Latest news with #Warsh
Reuters
17-07-2025
- Business
- Reuters
Ex-Fed Governor Warsh says new accord between Treasury, central bank needed
July 17 (Reuters) - Former Federal Reserve Governor Kevin Warsh, seen as a potential successor to Fed Chair Jerome Powell, said on Thursday there needs to be a new accord between the Treasury Department and U.S. central bank, referencing a 1951 pact that separated federal debt management from monetary policy. Warsh, now a fellow at Stanford University's Hoover Institution, said on CNBC that such an agreement between the two agencies could smooth the process of reducing the Fed's balance sheet by communicating intentions jointly. "If we have a new accord, and ... the Fed chair and the Treasury secretary can describe to the markets plainly and with deliberation this is our objective for the size of the Fed's balance sheet, the Treasury can say this is our issuing calendar, and by the end of, let's say, this administration we'll be at an equilibrium rate on the balance sheet, so that markets will know what is coming," he said. The original accord, struck in March 1951, ended a period when the Fed had committed to a policy of low interest rates at Treasury's request to allow for lower-cost federal borrowing to finance the war effort during World War Two. It is seen by Fed historians as a critical moment that established its practical independence from presidential administrations and laid the ground for how monetary policy would be set in the future. Warsh made his remarks at a time when President Donald Trump is demanding the Fed cut rates, in part to lower the federal government's debt service costs, which topped $1 trillion last year for the first time. Trump has said he will not pick a candidate to succeed Powell who is not on board with the president's desire for rate cuts. The Fed last cut rates in December, before Trump's return to the White House in January. Warsh, who served as a Fed governor from 2006 to 2011, said his idea would not represent a return to the pre-1951 way of operating. "That would not be working in conjunction with the administration," he said. "It would be working with Treasury on goals that the Fed thinks are important to try and pursue and how would you present that to markets, as such, will be in conjunction."
NBC News
17-07-2025
- Business
- NBC News
Potential Powell successor pushes ‘regime change' at the Fed
Former Federal Reserve Governor Kevin Warsh, reportedly on President Donald Trump's short list to lead the institution, called Thursday for sweeping changes on how the central bank conducts business and suggested a policy alliance with the Treasury Department. 'We need regime change in the conduct of policy,' Warsh said during an interview on CNBC's ' Squawk Box.' 'The credibility deficit lies with the incumbents that are at the Fed, in my view.' Principal among those holdover officials is Chair Jerome Powell, who repeatedly has incurred Trump's wrath and is certain not to be reappointed when his term expires in May 2026, if attempts aren't made to remove him before then. Warsh is considered one of three or four finalists to take over, and he expressed multiple sentiments in line with what Trump wants from the Fed. The president has demanded the Fed to cut its benchmark overnight borrowing rate and has urged Powell to resign for not pushing for cuts. Warsh's comments indicate he could be at loggerheads not only with the way Powell has led the Fed, but also with holdover members who would be in place should he be put at the organization's helm. 'Their hesitancy to cut rates, I think, is actually quite a quite a mark against them,' Warsh said. 'The specter of the miss they made on inflation, it has stuck with them. So one of the reasons why the President, I think, is right to be pushing the Fed publicly is we need regime change in the conduct of policy.' In the latest drama surrounding the Fed and its embattled chair, a Trump administration official on Wednesday confirmed that the president met with Republican lawmakers the previous day and discussed Trump firing Powell. The official said Trump planned to do so soon, but he denied that shortly after. In addition to the rates issue, White House officials have criticized Powell over a multi-billion dollar renovation program at two of the Fed's buildings in Washington, D.C. Asked whether Trump should try to fire Powell, Warsh said, 'I think regime change at the Fed will happen in due course.' Trump's main stated reason in pushing for rate cuts has been to help lower financing costs on the nation's $36 trillion deb, which ostensibly out of the Fed's twin goals of low unemployment and stable prices. However, Warsh seemed to take the issue a step further and suggested a coordination between the Fed and the Treasury Department in how the nation manages debt issuance. 'We need a new Treasury-Fed accord, like we did in 1951 after another period where we built up our nation's debt and we were stuck with a central bank that was working at cross purposes with the Treasury. That's the state of things now,' he said. 'So if we have a new accord, then the .. Fed chair and the Treasury secretary can describe to markets plainly and with deliberation, 'This is our objective for the size of the Fed's balance sheet.'' The Fed is currently shrinking its balance sheet by allowing proceeds from maturing debt to roll off, rather than being reinvested as usual. Warsh generally supports the idea, known as quantitative tightening, but recently asserted that the Fed ought to be working with Treasury to help lower borrowing costs. 'I think the Fed has the balance wrong. A rate cut is the beginning of the process to get the balance right,' he said. However, the last time the Fed cut rates, Treasury yields actually rose. Markets expect the Fed to hold its benchmark funds rate steady at its policy meeting in late July, then possibly start cutting in September.
CNBC
17-07-2025
- Business
- CNBC
Kevin Warsh touts 'regime change' at Fed and calls for partnership with Treasury
Former Federal Reserve Governor Kevin Warsh, reportedly on President Donald Trump's short list to lead the institution, called Thursday for sweeping changes on how the central bank conducts business and suggested a policy alliance with the Treasury Department. "We need regime change in the conduct of policy," Warsh said during an interview on CNBC's "Squawk Box." "The credibility deficit lies with the incumbents that are at the Fed, in my view." Principal among those holdover officials is Chair Jerome Powell, who repeatedly has incurred Trump's wrath and is certain not to be reappointed when his term expires in May 2026, if attempts aren't made to remove him before then. Warsh is considered one of three or four finalists to take over, and he expressed multiple sentiments in line with what Trump wants from the Fed. The president has demanded the Fed to cut its benchmark overnight borrowing rate and has urged Powell to resign for not pushing for cuts. Warsh's comments indicate he could be at loggerheads not only with the way Powell has led the Fed, but also with holdover members who would be in place should he be put at the organization's helm. "Their hesitancy to cut rates, I think, is actually quite a quite a mark against them," Warsh said. "The specter of the miss they made on inflation, it has stuck with them. So one of the reasons why the President, I think, is right to be pushing the Fed publicly is we need regime change in the conduct of policy." In the latest drama surrounding the Fed and its embattled chair, a Trump administration official on Wednesday confirmed that the president met with Republican lawmakers the previous day and discussed Trump firing Powell. The official said Trump planned to do so soon, but he denied that shortly after. In addition to the rates issue, White House officials have criticized Powell over a multi-billion dollar renovation program at two of the Fed's buildings in Washington, D.C. Asked whether Trump should try to fire Powell, Warsh said, "I think regime change at the Fed will happen in due course." Trump's main stated reason in pushing for rate cuts has been to help lower financing costs on the nation's $36 trillion deb, which ostensibly out of the Fed's twin goals of low unemployment and stable prices. However, Warsh seemed to take the issue a step further and suggested a coordination between the Fed and the Treasury Department in how the nation manages debt issuance. "We need a new Treasury fed accord, like we did in 1951 after another period where we built up our nation's debt and we were stuck with a central bank that was working at cross purposes with the Treasury. That's the state of things now," he said. "So if we have a new accord, then the .. Fed chair and the Treasury secretary can describe to markets plainly and with deliberation, 'This is our objective for the size of the Fed's balance sheet.'" The Fed is currently shrinking its balance sheet by allowing proceeds from maturing debt to roll off, rather than being reinvested as usual. Warsh generally supports the idea, known as quantitative tightening, but recently asserted that the Fed ought to be working with Treasury to help lower borrowing costs. "I think the Fed has the balance wrong. A rate cut is the beginning of the process to get the balance right," he said. However, the last time the Fed cut rates, Treasury yields actually rose. Markets expect the Fed to hold its benchmark funds rate steady at its policy meeting in late July, then possibly start cutting in September.
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First Post
09-07-2025
- Business
- First Post
Who after Jerome Powell? Two Kevins heat up US Fed chair race— one from Trump's inner circle
Two Republicans are vying for the top chair at the Federal Reserve. Kevin Hassett, a Ph.D. economist who worked at the Fed in the 1990s, is a part of Trump's inner Warsh, former adviser to President George W. Bush, is also in the race read more Two Republicans named Kevin are vying to succeed Jerome Powell as the next chairman of the US Federal Reserve, in what is becoming a high-stakes political contest shaped by President Donald Trump's preferences. Kevin Hassett, a longtime Trump economic adviser, is gaining traction as a serious contender, according to people familiar with the matter. His emergence has cast doubt over the chances of Kevin Warsh, a former Fed governor once considered a frontrunner for the job. Warsh's lack of ties to Trump's inner circle and his more cautious approach to rate cuts are raising concerns among the former president's advisers. STORY CONTINUES BELOW THIS AD The contest, Wall Street Journal cited insiders as saying, mirrors the boardroom intrigue Trump once popularised on 'The Apprentice,' as both men manoeuvre for influence and proximity to the former president's economic agenda. Hassett rises within Trump's circle Hassett, 63, is a Ph.D. economist who worked at the Fed in the 1990s and later became a key figure in Trump's economic team. After two stints in the Trump administration, he joined a private-equity firm founded by Trump's son-in-law, Jared Kushner. Although Hassett had previously shown little interest in the Fed chairmanship, he has now changed his stance. He met with Trump at least twice in June to discuss the position, sources said, and has since become a vocal critic of Powell's leadership. In a June television interview, Hassett accused Powell of aligning with Democrats, claiming that 'Jay Powell is the person who cut rates right ahead of the election to help Kamala Harris' and is 'doing whatever it is that Elizabeth Warren wants.' White House spokesman Kush Desai said, 'President Trump has been clear about the need for the Federal Reserve's monetary policy to complement the Administration's pro-growth agenda,' adding that Trump 'will continue to nominate the most qualified individuals who can best serve the American people.' Warsh battles outsider status Warsh, 55, has been preparing for a return to the Fed for years. He interviewed with Trump in the past for the Treasury Secretary post but used the opportunity to advocate for the Fed job. A former adviser to President George W. Bush, Warsh was an early critic of Trump's trade policies, warning in 2018 that 'tariffs and trade restrictions the world over' would harm the US economy. Warsh is now adjusting his policy tone, suggesting that the Fed could lower interest rates if it reduced its balance sheet of $6.2 trillion in Treasuries and mortgage-backed securities. Despite his elite background and ties to establishment Republicans like Paul Ryan, Warsh has struggled to win over Trump loyalists. He is married to the daughter of billionaire Ronald Lauder, a longtime Trump acquaintance, but remains on the outside of Trump's core advisory network. STORY CONTINUES BELOW THIS AD Still, his telegenic longstanding friendship with current Treasury Secretary Scott Bessent could work in his favour. Bessent himself is a potential wildcard. Trump has floated the idea of him serving as both Treasury Secretary and Fed chair, though it remains unclear if the suggestion was serious. Great expectations Trump has said recently that he expects the next Fed chair to pursue interest rate cuts, a more explicit demand than when he elevated Powell to the role in 2018. The White House is also said to be considering placing Hassett on the Fed board early next year, when a seat becomes vacant. That move would give Trump flexibility to later decide whether to elevate Hassett or Chris Waller, a current Fed governor appointed by Trump, to the top post when Powell's term ends in May.
The Hill
30-06-2025
- Business
- The Hill
5 people Trump could pick to replace Powell at Federal Reserve
President Trump is laying the groundwork to replace Federal Reserve Chair Jerome Powell as soon as he can. With less than a year left in Powell's term as Fed chair, Trump is eager to usher him toward the door and line up a replacement more aligned with the president's agenda. Trump said this week he's currently vetting 'three or four' candidates to be Fed chair, and that he could announce his pick well before Powell's term ends in May. Here are five front-runners for Trump's Fed nomination. Kevin Warsh has been in the running for a top Trump administration economic position since the president's first administration. This may finally be his moment. A former Morgan Stanley banker and George W. Bush economic advisor, Warsh became the youngest person to join the Fed board in 2006 at age 35. He served as the Fed's point man with Wall Street during the 2007-08 financial crisis and remained at the central bank through 2011. Warsh was among Trump's finalists to replace former Fed Chair Janet Yellen in 2018 but lost out to Powell — a Republican Fed governor with bipartisan credibility and a strong working relationship with then-Treasury Secretary Steven Mnuchin. After the 2024 election, Warsh was among several rumored candidates for Trump's Treasury secretary nomination and has met with the president at Mar-a-Lago. 'Trump has been vocal about his desire for a Fed that embraces lower rates and his ideal Fed chair candidate would be more pliant yet someone that the markets can accept with a degree of credibility. Kevin Warsh … could fit the bill,' wrote analysts at Beacon Policy Advisors. Fedwatchers have long considered Warsh the heir apparent to Powell given his close ties to Trump's orbit and willingness to call out the current central bank regime. Warsh has been fiercely critical of the Fed under Powell's leadership, accusing the bank of hiding behind its independence to avoid accountability. 'Independence is reflexively declared, all too often in my view, when the Fed is criticized,' Warsh said in an April speech to a conference in Washington, D.C. Warsh amped up his criticism earlier this month, denouncing central bankers as 'pampered princes' and defending Trump's attacks on the Fed. 'Central banks were created so that politicians would have someone to blame for this' he said. 'Well, grow up. Be tough.' Warsh also shares close political connections to Trump. His father-in-law, cosmetics heir Ronald Lauder, has donated millions of dollars to Trump and Republican candidates, and was reportedly behind Trump's quest to purchase Greenland. Bessent quickly cemented himself as Trump's chief dealmaker and Wall Street ambassador as the president's rocky tariff rollout roiled markets. The Treasury secretary was front and center as markets cratered, while urging Trump behind the scenes to refocus the bulk of his new tariffs toward Chinese goods. After Trump's pivot soothed markets, the president dispatched Bessent and U.S. Trade Representative Jamieson Greer to Switzerland, where they met with Chinese officials to broker a truce. The mission put Bessent squarely in the middle of Trump's orbit and established him as the de facto leader among the president's fractious economic team. Bessent has been tamer in his criticisms of the Fed and Powell than some of his White House colleagues since taking office, towing a careful line drawn between the Treasury and central bank more than seven decades ago. Even so, Bessent's loyalty to Trump and credibility with markets have put him in the conversation to succeed Powell. But his importance to Trump's overall economic agenda may dissuade the president from opening up a void in his administration. 'The president may not consciously acknowledge this dynamic but could be convinced that replacing Bessent with an alternative who can earn the trust of Wall Street would be a hassle. This doesn't mean that Trump wouldn't want Bessent helming the Fed, but that having to fill a vacancy at the Treasury Department would be creating a challenge where there doesn't need to be one,' Beacon analysts wrote. After decades as an economics professor and Fed research director, Waller joined the Fed board on Trump's nomination in 2020. Unlike four of Trump's other Fed nominees, Waller squeaked through the Senate in the waning days of the president's administration. He's largely been in sync with Powell on interest rates, but has voiced far less concern about the potential inflationary impact of Trump's tariffs and suggested cutting rates as soon as July. 'You'd want to start slow and bring them down, just to make sure that there's no big surprises. But start the process. That's the key thing,' Waller told CNBC last week. 'We've been on pause for six months to wait and see, and so far, the data has been fine. … I don't think we need to wait much longer, because even if the tariffs come in later, the impacts are still the same. It should be a one-off level effect and not cause persistent inflation.' Waller has also dismissed Trump's constant attacks on the Fed, arguing that the president's opinions alone do not harm the bank's independence. 'If the president wants to complain about it, he is free to do so just like everybody else,' Waller said in an interview with Bloomberg News after Trump's victory. 'That doesn't mean I have to listen or adjust policy to that, but he is entitled to every damn opinion he wants.' Bowman was nominated by Trump and confirmed by the Senate in 2018 to fill the first seat on the Fed board designated specifically for someone with community banking experience. Before joining the Fed, Bowman served as Kansas state banking supervisor and as vice president of Farmers & Drovers Bank. After keeping a relatively low profile as a Fed governor, Bowman scored a significant promotion when Trump nominated her earlier this year to serve as the central bank's vice chair of supervision. The role puts her in charge of the Fed's expansive regulatory portfolio and oversight of the biggest, most powerful U.S. banks. Like Waller, Bowman has generally voted with Powell in favor of loosening bank regulations and gradually reducing interest rates, but recently broke from the pack and called for a cut as soon as July. If nominated and confirmed to lead the Fed, she would be just the second woman to chair the central bank. Yellen was the first and held that position until she was replaced by Powell. While Hassett has served a variety of economic roles in both of Trump's administrations, he's shared one major goal among them: tout the benefits of the president's agenda when markets and the country at large are doubting it. Hassett was chair of the White House Council of Economic Advisers (CEA) during the first Trump administration, serving as the president's top economist amid major changes to tax, financial and trade policies. Now as director of the National Economic Council (NEC), Hassett has primarily been involved in crafting and modeling Trump's sweeping tariffs and domestic policy agenda, including extensions to key tax cuts passed during the first administration. Hassett is well known for his sunny demeanor even while fiercely defending Trump and his agenda on TV — an important balance for any of the president's top advisors. But Hassett has sharpened his criticism of the Fed and Powell as Trump's own tensions with the Fed chair boil over. 'There's absolutely no excuse, other than partisanship for the Fed not to cut rates,' Hassett said of his fellow Republican in an interview with Fox Business last week. Hassett in April also accused Powell of partisanship when discussing key issues. 'Having everybody that refused to warn about the runaway spending out there, saying, 'Oh, this is going to be a catastrophe for inflation because of the tariffs,' means that people need to improve their models and improve their messaging,' Hassett said. Powell, however, has warned under both Trump and Biden that the U.S. was on an 'unsustainable' fiscal path and needed to pay down its debt.
