Who is incoming Fed chair Kevin Warsh?

WASHINGTON (AP) — The U.S. Senate on Wednesday confirmed Kevin Warsh to lead the Federal Reserve. President Donald Trump had picked the former Fed governor to replace Jerome Powell, believing that Warsh can deliver the booming economy the president had promised voters.

Warsh takes over a divided central bank wrestling with the economic fallout from the war started by the U.S. and Israel with Iran on Feb. 28. The conflict has driven up energy prices and made it even more difficult for the Fed to bring inflation down to its 2% target.

But Trump has demanded lower interest rates, not the higher ones that might be needed to keep inflation in check. Warsh, who had positioned himself as an inflation hawk earlier in his career, has more recently aligned himself with Trump's views, arguing that artificial intelligence and other technologies can boost productivity and economic growth without igniting inflation.

Trump had consistently attacked Powell for refusing the deep rate cuts the president believes will boost the economy. And his Justice Department had launched an investigation into the Fed that was widely seen as an attempt to oust Powell. The legal drama delayed Warsh's confirmation. Sen. Thom Tillis, a North Carolina Republican, said he would oppose Warsh until the Justice Department dropped the investigation, which it finally did last month.

In an unusual move, Powell said he would remain on the Fed's governing board indefinitely after Warsh came on as chair, citing Trump's "unprecedented'' attacks on the central bank's independence. Although Powell's term as chair is ending, his term as a Fed governor doesn't expire until 2028.

Powell's continued presence could make things awkward for Warsh, especially if he tries to convince other Fed officials to go along with rate cuts.

Trump has said that Warsh comes from “central casting,” revealing a lot about the president's own views of the 56 year-old's looks and conventional pedigree. Warsh has many of the trappings of a traditional pick to lead the world's most important central bank, yet he's doing so at a decidedly unconventional moment for the Fed as Trump has said the new chair needs to cut its benchmark rates to the White House's liking.

Rate cuts of the degree sought by Trump could temporarily boost growth, but they also pose the risk of overheating the economy at a time when inflation is already elevated and affordability is a top concern for much of the American public.

Warsh was previously a runner-up for the Senate-confirmed post of Fed Chair in 2017, when Trump selected Powell to lead the central bank. Trump has since said that he was given bad advice regarding Powell.

Warsh is credentialed with degrees from Stanford University and Harvard University Law School. He is also married to Jane Lauder, the daughter of billionaire cosmetics heir Ronald Lauder, a major Republican donor.

Senate Democrats have condemned Warsh for not fully divulging the details of his own wealth, which amounts to at least $100 million. His investments include stakes in Polymarket and SpaceX, but he hasn’t revealed the size of those holdings. He promised to sell all such assets within 90 days of being sworn in.

At 35, Warsh became the youngest governor on the Fed's seven member board, serving in that post from 2006 to 2011. He was previously an economic aide in George W. Bush’s Republican administration and was an investment banker at Morgan Stanley.

Warsh worked closely with then-Chair Ben Bernanke in 2008-09 during the central bank’s efforts to combat the financial crisis and the Great Recession. Bernanke later wrote in his memoirs that Warsh was “one of my closest advisers and confidants” and added that his “political and markets savvy and many contacts on Wall Street would prove invaluable.”

Still, Warsh appeared in key moments to be misguided about the depth of the challenges confronting the U.S. economy as mortgage defaults and layoffs mounted in the Great Recession. He wanted the Fed to keep its benchmark rates higher when the economy was at risk of deflation and possibly collapsing.

Warsh raised concerns in 2008 that further interest rate cuts by the Fed could spur inflation. Yet even after the Fed cut its rate to nearly zero, inflation stayed low.

And he objected in meetings in 2011 to the Fed’s decision to purchase $600 billion of Treasury bonds, an effort to lower long-term interest rates, though he ultimately voted in favor of the decision at Bernanke’s behest.

Warsh also behaved at times like a pre-Trump Republican, calling in a 2010 speech for ending “the creep of trade protectionism” that he declared to be the opposite of “pro-growth policies.” Trump has since largely overhauled GOP dogma by pushing for massive hikes in import taxes, having unilaterally imposed them last year by declaring an economic emergency.

Warsh has been working as a visiting economics fellow at the Hoover Institution, a conservative think tank located at Stanford University. He is also a lecturer at the Stanford Graduate School of Business and a partner at the Duquesne Family Office, which manages the wealth of billionaire investor Stanley Druckenmiller.

In what appeared to be an active campaign for the Fed post, Warsh criticized the Fed in interviews, calling for “regime change” and assailing Powell for engaging on issues like climate change and diversity, equity and inclusion, which Warsh said are outside the Fed’s mandate.

In a interview last year on CNBC, Warsh said Fed policy “has been broken for quite a long time.”

“The central bank that sits there today is radically different than the central bank I joined in 2006,” he added. By allowing inflation to surge in 2021-22, the Fed “brought about the greatest mistake in macroeconomic policy in 45 years, that divided the country.”