Kevin Warsh as Federal Reserve chair: A high-risk appointment

AS US President Donald Trump narrows his search for the next Federal Reserve chair, former Fed governor Kevin Warsh has emerged as the leading contender alongside National Economic Council director Kevin Hassett. Trump’s recent comments that Warsh now tops his list – and his stated expectation that the next chair must consult him on interest rate decisions – have intensified scrutiny of Warsh’s qualifications and what his appointment would mean for monetary policy and the Fed’s independence.

Qualifications and crisis experience

Warsh brings substantial credentials to the table. Appointed to the US Federal Reserve Board of Governors in 2006 at age 35, he became the youngest person ever to serve in that role. His background spans Wall Street and the White House under George W Bush’s presidency.

His defining experience came during the 2008 financial crisis, where he served in Fed chairman Ben Bernanke’s inner circle and acted as the Fed’s primary liaison to Wall Street. Bernanke later credited Warsh with warning colleagues early that the financial system was vastly undercapitalised. In March 2008, Warsh presciently observed that the investment bank business model was doomed.