Trump’s pick for Fed chair spurs doubt on key issues

President Trump has decided on a nominee for the next Federal Reserve chair – Kevin Warsh, financier, bank executive, and former Federal Reserve Board of Governors member. CEI financial and economic policy experts expressed doubts concerning the prospective nominee’s views.

John Berlau, director of finance policy:

“The nomination of Kevin Warsh as Fed Chair warrants concern and scrutiny, as Warsh has repeatedly expressed support for the Fed creating a central bank digital currency (CBDC). His support for a CBDC – a digital form of a nation’s fiat money, backed by the central bank and acting as a direct liability of the government – puts Warsh in opposition to President Trump, Republicans in Congress, and numerous conservative and free-market public policy groups.

“CBDCs are dangerous because they could crowd out innovation from the private sector, make it easier to pursue inflationary policy, and most importantly be used for engaging in digital surveillance on the financial transactions of innocent American citizens. As Ari Patinkin and I wrote in RealClearMarkets: ‘Unlike paper or a private decentralized digital currency, a CBDC leaves an electronic trail of purchases and sales within a government digital ledger.’ Having such voluminous information in the hands of the Fed would likely result in abuse either from rogue employees or a matter of policy from any current or future administration.

“Senators weighing Warsh’s nomination must give serious consideration to and grill Warsh on his views on these matters.”

Steven Swedberg, finance and monetary policy analyst

“Instead of preserving a clear separation between the Federal Reserve and the Treasury, Kevin Warsh has suggested closer coordination to help manage the national debt and the Fed’s balance sheet. That approach carries real risks.

“When monetary policy is tied to the government’s financing needs, the central bank can come under pressure to prioritize debt management. That dynamic would weaken the Fed’s independence and reduce incentives for fiscal discipline, increasing the likelihood that monetary policy is used to smooth over budgetary imbalances.

“Over time, such structural pressures could lead to more distorted policy outcomes, higher inflation risks, and diminished confidence in the Fed’s ability to act as an independent economic authority.”

Ryan Young, CEI senior economist:

“The Fed’s top issue right now is protecting its independence, regardless of administration. On that front, Warsh’s nomination is not reassuring.

“He would be just one vote out of 12 on interest rates, which limits the damage he could do there. But his past support for a Central Bank Digital Currency and his wanting the Fed to work more closely with the Treasury Department do not bode well for either the Fed’s independence, or for keeping inflation under control.

“While Warsh has his positive aspects such as a long track record as an inflation hawk, his recent repositioning on tariffs indicate that at least some of his principles can melt when they come into contact with politics.”