Kevin Warsh wants Trump to know about his rate cuts U-turn in hunt for Fed job

Kevin Warsh, once known for fighting interest rate cuts with everything he had, now wants them. And he wants them fast.

In an interview on Fox News, Kevin made it clear that the Federal Reserve needs to cut rates and start shrinking its $7.7 trillion balance sheet. The timing is not subtle. Donald Trump is looking for someone to replace Jerome Powell at the helm of the Fed.

Kevin, long viewed as a frontrunner, is now aligning his policy views to match Trump’s demands. According to Fox, Kevin said, “The Fed has the policy mix exactly wrong, it has a big balance sheet, like we’re in the ‘08 crisis or the 2020 pandemic, and has rates that are too high.”

He argued that reducing the balance sheet would make room to bring down the federal funds rate, which in turn would lower the cost of credit for everyday Americans. He’s also pitching a complete institutional reboot, claiming the Fed is no longer functioning the way it should.

Kevin once resisted cuts

During his time as Fed governor from 2006 to 2011, Kevin opposed rate cuts even when the financial system was falling apart. He repeatedly warned of inflation that never came. In May 2008, just two months after Bear Stearns collapsed and the Fed had already slashed rates by 3%, Kevin was still pushing back, saying further reductions could fuel inflation.

Four months later, Lehman Brothers triggered global panic. The Fed dropped rates to zero. Kevin went along, but by September 2009, with inflation in negative territory and unemployment close to 10%, he warned the Fed might need to hike rates with “greater force” than before. The Fed didn’t raise rates again until 2015, and inflation during that stretch stayed around 1.5%.

Kevin left the Fed in 2011, soon after then-chair Ben Bernanke launched a second wave of bond-buying. Kevin hated the idea of quantitative easing outside a crisis. Now he wants the Fed to unwind that balance sheet while also cutting rates — something even his past self would’ve rejected outright. And while inflation is still hovering above the Fed’s 2% target, Kevin’s pushing rate cuts anyway.

He isn’t just aiming to change policy, though; this guy wants to clean house. “I think what we need is regime change at the Fed,” he said, making it clear he’s not just targeting Powell. He wants to replace multiple officials. He believes the Fed’s poor response to pandemic-era inflation, along with its refusal to admit policy failures, has wrecked its credibility.

Trump wants a rate cutter and Kevin wants the job

Trump has been loud about needing someone who’ll lower rates, and he’s said flat out that if a candidate won’t commit to that, they’re out. “If I think somebody’s going to keep the rates where they are or whatever, I’m not going to put them in,” he told reporters on June 27. Kevin’s very public reversal looks like a job application. And he’s not trying to hide it.

This wouldn’t be his first shot. Kevin was close to landing the job in 2017, when Trump ended up choosing Powell instead. Trump later said he regretted that decision. In 2020, he told Kevin, “Kevin, I could have used you a little bit here. Why weren’t you more forceful when you wanted that job?”

This time, Kevin’s making sure he’s being heard.

Other contenders include Scott Bessent, Kevin Hassett, and Christopher Waller — all of whom support cutting rates. But Kevin’s got something they don’t. He was with the central bank during the 2008 crisis. When banks were collapsing and everyone was panicking, Kevin helped push the sale of Wachovia to Wells Fargo, and he helped design a plan to push billions in capital into the nine biggest U.S. banks. That hands-on experience gives him a strong edge.

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