Chapter 1: What announcement did President Trump make regarding the Fed chair?
This morning, President Trump made a huge announcement, one that could impact the economy for years to come. What's the big news today, Nick?
Well, the big news is that Kevin Warsh will be the next Fed chair.
Our colleague Nick Timoros covers the Federal Reserve.
We've been waiting for months, really. It was really, you know, a pageant. It was like an episode of his old TV show, The Apprentice, I called it. The Apprentice Fed Edition, because he had everybody sort of guessing. They started with 11 candidates, and then they whittled it down to four that got to interview with Trump. And there was some swirl of intrigue this week.
But in fact, the person that Donald Trump picked, Kevin Warsh, is the person that a lot of people thought was going to get it from the very beginning.
And what do you make of this choice, Kevin Warsh?
Kevin Warsh is a Fed insider turned critic. He is an establishment Republican turned Trump supporter.
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Chapter 2: Who is Kevin Warsh and what is his background?
This isn't the first time you've heard me in the last decade say we need regime change at the Fed.
He spent five years at the central bank, beginning 20 years ago, so he knows the Fed. But he's also been a vocal advocate recently for Donald Trump's policies. The question I think a lot of people on Wall Street are going to ask in the coming days and weeks is, which Kevin Warsh ends up being the Fed chair?
Welcome to The Journal, our show about money, business, and power. I'm Jessica Mendoza. It's Friday, January 30th. Coming up on the show, Kevin Warsh and a new era at the Federal Reserve. Kevin Warsh is 55 years old, originally from upstate New York. He got his bachelor's degree from Stanford University, where he made connections in conservative economic circles.
And he was seen as just a very brilliant up-and-comer. He married Jane Lauder, heiress to the Estee Lauder family fortune. His father-in-law is Ron Lauder, who is a former classmate of Donald Trump's.
Warsh also got a law degree from Harvard and worked as a banker at Morgan Stanley.
And in 2002, there was an economic advisor at the White House who calls up one of Warsh's old professors and says, hey, I need to hire a really smart, hardworking person. Have you got anybody? And the economist professor says to the White House advisor, I've got the guy. He's brilliant. And that was Kevin Warsh.
While working in George W. Bush's White House, Warsh got to know economist Ben Bernanke, who went on to lead the Federal Reserve.
And from that, he scores an appointment to the Fed board himself. In 2006, at age 35, he became the youngest person ever to become a Fed governor.
Here's Warsh at a Federal Reserve board meeting in 2007.
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Chapter 3: What were Kevin Warsh's views on the Federal Reserve during his tenure?
You've done it with a rigor that I think is...
quite representative of the Federal Reserve. And then he has a ringside seat to the financial crisis in 2008.
During that period, one of the most significant moves the Fed made was something called quantitative easing, buying Treasury bonds to stabilize the economy. Initially, Warsh was on board with the policy. But by the time he left the Fed in 2011, he had his doubts.
He is disillusioned with some of the easy money policies that Bernanke is pursuing. And so he becomes more critical of the Fed after he leaves. The worry was that all of the money sloshing around in the economy would show up either in inflation or asset bubbles.
Warsh writes regular essays, op-eds, gives interviews where he's pointing out what he thinks are the problems with the policies the Fed is pursuing.
That economic policy provokes our adversaries to take us on, so that makes the country less prosperous and less peaceful.
Warsh's concerns drew a lot of attention, including from President Trump, who in 2017, during his first term, was choosing a new Fed chair. The choice came down to Warsh and Jerome Powell. Ultimately, Trump chooses Powell. Why didn't Trump choose Warsh at the time? What was sort of the idea there?
Well, I talked to somebody who spoke with the president right as Trump was making that decision. And this was somebody who said, I think you should pick Kevin Warsh. And the president said, well, I want somebody who favors low interest rates. So I think...
One way to read this is to say Trump saw the long track record, the written record that Warsh had published and said, well, maybe this guy doesn't actually want lower interest rates. He also told people he thought Warsh looked too young. Warsh is 17 years younger than Powell, the silver-haired former private equity investor.
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