Don’t expect Kevin Warsh to be a bomb-thrower.
Several longtime observers of the Federal Reserve told Business Insider that President Donald Trump’s pick to become its next chairman is a good listener who looks for consensus.
That could prove essential for Warsh, who has emerged as a sometimes-vocal critic since leaving the central bank more than a decade ago. While some Fed watchers criticized Warsh’s nomination, citing shifts in his stance on interest rates, others praised his experience and communication skills.
If confirmed as its next chair, Warsh would need to steer an institution increasingly caught between public pressure and the maintenance of a somewhat frayed internal consensus.
Trump has repeatedly criticized Jerome Powell, whose term as Fed chair ends in May, for not cutting rates faster. That backdrop would likely test any incoming chair’s ability to defend the central bank’s independence.
‘Insider experience and outsider critique’
Former colleagues say that Warsh understands the importance of the Fed’s dual mandate of price stability and maximum employment. That grounding, they say, could help him manage internal debates even as external expectations shift.
“Warsh has a very valuable skillset of insider experience and outsider critique,” said Aaron Klein, a senior fellow in economic studies at the Brookings Institution, who worked with Warsh after 9/11, when Warsh served under President George W. Bush.
Warsh proved easy to work with and adept at listening, Klein said — skills that matter when a leader must manage disagreement rather than impose direction.
The chair is only one of 12 votes on monetary policy, though that person also controls the Fed’s “incredibly powerful staff,” he said.
Donald Kohn, who spent 40 years at the central bank and worked alongside Warsh as a Fed governor, said in a statement to Business Insider that Warsh understands that the Fed’s decision-making must remain focused on its dual mandate.
He has a good ability to read the room, said Kohn, a senior fellow at the Brookings Institution. Kohn said he worked closely with Warsh during the “stressful years” of the 2007-09 global financial crisis.
The ability to gauge a group’s temperature could be critical. Warsh would be returning to a policymaking environment — and to staff and officials — he has publicly criticized in recent years.
Congress set up the Fed so that it would be shielded from political pressure to juice the economy by slashing rates — and risk subsequent inflation.
“He knows he will need to use his considerable skills to marshal evidence and analysis to support the direction he wants to take policy,” Kohn said.
That matters in part because the bank’s Federal Open Market Committee, which sets short-term rates, is divided; it hasn’t voted unanimously since July. The committee was again split at its January meeting, when 10 members, including Powell, voted to hold on rates, while two sought a cut.
‘Consensus-oriented’
In recent years, Warsh has sharpened his critiques of the Fed, including in speeches and in his academic work at Stanford. In a 2023 op-ed in The Wall Street Journal, he called for “regime change” in US economic policy. Warsh criticized the Fed for being too slow to corral inflation after policymakers slashed borrowing costs in the early days of the pandemic.
Klein, who was a lead Democratic staffer on Warsh’s original Senate confirmation in 2006, said that Warsh’s critiques from academia have been “reasonable and thoughtful.”
Klein added that Warsh’s experience makes him an ideal operator to make changes at the central bank if he’s once again confirmed by the Senate.
“I hope he shakes up the Fed’s decision-making process, which has gotten most of the major bank regulatory questions dead wrong over the last 30 years, while maintaining the Fed’s independence on monetary policy,” Klein said.
A Fed spokesperson declined to comment on the critique.
Not everyone sees Warsh as a change agent, despite his criticisms. There is a risk that his instinct to seek common ground could become a limitation, Joseph Brusuelas, principal and chief economist at RSM US, told Business Insider.
“He’s consensus-oriented and not willing to jump too far out in front of the committee,” Brusuelas said.
In reading policymaking transcripts from Warsh’s time at the Fed, from 2006 to 2011, he came off as a follower rather than a leader, Brusuelas said.
“He’s an echo, not the tip of the spear,” he said.
A leadership style that’s focused on common consent and “organized around protecting the status quo” means that Warsh will likely “always be late” to needed policy shifts due to domestic or external shocks, Brusuelas said.
Warsh didn’t respond to a request for comment from Business Insider.
Asked about the criticism, White House spokesperson Kush Desai said in a statement that to restore confidence at the Fed, the president’s primary considerations for a new chairman were “competence and experience.”
“Kevin Warsh is eminently qualified to hold the job,” Desai said.
Famed economist Mohamed El-Erian likewise sees Warsh as a good fit, writing on X that Warsh “brings a strong mix of deep expertise, broad experience, and sharp communication skills.”
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