Kevin Warsh says he still bears the scars from “the darkest days” of the 2008 financial crisis.
Then a newly appointed Federal Reserve governor, Warsh acted as a vital conduit between the central bank and Wall Street as the financial system and the US economy confronted their gravest threat since the Great Depression.
“He brought a lot of real experience, he knew these people on Wall Street — he knew the difference between when they were arguing their book and when they were bringing us good information — and that was very, very valuable,” said Don Kohn, the former Fed vice-chair who had an office next door to Warsh.
It is a view echoed by Lloyd Blankfein, who led Goldman Sachs during the crisis. “Kevin was unflappable at chaotic moments,” he recalled, pointing to an even temperament and willingness to engage.
Almost two decades on, Warsh’s ability to balance competing demands is set to be tested as never before after Donald Trump on Friday nominated him to succeed Jay Powell as chair of the Fed.
Warsh will take the reins of the world’s top central bank during one of the most consequential periods in its 112-year history.
The 55-year-old, described by Trump as from “central casting”, must contend with the president’s belligerent campaign for lower interest rates and investors’ fears for the central bank’s independence.
In an early sign that investors are sanguine that Warsh will not be cowed by the White House into aggressive rate cuts, the dollar rose on Friday.
“Kevin right now very much believes you can have growth without inflation,” former hedge fund manager Stanley Druckenmiller told the FT in an interview on Friday. Warsh has been a partner at Druckenmiller’s family office since 2011.
“He’s very open minded to the so-called Greenspan view back in the late ’90s given what’s going on and given the productivity,” Druckenmiller added, referring to former Fed chief Alan Greenspan, who presided over the growth era that preceded the financial crisis. “I think he’ll handle it appropriately.”
Warsh has recently maintained that AI will increase productivity, meaning that central bank policy need not be so concerned that gains in workers’ take-home wages will stoke inflation. Such an argument could open the way to more Fed rate cuts.
Warsh’s voting record on monetary policy when he was a Fed governor between 2006 and 2011 has strengthened investors’ confidence.
Mohamed El-Erian, who led fixed-income asset manager Pimco and is an acquaintance of Warsh, said: “I feel he’s much more of a known quantity and I am comfortable with most of his views.”
He added that Warsh was the last Fed governor to have “made a significant effort to understand market developments”.
It is not just ties to Wall Street that Warsh has forged over a four-decade career that began in 1995 as an investment banker at Morgan Stanley. In 2002, he swapped Wall Street for government, joining George W Bush’s administration as an economic adviser.
The same year, marriage to Jane Lauder, a member of the billionaire family behind the Estée Lauder cosmetics empire, strengthened his ties to the Republican establishment. Her father, Ronald, who is close to Trump, was the US ambassador to Austria under Ronald Reagan.
Bush’s selection of him as a Fed governor in 2006 made the then 35-year-old the youngest ever nominee to the central bank’s board.
But it is a different Republican president who has propelled Warsh, who was born in New York’s state capital Albany and studied at Stanford and Harvard universities, into a job he has long sought.
According to people familiar with the matter, Trump considered Warsh as Fed chair before nominating Powell in 2017. Following Trump’s election victory in 2024, Warsh was even on the president’s radar for the role of US Treasury secretary.
As Trump assembled his second-term cabinet, Warsh was summoned to a meeting at the president’s Mar-a-Lago resort in Florida after Elon Musk argued that appointing Scott Bessent would be “business as usual”.
While the Treasury role eventually went to Bessent, Warsh won admirers within the Trump administration for pushing for “fundamental reform” of an institution that he believed has overstepped its mandate.
Last April, as global markets reeled from Trump’s trade war, Warsh used a speech to the influential Group of 30, a body of former central bankers and top financiers of which he is a member, to take aim at the Fed.
Warsh argued that “changes in the role of the US central bank have been so pervasive as to be nearly invisible. The Fed has assumed a more expansive role inside our government on all matters of economic policy.”
Some of Warsh’s sharpest barbs have been directed at policies he helped shape, notably the central bank’s huge bond-buying sprees. Warsh resigned as Fed governor in the spring of 2011, just months after the central bank had voted to purchase more bonds.
“In my view, forays far afield — for all seasons and all reasons — have led to systematic errors in the conduct of macroeconomic policy,” he said.
If he is approved by the Senate, Warsh will join a US central bank divided over whether it should prioritise fighting inflation or supporting a weakening jobs market.
Alan Schwartz, who led Bear Stearns during the financial crisis and is now executive chair of Guggenheim Partners, said he was confident that Warsh would be able to corral a consensus on the board.
“That’s one of the requirements of being a Fed chair,” he said. “You can’t be dictatorial about policy. Warsh will bring the gravitas to group discussions that will allow a consensus to be reached.”
The Fed cut rates three times in 2025. But officials have signalled this week that, with inflation still in excess of their 2 per cent goal, the bar to more action is high. At a range of 3.5 to 3.75 per cent, interest rates remain much higher than the 1 per cent level Trump wants.
Like all of the other candidates interviewed for the role, Warsh claims there is room for more rate cuts.
His calls for the US central bank to revisit the Treasury-Fed Accord of 1951, the template upon which the Fed’s independence from the executive branch is based, echo those of Bessent, with whom Warsh is said to be close.
But they have rankled with central bank insiders who view his fierce attacks against the institution as unfair. They also believe that some of Warsh’s claims, such as a view that the central bank should radically shrink its balance sheet, are ill thought-out.
Isabelle Mateos y Lago, chief economist at BNP Paribas, said that, while Warsh was in some ways a traditional pick, given he is well known in the Fed and on Wall Street, the nomination could prove “disruptive”.
“He has an overt agenda to overhaul the way the Fed works institutionally, and is by no means a continuity candidate. And he has argued for a small balance sheet, which is very hard to reconcile with the president’s view that the Fed should lower borrowing costs for the federal government,” she said.
Kohn said that, while he was “all for bringing in new thinking and making things better”, he was sceptical of the merits of some of Warsh’s ideas.
“Some — though by no means all — of the criticisms he has have a kernel of truth about them, but then they’re carried too far,” the former vice chair, now at the Brookings Institution think-tank, said. “But he knows the institution. And I think he respects the history of the institution.”
Additional reporting by Sam Fleming
Data visualisation by Keith Fray and Ray Douglas