supply money. 'If the Fed decides to cross the line,' Warsh said, 'then there must be real and rhetorical symmetry.' It was absent.
The central bank also became the largest buyer of federal debt after 2008. Kevin said its balance sheet grew from less than one trillion dollars to seven trillion dollars by the time of his speech. This was the cost of purchasing Treasury bonds and mortgage-backed securities.
And this gave Congress the ability to continue spending without worrying about interest rates. This was the result of quantitative easing, or QE, a tool that Warsh helped create during the collapse of 2008. 'I strongly supported this innovation in times of crisis, then and now,' he said. But after the crisis ended, the Fed refused to reduce its volumes.
By 2010, growth had recovered, and markets became stable. Warsh stated that he opposed QE2, which was another round of debt purchases by the Federal Reserve. He warned that this would drag the Fed into politics. He resigned shortly after it was announced.
Now QE is no longer just a temporary emergency measure. It has become an integral part of the Fed's daily operations. And Congress has gotten used to it.
The Fed is diving into politics, failing at its job and demanding to be left unchecked.
The chaos did not end with spending. Kevin also said that the Federal Reserve jumped into politics for which it was not designed. 'The Fed has neither the experience nor the privileges to make political decisions,' he said.
In 2020, the Fed joined the Network of Central Banks and Supervisors for Greening the Financial System and stated that it was 'active' and even a 'leader' on climate issues. But by January 2025, under a new political climate, the Fed withdrew from this group.
'If in practice it is no different, was the new language just a political hint?' Warsh asked. 'If the new definition is different, shouldn't Congress have some rights?'
In any case, the spending fell on the same groups that the Fed claimed to help. Inflation hit the lower strata the hardest. Meanwhile, the Fed continued to pretend that it could do everything without consequences. Kevin said it failed at the most basic task in its job description: 'The Fed has failed in the fundamentals, and inflation has risen.'
He reminded those present that for 40 years people did not worry about inflation. Now it's back on the front pages of the news. 'Stable prices were the Fed's armor,' he said. Once inflation exploded, that armor disappeared. What remained was a bare, excessive institution that could not fix what it broke.
Kevin also strongly criticized the Fed's habit of shouting 'independence' every time someone questions its decisions. 'Independence is not a political goal in itself,' he said. It only matters when the Fed actually delivers results.
And when the Fed crosses into the realm of Treasury or takes sides on social issues, it weakens its own position. This invites politicians to intervene, and they will.