President Donald Trump announced Friday that he is nominating Kevin Warsh to be the next Federal Reserve chairman, replacing Jerome Powell, whose term ends in May.

Warsh worked as an aide to former President George W. Bush, who later appointed him to the board of the Federal Reserve. The youngest ever Fed governor, Warsh served in that position from 2006 to 2011. He also previously worked as a mergers and acquisitions specialist at Morgan Stanley, and during his tenure as a Fed governor, served as a liaison between the central bank and Wall Street. He helped arrange the government’s bailout of insurance giant AIG.

The most important thing we need to know about Warsh’s background is where he stands on monetary policy, inflation, and interest rates. And, the fact that he was dead wrong about the housing market in the lead-up to the 2008/2009 Financial Crisis.

Throughout his career, Warsh has cultivated an image of an inflation “hawk” rather than a “dove.”

Roughly, the Fed hawks believe that keeping inflation low and prices stable is absolutely paramount to the U.S. economy. The Fed doves, on the other hand, are more loose with monetary policy, and believe that spurring economic and job growth by lowering interest rates and making money easier to borrow should take precedent over keeping inflation low. This dove policy is known as Quantitative Easing.

In the fallout from the 2008/2009 financial crisis, Warsh had sought to keep then-Fed Chairman Ben Bernanke, a dove par excellence, at arm’s length.

In November 2010, the Fed voted on Quantitative Easing 2 to buy large amounts of treasuries, lower long-term interest rates, and re-purchase mortgage-backed securities that went bust during the housing crisis. Of course, juicing the economy by creating money out of thin air runs the risk of high inflation. Warsh voted for QE2, yet days after he wrote in The Wall Street Journal that strategy should be “necessarily limited, circumscribed and subject to regular review.”

“Policies should be altered if certain objectives are satisfied, purported benefits disappoint or potential risks threaten to materialize,” he added.

Even as the financial crisis began to unfold in 2008 and the Fed moved to slash interest rates, Warsh warned that using the “hammer,” his phrase for rate-cutting, could backfire.

“If the economy were to weaken somewhat further, we should be inclined to resist expected, reflexive calls to trot out the hammer again,” he said.

But Warsh was also dead wrong in the lead-up to the crisis and the housing market’s collapse from 2007 to 2010.

“If the housing situation is beginning to stabilize, I find it hard to believe that broader anxiety about it will affect business spending or the consumer as some of these scenarios contemplate,” he said during a Fed meeting in January 2007.

In that same meeting, he predicted that economic trends pointed to “strong, balanced economic growth for 2007.” That year ended in the Great Recession.

Now, in 2026, Trump and Treasury Secretary Scott Bessent have been calling for lower interest rates, leading some commentators to question the president’s pick. Why would he nominate a so-called “inflation hawk” who might support higher interest rates?

Well, Warsh has already publicly called for interest rate cuts while arguing that the Trump administration’s tariffs will not lead to higher inflation. And he has also argued that reducing the Fed’s holding of U.S. bonds would allow for rate cuts that would not trigger inflation.

In a speech in April 2025, Warsh blasted America’s “irresponsible spending,” saying that it has been on a “dangerous trajectory,” especially since COVID-19. Fed leaders like Powell, Warsh said, had encouraged government spending but “didn’t call for financial discipline at the time of sustained growth and full employment.” They also got too political, according to Warsh.

“The more the Fed opines on matters outside its remit, the more it jeopardizes its ability to ensure stable prices and full employment,” Warsh argued.

He also called for a “regime change” at the Fed during an interview with CNBC in July 2025, saying the central bank was facing a “credibility crisis.”

“It’s not just about a person, it’s about an approach to economics … I’m troubled when I see them moving the goal posts,” he said. The Fed has “done a very good job of blaming others for its mistakes,” and its decisions on inflation were made “poorly,” he added.

Only time will tell if Warsh is a hawk in the vein of Paul Volcker, the Fed chairman from 1979 to 1987, who kept interest rates high and stamped out inflation; or, if he is a mix of hawk and dove, willing to cave to pressure from Trump, Bessent, and Wall Street.

Judging by his vote on QE2 in 2010, he may be someone who wants to fight inflation in theory, but doesn’t have the Volcker-esque gumption to do it in practice. The market’s reaction, on the other hand, suggests asset holders are afraid that he will pull the trigger and raise interest rates.

Something of note:

“Warsh is married to Jane Lauder, the daughter of prominent Republican donor Ronald Lauder, who was a classmate of Trump’s at the Wharton School. Lauder donated $5 million in March to MAGA Inc., Trump’s super political action committee.”https://t.co/5JzsDMkEtJ

— zerohedge (@zerohedge) January 30, 2026

Warsh is married to billionaire heiress Jane Lauder, the daughter of Ronald Lauder, a big GOP donor. According to Bloomberg, Lauder donated $5 million to MAGA Inc., Trump’s super PAC, in March 2025.

Make of that what you will.

AUTHOR

John Loftus

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