Kevin Warsh
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NYT grills new Trump nominee over major ‘credibility problem’ - Alternet.org
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an 4 26
Trump’s crusade against Federal Reserve Chairman Jerome Powell is motivated by Powell’s refusal to lower interest rate for Trump — and yet, as one economics expert pointed out, Trump’s vendetta is keeping inflation high.
“The person that Donald Trump wants to appoint to succeed Jerome Powell is this guy, Kevin Warsh, who his entire career was known as an inflation hawk, basically wanted tighter monetary policy,” economics journalist Catherine Rampell told conservative website The Bulwark’s Andrew Egger on Wednesday. “But lo and behold, [he] has changed his tune just in time to accept this nomination. And now he wants looser monetary policy, i.e. the lower interest rates that Donald Trump just coincidentally also happens to want.”
Rampell added, “He normally would sail through this confirmation process no problem, except for the fact that Thom Tillis, the senator from North Carolina who is retiring, has said: I like Kevin Warsh, but I will not allow any Fed appointment to go through … until Donald Trump drops this bogus investigation of Jerome Powell.”
Yet because Trump will not stop his politically-motivated prosecution of Powell, whose term expires in roughly a month anyway, he is undermining his own economic agenda. Trump’s war on Powell matches his attempt to fire other members of the Fed, Lisa Cook — a move that is also working its way through the Supreme Court, Rampell added.
The courts and Wall Street are not oblivious to his behavior, said Rampell, and it is undermining their faith in America’s financial institutions.
“This is really bad for inflation — the one thing that Donald Trump claimed he would deliver,” Rampell explained. “By trying to politicize the Fed, he is likely to, in the long run, make the Fed's ability to promote price stability and low inflation much worse.”
Pro-Trump entertainers like Fox Business network’s Maria Bartiromo tried to spin the level of inflation as good by arguing “the price shocks from crude oil are transitory.”
“It could have been a lot worse," Bartiromo said.
But spin like this is not working, and Trump’s hopes of prosecuting Powell are floundering in the “most basic steps of criminal investigations," according to the New York Times.
"The latest setback in the president's retribution campaign came on Friday when Judge James E. Boasberg of Federal District Court in Washington quashed grand jury subpoenas to the central bank for information about the renovations underway at its headquarters and Mr. Powell's testimony to Congress about them," reports the Times.
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Kevin Warsh}:
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When President Donald Trump was weighing his options for a U.S. Federal Reserve nominee to replace the current chairman, Jerome Powell — whose term ends in May — his search was described as a "tale of two Kevins": National Economic Policy (NEC) Director Kevin Hassett, and financier/attorney Kevin Warsh (who served on the Fed's Board of Governors under former Presidents George W. Bush and Barack Obama).
Trump announced his decision early Friday morning, January 30, nominating Warsh rather than Hassett.
Liberal economist Paul Krugman analyzes Trump's Warsh pick in a January 30 column posted on Substack, and he isn't enthusiastic. The former New York Times columnist views Warsh as a "political" partisan who won't serve the Fed well.
"The Fed is a republic, not a dictatorship; key decisions are made by a committee in which the chairperson has only one vote," Krugman explains. "Fed chairs can only drive policy through persuasion — and Warsh lacks the intellectual and moral credibility to be effective on that score. But God help us if we enter a crisis that requires decisive Fed leadership, the kind Fed Chair Ben Bernanke showed during the financial crisis, or Jay Powell is now showing against Trump's attacks."
Krugman adds, "Absent a crisis, my prediction is that the majority of Warsh's colleagues will largely ignore him, albeit without expressing their contempt openly…. While I don't think Warsh will do too much damage to monetary policy, he, along with his fellow Trumper Michelle Bowman, the vice chair for financial supervision, may well eviscerate the Fed's role as a financial regulator."
The Nobel laureate economist disagrees with reporters who are describing Warsh as a "monetary hawk."
"That's a category error," Krugman writes. "Warsh is a political animal. He calls for tight money and opposes any attempt to boost the economy when Democrats hold the White House. Like all Trumpers, he has been all for lower interest rates since November 2024. Depressingly, some Democratic-leaning economists are stepping up to reassure us about Warsh's qualifications. This is reminiscent of the way many economists rallied around the selection of Kevin Hassett as chair of the Council of Economic Advisers in 2017, although he was an obviously ludicrous hack."
Krugman describes Warsh as a "Republican loyalist" who "always wants to slam the economic brakes when Democrats are in power and step on the gas when Republicans rule."
"It's a humiliating day for the Federal Reserve, which has always prided itself on its professionalism and has been hugely respected around the world," Krugman laments. "But even the Fed can't insulate itself from the derangement sweeping America."
*Paul Krugman's full Substack column is available at this link.