Seemingly, Kevin Warsh is a mainstream central banker. Dig down and he’s the Fed equivalent of Pete Hegseth.Click to view this email in your browser. [link removed]

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FEBRUARY 2, 2026

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****KUTTNER ON TAP****

**Central banker or central casting?**

**Seemingly, Kevin Warsh is a mainstream central banker. Dig down and he’s the Fed equivalent of Pete Hegseth.**

Don’t expect Kevin Warsh, Trump’s nominee to chair the Fed, to have smooth sailing, either at his confirmation hearing or at the Federal Reserve—if he does manage to get confirmed. The commentators have pointed to the challenge of reconciling Trump’s demand for low interest rates with the imperative of not spooking the bond market. But that’s the least of it.

In his announcement on Truth Social of the Warsh appointment, Trump listed Warsh’s biographical accomplishments and then added, “On top of everything else, he is ‘central casting’ and he will never let you down.”

That was probably the only part of the announcement that Trump wrote himself. According to

**The Wall Street Journal**, Trump **repeated how much Warsh looked like a central banker** [link removed] at a black-tie speech Saturday night to a private group, the Alfalfa Club.

But this makes Warsh sound like another Pete Hegseth, an empty suit who just looks the part. In fact, that’s uncomfortably close to the reality.

Though Warsh served on the Fed for five years as a George W. Bush appointee, a reading of his remarks over the years suggests a stunning ignorance of what the central bank actually does and its policy tools. And he has an almost perfect record of getting predictions wrong.

For instance, when the economy risked total collapse in 2008 because major banks were insolvent, lowering interest rates to near zero was insufficient. The Fed had to devise a strategy of recapitalizing the banks with massive bond purchases.

Fed leaders gave this strategy the disarming name of “quantitative easing.” Warsh left the Fed in March 2011, in part because he opposed the policy. Throughout the Great Recession that followed the financial collapse, Warsh loudly and repeatedly expressed concern about bond purchases driving inflation—that never came, as the recession dragged on.

The Treasury failed to use the leverage of all that capital infusion to insist that the big banks be broken up. But the bond buying saved the economy. When the COVID pandemic produced another abrupt recession, the Fed turned to large-scale bond purchases again.

Warsh has repeatedly condemned this tool. He blames Fed bond buying for allowing government to run steep deficits and ultimately unleashing inflation.

“Each time the Fed jumps into action, the more it expands its size and scope,” he said **last April** [link removed]. “More debt is accumulated … more capital is misallocated … more institutional lines are crossed.”

In fact, the deficits are rooted in tax cuts for the rich and emergency COVID spending, not in Fed bond purchases.

And though Trump has put him on the Fed expressly to lower interest rates, Warsh over the years has sounded more like a monetary hawk, criticizing the Fed for keeping rates too low. The kindest thing you can say about Warsh is that he is a situational hawk. As Paul Krugman has observed, “He calls for tight money and opposes any attempt to boost the economy

**when Democrats hold the White House**.”

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As a number of commentators have pointed out, Warsh faces three incompatible policy goals: reverse the Fed’s bond purchases (his own hobbyhorse); cut interest rates (Trump’s demand); and keep inflation under control (an ongoing function of the Fed.)

But if he succeeds in cutting short-term interest rates, that risks increasing inflation. And if he curtails Fed bond purchases, that will spook the bond market and lead to higher long-term rates.

As an opportunist, Warsh could also turn around and simply ignore Trump. As Jay Powell has demonstrated, the Fed chair is one of the true independent power centers left in our democracy. But the wise use of that power requires both deep knowledge and integrity. Warsh is lacking in both.

The only good news, sort of, is that if Warsh does manage to get confirmed, he will not have anything like control of monetary policy. There are only two other members of the 12-person Federal Open Market Committee willing to sacrifice economic stability to Trump’s demand for cheap money. He would also need the consent of the FOMC to alter the Fed’s program of bond purchases.

But a weak and outvoted Fed chairman is small comfort. When a crisis breaks out, we need a Fed chair who is both deeply knowledgeable and has the leadership skills to listen to other experts, devise sound policies, and achieve a consensus. On monetary policy, this describes both Jay Powell and his predecessor Ben Bernanke, though both were too weak when it came to bank regulation (and Warsh will be even weaker).

Warsh is more of a bomb thrower than a consensus builder, and he doesn’t know when he’s out of his depth. He has criticized the Fed for being too “data driven.” What does that even mean? Should monetary policy be made by intuition?

And he has been scathing in his attacks on Chairman Powell. **Speaking on CNBC last July, Warsh said** [link removed], “We need regime change in the conduct of policy. The credibility deficit lies with the incumbents that are at the Fed.”

It’s not clear that Warsh will get confirmed. Republican Sen. Thom Tillis (NC) has put a hold on his nomination until Trump stops harassing Jay Powell. Warsh’s loudmouthed displays of ignorance will prompt other hard questions and cost him votes. With each passing week, more Republican senators are willing to defy Trump. In this case, the stakes are the competent stewardship of the economy.

Oh, and if Warsh needed one more blemish, the latest tranche of Epstein files shows that he was invited to Epstein’s island. Apparently, he didn’t go. But still.

Powell himself, the object of Warsh’s scorn, could well stay on the Board of Governors, where his deep knowledge of money markets would upstage and embarrass Warsh. During Powell’s tenure as chair, Trump has repeatedly spoken of appointing a shadow chairman. But the shadow chair, with a working majority to Warsh’s minority, could turn out to be Powell.

Robert Kuttner
Co-Editor, Co-Founder

Robert Kuttner
Co-Editor, Co-Founder

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