The months-long beauty contest is over: President Donald Trump has nominated Kevin Warsh to replace Jerome Powell as Federal Reserve Chairman.
Before explaining why you should care, a quick rundown of Warsh’s resume:
– Served as Fed governor during the financial crisis (2006-2011) but resigned seven years before the end of his 14-year term.
— Long considered a “hawk” in favor of high interest rates, and his early departure may have been due to disagreements with Chairman Bernanke — Warsh opposed raising rates, while others favored keeping rates low to help the recovery.
– He was a candidate for Fed Chair in 2017, but former President Trump nominated Powell for the post.
– Recently, Warsh has changed positions, arguing that interest rates are too high. He also believes that government spending is at the root of inflation – and that productivity improvements from artificial intelligence will reduce inflation over time. He supports Trump’s policies on taxes and deregulation as a way to boost the economy and has criticized the Powell administration’s restructuring of the Fed.
What happens next?
Warsh must be confirmed by the Senate, which could be difficult. Republican Senator Thom Tillis said he would not vote to confirm Warsh (or any Fed Chairman) until the Justice Department dropped its investigation into Powell regarding the Fed’s stimulus project.
After receiving the subpoena, Powell said “the threat of criminal charges is the result of the Federal Reserve setting interest rates based on our best assessment of what is in the best interest of the public, rather than following the President’s preferences.”
If Warsh is finally confirmed, he can’t lower interest rates collectively. The Federal Open Market Committee (FOMC), has 12 members (seven members of the Board of Governors, plus the president of the New York Fed, and four rotating Fed regional presidents) and each vote has equal weight. The Fed only acts if a majority votes to do so.
Why should you care about the Fed?
The Fed’s actions affect everything from credit card interest rates to auto and personal/business loans to interest on savings accounts. While it may seem good to lower interest rates to help borrowers, doing so may encourage inflation, and if that happens, investors will demand higher rates to compensate for the increased risk of inflation.
For the US economy to function properly, the Fed needs the freedom to raise interest rates to fight inflation, even if it slows the economy and frustrates consumers and politicians.
What is the deal on Fed independence?
The Federal Reserve is an independent, self-funded agency and is not part of the congressional appropriations process, although it is accountable to the public and Congress. The bar is high to fire Fed officials: a 1935 Supreme Court decision found that Fed officials could only be fired or dismissed for “cause,” which the majority defined as some type of crime, such as fraud or embezzlement.
Last spring, the Supreme Court appeared to give the Fed a special right, as it gave permission for the administration to fire some agency heads, noting that “the Federal Reserve is a separate, secret organization.”
Recently, the Supreme Court held oral arguments on January 21, 2026, regarding whether the president can remove Lisa Cook as Fed governor. Executives say Cook lied about the loan application, which he flatly denies. In the debates, some conservative justices appeared unwilling to give the president broad powers to remove Cook. Until they issue a decision, Cook remains a voting member of the FOMC.
Jill Schlesinger, CFP, is a business analyst for CBS News. A former options trader and CIO of an investment advisory firm, he welcomes comments and questions at askjill@jillonmoney.com. Check out his website at www.jillonmoney.com.
