Regime change could be coming to the Federal Reserve System. Following months of speculation, President Donald Trump named his pick to replace Chair Jerome Powell: Kevin Warsh. Long considered a heavyweight contender to become the new head of the US central bank, Fed policy could experience a much-needed facelift if he is confirmed by lawmakers.
The Warsh Machine Coming to Fed Policy
Could Kevin Warsh become one of the greatest chairmen of the Fed? President Trump believes so, describing him as “central casting” and someone who could restore the national bank’s greatness. Trump, speaking to reporters in the Oval Office, called Warsh a “perfect candidate” and someone who would probably lower interest rates.
Markets were not as enthusiastic, although Wall Street was also contending with a lackluster earnings season. The leading benchmark averages ended the trading week firmly in the red. As for the metals market, gold prices fell below $5,000, and silver entered a bear market in a single session (the white metal suffered the largest single session drop since 2011). The US dollar jumped nearly 1%, while Treasury yields were little changed.
The path to confirmation may be uncertain. Democrats will most likely oppose his nomination, while Republicans may be mixed. Sen. Thom Tillis (R-NC) already confirmed that he would oppose Warsh’s nomination until the Department of Justice resolves its investigation of the Eccles Building. But Trump is confident will be a smooth ride, telling the press that he is not a controversial pick and has “the whole package.”
Based on Warsh’s past actions and commentary on Fed policy, President Trump may be right.
Manifesto
Powell’s term expires in May, but he will still – at least for now – have a presence at the Federal Reserve since his seat on the Board of Governors is not finished until January 2028. Additionally, he has a couple of more meetings leading operations, and it seems he will adopt more of a wait-and-see approach (again) to conducting policy.
Among the 11 candidates interviewed for the top job, Warsh was the only one to actively encourage a “regime change” in both policy and personnel. While not on the same level as Ron Paul’s calls for ending the central bank, the incoming chairman might be the next best thing for those who want real change at the century-old institution.
“Institutions like the Federal Reserve need to be restored to what they once were, which is important institutions that are on the sidelines most of the time and come in only in exigent circumstances,” Warsh told eminent interviewer Peter Robinson.
Throughout his hour-long interview, he championed the views of legendary economists Milton Friedman and Friedrich Hayek. Warsh blamed the Fed for the deteriorating fiscal picture in Washington, arguing that the institution has subsidized Congress for too long by monetizing the debt through aggressive bond-buying programs.
“We are at a regime change in the conduct of economic policy, and we need to build a set of new institutions, new American leadership, so the 21st century can be as good for the American worker and the American economy as the 20th century was,” Warsh told Tom Bevan on the RealClearPolitics podcast in February 2025.
Does this mean the Pixie Sticks and soda pop are going to be tossed in the trash can? Starving the beast might also mean making enemies, including the very person who nominated him for the job.
A New Jerome Powell Punching Bag?
President Trump has indicated he wants interest rates to come down at a fast and furious pace, suggesting they should be as low as 1%. The current range is between 3.5% and 3.75%. The Fed has signaled a single quarter-point rate cut this year, while the futures market suggests two to three.
Either way, this is still firmly above the president’s goal. What will Warsh do? He has expressed sympathy for Trump’s position, purporting that interest rates should be lower. But it could be challenging to fire off rates totaling 200 to 300 basis points over the span of a few months.
This is partly why the metals sold off, and the US dollar strengthened. Wall Street views Warsh as a more pragmatic option rather than a firestarter who will take a chainsaw to interest rates. Additionally, despite his criticisms of the institution, Warsh is likely to maintain the feeling of central bank independence.
If the median Fed policy rate remains above 3% by the year’s end, will President Trump assign a series of derogatory nicknames for Warsh? Get the popcorn ready for the second half of 2026 just in case.
Make the Fed Great Again
Ultimately, it appears that Kevin Warsh wants to make the Federal Reserve great again. But was it ever truly great to begin with?
Its recent track record has been putrid, but its history has been just as poor. Shortly after its creation, price inflation soared, and a Great Depression ensued. By the 1960s, the Fed ushered in two decades of high inflation. In the 2000s, the stock market suffered multiple crashes, and the Great Recession followed. In the post-pandemic era, asset bubbles, 22% inflation, and a deteriorating US dollar lay in the wake of quantitative easing.
How can confidence be restored when the Fed never earned it in the first place?
