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President Donald Trump took to truth Social Friday morning to announce his choice for the next chair of the Federal Reserve.
President Trump has tapped FED critic Kevin Walsh Kevin Walsh, Kevin Walsh to be the next FED Chair.
Kevin Walsh. He's not a household name, but he's also not exactly a surprise pick. He's a former FED governor who served during the financial crisis, and he was up for the FED chair position during Trump's first term in twenty seventeen. Trump chose Jerome Powell instead. But there's a big difference between the old worsh and the new Worsh.
Well, I think the big question that many fedwatchers are asking today is which Kevin Walsh will show up to be FED chair if he is confirmed.
My colleague Amara Amokway covers the Federal Reserve. She says that for a long time Worsh was hautious about lowering rates because of the risks of driving up inflation, but recently Worsh has been signaling a shift in position.
He does have this track record of being an inflation hawk, but then as he's been in the mix for FED chair has really embraced this idea that for several reasons, he argues that the FED can be cutting interest rates.
Here he is on Fox News this summer.
The FED has the policy mix exactly wrong. It has a big balance sheet like we're in thea crisis, the twenty twenty pandemic, and has rates that are too high. It needs to shrink the FED balance sheet and cut interest rates.
Trump, of course, has put pressure on the FED to cut rates more aggressively, challenging long held norms around the central banks independence, and stoking concerns about how much influence the President will have over the next FED chair.
Did Kevin Walsh commit to you that he will push to cut interest.
Rates if he has come At the White House Friday morning, reporters asked the President about what he expects from Worsh.
But we talk about it, and I've been following them, and I don't want to ask him that question. I think it's inappropriate. Probably it probably would be allowed, but I want to keep it nice and pure. But he certainly wants to cut right, So I've been watching him for a long time.
Worsh would replace Fedchair Powell when he turns out in May. But before Worsh can step into the role, he'll need to be confirmed by the Senate, and until then he'll be under a microscope.
Is Kevin Worsh going to show up to the FED chair job and defend this decade's long tradition of FED independence and really push for policy that is based on his best judgments of what's happening in the economy. Or is he going to be a person who pushes for policy that is aligned with what the president prefers.
I'm Sarah Holder, and this is the big take from Bloomberg News Today. On the show, President Trump has named Kevin Walsh as his pick for the next chair of the Federal Reserve. I sit down with Fed reporter Amara Amokway and Senior Washington correspondent Seleiah Mosen to break down what we know about Worsh, how he might lead the FED, and what to watch out for on the road to
his confirmation. So the reason we're here is that in a truth Social post this morning, President Donald Trump announced his pick for the next Chair of the Federal Reserve, Kevin Worsh. Seleia, who is Kevin Worsh.
Kevin Worsh previously served at the Federal Reserve. He was nominated to that role by George W.
Bush.
He interviewed for the chairmanship back in the first Trump term in twenty seventeen, when those interviews were going on, and eventually J. Powell was offered the job. At that time, then treasure Secretary Stephen Nushan said you should choose J.
Powell.
And then we saw in November of twenty twenty four when Trump had been reelected and he was looking for hi as your secretary, Worsh popped up again and was part of those interviews. Didn't get that job, but still everyone kind of had a sense that the job that he would really want is the FED chair role.
Well, I mean, as you've just laid out, Worsh has had many of the roles you might expect for a future FED chair. He was on the Central Bank Spoort of Governors. He served during the financial crisis. He's been an economic advisor for the president. Trump even said he was Central Casting amara. When you look at his resume, what stands out to you most, What does it signal about his potential approach in this role.
I think people some people are comforted by the fact that he knows the institution and that during his time at the FED he played a very key role in helping craft the Fed's response to the financial crisis because he had a lot of ties to Wall Street. But I think what people have been thinking a lot about is the fact that during his time at the FED,
Kevin Worsh was seen as an inflation hawk. He was seen as someone who was very concerned about inflation during the depth of the financial crisis, and over the last year, as he's been in the mix for the FED chair, he has become notably more dubvish. But to be fair, Worsh, in advocating for lower rates, has laid out an economic argument. It's not like he's just saying we should be lowering
rates for no reason. He has pointed to factors in the economy that he believes should allow the FED to lower rates, including where we are with productivity in the economy, and he's also talked about other things, like his view that the FED should have a significantly smaller balance sheet as a way of opening the door for lower rates.
So he's been laying out an economic argument. But I think people see a little bit of inconsistency in the fact that he used to be so concerned about inflation, and then as he's been one of the top candidates for this job, the story has kind of changed.
Worsh did resign from the FED Board in twenty eleven over some fundamental disagreements with the central banks post crash strategy. What were at the heart of his issues with FED policy at the time.
So he disagreed with the Fed's decision to continue engaging in quantitative easing, that is, the purchase of assets that basically grows its balance sheet. And as he has been in the mix for FED chairs, he's made speeches and appearances over the last year since Trump returned to office, he has continued to talk about how he thinks the fed's balance sheet policies have gotten sort of out of hand.
And what is interesting is that that criticism and other criticisms that Walsh has made of the FED since he left have actually been really closely aligned with some of the criticisms we've heard from Treasury Secretary Scott Bessant. Treasury Secretary Bessant had an essay, a very long essay where he laid out several criticisms of the FED, and it was actually striking how similar his criticisms were to some of the criticisms that Kevin Walsh has made up the FED,
particularly on the balance sheet. And we heard Kevin Walsh over the summer basically say that there needs to be regime change at the FED and institutional change at the FED, and these are exactly some of the things that Tragy Secretary Besson, who ran point on this FED selection process, has been talking about. And so in that way you can see that Wosh was really aligned with the views of some of the most important figures in the administration.
And Selia you've mentioned, you know, one of the pivotal moments in Worsh's evolution is that in twenty seventeen he was passed over for the FED chair role. Trump chose Powell instead. Trump has since, you know, basically said he regrets doing so. But I'm wondering, you know, what's changed since twenty seventeen. Why did Trump choose Worsh this time?
That is currently what we're reporting out. I'm so curious because ever since the DOJ investigation into Powell and the FED was launched, it really threw a wrench into Scott Besson's process to get Trump to select a FED chair because all signs were pointing to Kevin Hassett, the top economist in the White House, who had previously been a staffer at the Federal Reserve, getting the job. And this is something that Trump himself acknowledged this morning when he
truth socialed that worsh is getting the job. His next post was, I love Hassett, I just want to keep him. So that's just confirmation that Hassett was the front runner for many many months there, and Trump would say, I know who it's going to be. I have the guy's name in my head. I'm just not going to tell you. And so then you're looking at the other candidates. You had Rick Reader from Blackrock, you had Chris Waller, who is currently a FED Board governor, and you had Kevin Walsh,
and all of them had pros and cons in Trump world. Right, Blackrock is not super popular among the MAGA folks. You have Chris Waller, who maybe he was seen as a steady hand and had shown that he thinks independently from what some people call the group think at the FED, but still he was maybe seen as too institutional of a person. Even though now Trump has said all the
other options we would have been great. And then you have Kevin Walsh, who was sort of like the one who got away maybe, And a lot of the time things just come down to relationships. For Trump, who does he already know and he didn't want to repeat the mistake. He did not know j Powell at the time of choosing him. He just knew him from interviews and reading up on him and studying him as he's making the selection. Kevin Walsh, he's known now for a long time.
One of the things that the FED chair is going to have to have is credibility in the markets, right, And if you're just seen as a SICKA fan who's just doing the president's bidding, that would likely rattle markets and make people feel unsettled. But if you can make an economic argument for rate cuts that convinces people, then
you're on better footing. Right. So intellectual arguments that make the case for rate cuts without appearing like you're just only interested in doing the president's bidding, I think probably helped his case.
Jerome Powell's term as FED Chair ends in May, and before worsh can take over, he'll have to be confirmed by the Senate. What the Fed's transition period could look like coming up next. Kevin Worsh's nomination as the next FED chair comes at an intense time for the Central Bank. As Trump continues his relentless quest for lower interest rates. His administration has ramped up the pressure on the FED
and FED Chair Jerome Powell. There's an ongoing Justice Department probe into renovations at the Fed's HQ and a Supreme Court case over Trump's attempt to fire FED Governor Lisa Cook. Lawmakers on both sides of the aisle, including Republican Senator Tom Tillis, have registered their concern that the result of all these attacks could be a less independent FED.
We've got the Cook, so we have the power case. Both of those, to me are instances of trying to undermine the credibility of the FED independent.
I asked Bloomberg, Samara Amokwagh, and Saliah Mosen how those dynamics could affect Congress's decision about whether to confirm Worsh.
Tom Tillis, who was on the Senate Banking Committee that does the initial vetting of FED nominees, has made clear that he is going to block any FED nominee until this DJ probe of Chairpowal and the FED is resolved somehow. And then Senator Tillis came out after President Trump announced his pick and reiterated that I am.
Placed with the nominee. I think that by most accounts he's well regarded. But we still have to clear the current matter.
And so that is a roadblock that the administration now has. Is the Department of Justice going to drop the investigation or find some other kind of off ramp because Tillis has made clear that he's not going to allow this nomination to move forward.
The Senate has to stand in the breach. We have to make sure that the FED maintains its independence and we cannot reward any bad behavior.
I think also you can expect that whenever worsh does go before the committee, you are going to hear a lot of questions about FED independence because the administration has really up the ante in putting pressure on the FED, from the DOJ investigation to the attempt at firing of
Lisa Cook. We did see Senator Elizabeth Warren, who is the ranking member on the Banking Committee, come out and be very critical of this nomination and basically tie that to the fact that there are questions around the FEDS and dependence, and she said that this nomination it is essentially Trump's latest attempt to seize control of the FED.
I think you're really going to hear the Senators probably on both sides of the isle at this point, given the DOJ investigation, really pushing Walsh on whether he's going to be independent and how he can assure the public and the markets that he's not going to just do President Trump's bidding.
And where does all this leave current FED Chair Jerome Powell. What does a worst pick mean for him?
Well, I mean that's the big question, right. I think before the DOJ probe, the feeling among FED watchers was that Jerome Powell was ready to leave. He has been on the FED board for a long time. This is his second term as chair, and you know, I think the expectation was that he was ready to go. The DJ probe has changed everything, and we saw that in the extraordinary statement that chairpal released about the subpoenas that
were issued to the FED. At the FOMC meeting, Pale was asked about his future plans and he, again, as he has in the past, declined to say whether he's going to stay or go. But I think the DOJ probe is kind of the bigger issue. It's bigger than who the next FED chair is. It's really what is going to happen with that investigation that I think will ultimately determine whether chairpal stays or goes.
And Telia, You've done a lot of reporting on the dollar. I'm wondering how markets more broadly reacted to this pick.
Yeah, we saw markets rally. Markets are happy with the choice. So far, it looks like it's someone who, as Trump said acknowledged yesterday when he was teasing everyone, what I've made the decision you're going to hear about tomorrow. I don't know why he didn't just tell us right then in the moment, but he said, this is going to be someone that the world of finance already knows well. And because of that, we're seeing a rallying that it's
someone who understands how the institution works, understands. Hopefully, if you understand how it works, that means you understand the importance of independence, but also someone who maybe Trump trusts. Therefore, there will be fewer tweets and truth social posts about the FED chair being a bonehead, and all the other names that Trump has called j Paul.
The relationship that Worsh would have with the committee matters a lot, and consensus or dissent matters a lot, and how interest rates will be set moving forward. What do we know about how the current FED board might receive Worsh.
I mean, my understanding is that when there's an new chair, the fellow policymakers want to give that chair a fair shake, right, they want to give him the opportunity to lead. Obviously, this is someone who is nominated by the President and confirmed by the Senate, and I think the feeling is that that person should be given the benefit of the doubt to make their intellectual arguments and to lead the institution.
But again, I don't think it's the case that policymakers are going to go along with something that they don't think is right, that they don't think is right for the economy. And so we will really see how, if he's confirmed, how Worsh interacts with his fellow policy makers, and the extent to which he's able to bring them
along with where he thinks policy should be headed. Jae Powell is known as having been really successful at this and so it'll be interesting to see if Walsh is able to have that same influence and that same ability. I think this is something that often gets lost in conversations about the FED. The FED Chair is just one one of twelve people who votes on monetary policy. Okay, twelve people have to go in there, vote and come
to a consensus or not right. And so you know, we've seen President Trump really criticize Chair Poal and put all this pressure on him for not lowering rates. But the reality is the Chair has to drive the committee that votes on interest rates toward a consensus. And over the last couple of months, we've seen that it hasn't always been easy for even Chair Pal to do that. We've seen dissents, We've seen people say actually, we shouldn't
be cutting rates, or we should be cutting rates. And so even if Walsh is inclined to cut rates, he's going to have to convince his fellow policy makers that that is the right thing for the economy at that time. And we know that a lot of these policy makers our strong economic heavyweights in their and they're not going to go along with something that they don't feel is in the best interests of the economy, and so it will be really interesting to see how this all plays out.
If we're in a situation where worsh is pushing for lower interest rates and the rest of the committee is not willing to go along, how will President Trump reacts because no FED chair can push through rate cuts on his own.
This is The Big Take from Bloomberg News. I'm Sarah Holder. The show is hosted by Me, David Gera, and Juan ha. The show is made by Aaron Edwards, David Fox, Eleanor Harrison Dedgate, Patti hirsh Rachel Lewis, Krisky, Naomi Julia Press, Tracy Samuelson, Naomi Shaven, Alex Ugiera, Julia Weaver, Yanyong, and take Yasuzawa. To get more from The Big Take and unlimited access to all of Bloomberg dot Com, subscribe today at Bloomberg dot Com Slash Podcast Offer. Thanks for listening.
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