New Chair of the Federal Reserve Kevin Warsh walks straight into a professional buzzsaw. Though he now occupies one of the most influential and prestigious posts in America—and indeed the world—his daunting assignment may be among the most difficult in government in recent decades.
The difficulty of Warsh’s task flows first from the abject failures of his predecessor, Jerome Powell. A literal Washington lifer, Powell personifies the establishment: a mediocre operator who somehow climbed a ladder of failure into lofty perches of power. Such a process is possible only within the contorted confines of the Beltway machinery.
Powell learned the ways of Washington early, beginning at Georgetown Prep. He grew into a shrewd political maneuverer who spoke in seemingly sophisticated terms while grasping little about the harsh realities of a hypercompetitive and complex global economy.
His biggest miss, by a long shot, was completely whiffing on the inflationary explosion of 2021 and 2022 under President Joe Biden. Average Americans suffered miserably under Bidenomics, with inflation vaulting from a negligible 1.4% at the end of President Donald Trump’s first term to a stifling 9.1% at its peak during the Biden-Harris administration.
Instead of aggressively using monetary policy to fight the worst inflation surge in 40 years, Powell chose instead to parrot the Biden administration’s absurd “transitory” narrative. From his supposedly authoritative position as Fed chair and chief guardian against inflation, Powell repeatedly echoed claims pushed by Biden and his inept Treasury Secretary Janet Yellen, herself a former Fed chair.
Before entering politics and media full time, I traded bonds for institutional firms for 25 years. As such, I still maintain a broad network of sophisticated money managers, especially in the world of interest rates. Even though many in that network vehemently opposed Trump and politically aligned with Biden, I did not know a single money manager who believed Powell simply made an honest mistake.
With an army of Ph.D.s at the Fed and access to the best minds in finance, Powell almost certainly understood the risks. Instead, he appears to have chosen to provide political cover for Joe Biden, former Vice President Kamala Harris, and Janet Yellen. In doing so, he doomed working-class Americans to unnecessary economic suffering, including one of the worst sustained stretches of declining real wages in modern history.
Because of this dishonesty and mismanagement, Powell failed to hit the Fed’s stated 2% inflation goal for 62 consecutive months. That level of sustained failure is hard to fathom. What football coach or corporate CEO could survive for more than five years without once achieving the benchmark he himself established?
For these reasons, it is not hyperbole to describe the task facing Warsh as brutal—even Herculean. Warsh may possess the pedigree, skills, and worldview to handle such a momentous challenge, but no one should underestimate the gravity of this economic moment for him or for America.
Making matters even more difficult, Powell refuses to simply ride off into the sunset. Instead, in an unprecedented act of defiance, he will reportedly remain on the Fed’s Board of Governors and the Federal Open Market Committee even after relinquishing the chairmanship.
Why the stubbornness? First, Powell seems determined to thwart Trump at every turn. Second, as a creature of the Washington establishment, he appears to embody the instincts of powerful figures who never truly leave the capital after surrendering office, including former presidents Barack Obama and Woodrow Wilson.
Like many powerful men unwilling to fade quietly, Powell seems likely to undermine his successor. Expect leaks from the Fed and the inevitable Beltway smear campaign against Warsh.
Outside the Fed itself, Warsh faces even bigger challenges: elevated interest rates, mounting geopolitical instability tied to the Iran conflict, and an unsustainable $40 trillion national debt. Combine those realities with a White House already demanding rate cuts, and few would envy Warsh’s predicament.
Nonetheless, he is a skilled patriot, and every American should hope for his success in this critical role. If he can bring transparency to the opaque Federal Reserve, it would do wonders for public confidence in a tarnished institution.
Warsh now has the toughest job in Washington. As he begins it, Americans should clearly recognize the failures of his predecessor, Jerome Powell.
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