President Donald Trump just nominated Kevin Warsh to lead the Federal Reserve, replacing Jerome Powell when his term expires in May. The announcement caps a year-long pressure campaign against Powell that included personal insults, threats of termination, and just three weeks ago, DOJ subpoenas threatening criminal indictment over a building renovation.
If you wanted a clearer signal that Trump intends to bend the Fed to his will, you couldn’t design one better than this nomination. And if you want to see what happens when a strongman gets his hands on a central bank, look no further than Turkey.
Who Is Kevin Warsh?
On paper, Warsh looks like a reasonable choice. He’s 55, served as a Fed governor from 2006 to 2011, worked as the central bank’s primary liaison to Wall Street during the 2008 financial crisis, and studied at Stanford and Harvard Law. He spent time at Morgan Stanley before joining the George W. Bush administration as an economic policy adviser. He’s married to cosmetics heiress Jane Lauder, and his billionaire father-in-law Ronald Lauder is a longtime Trump confidant.
Wall Street isn’t panicking. CNBC analysts are calling him “qualified” and “credible.” The Dow didn’t crater at the news.
But dig into Warsh’s actual record, and you find something more troubling: a man who was catastrophically wrong about inflation during the worst financial crisis in generations, and who has now conveniently flipped his entire monetary philosophy to align with what Trump wants to hear.
A Track Record of Being Wrong at the Worst Possible Time
In September 2008, the month Lehman Brothers collapsed and the global financial system nearly imploded, Warsh said this: “I’m still not ready to relinquish my concerns on the inflation front.”
Seven months later, with unemployment at 9% and the Fed’s preferred inflation measure at 0.8%, he was still warning about inflation risks. The problem? Inflation didn’t materialize. It stayed near zero for years. What the economy actually needed was more aggressive stimulus, not the inflation hawkishness Warsh kept preaching.
Former Fed Chair Ben Bernanke wrote about his frustration with Warsh in his memoir, venting in an email: “I find myself conciliating holders of the unreasonable opinion that we should be tightening even as the economy and financial system are in a precarious position and inflation/commodity pressures appear to be easing.”
This matters because it shows Warsh’s judgment during a crisis. He was an inflation hawk when the economy was crashing into deflation. He opposed quantitative easing measures that most economists now credit with preventing a depression. Many observers argue his approach would have resulted in higher unemployment, slower recovery, and greater deflation risk throughout the 2010s.
As Bloomberg’s Chief U.S. Economist Ana Wong put it: “I read the FOMC transcripts during the GFC. His quotes scared me.”
The Convenient Conversion
Here’s where it gets interesting. After spending years as an inflation hawk who warned that easy money would cause prices to spiral, Warsh has recently become a dove who supports lower rates. What changed? The person he needs to please.
In a December interview with Trump, Warsh reportedly agreed that rates need to come down. Trump told the Wall Street Journal afterward: “He thinks you have to lower interest rates. And so does everybody else that I’ve talked to.”
This ideological flexibility isn’t reassuring. It suggests Warsh understands what’s expected of him. As Renaissance Macro Research noted on X: “Kevin Warsh has been a monetary policy hawk his entire career and most importantly, during a time when the labor markets fell out of bed. His dovishness today stems from convenience. The President risks getting duped.”
In January 2025, Warsh wrote a Wall Street Journal op-ed arguing that Trump’s deregulatory policies would be “disinflationary” and that DOGE-inspired spending cuts would “materially reduce inflationary pressures.” Translation: he’s providing intellectual cover for the rate cuts Trump demands.
The Context: A President Who Wants His Hands on the Printing Press
Trump has been unusually explicit about wanting to control monetary policy. He told the Wall Street Journal that Fed chairs should consult with the president on rate decisions: “Typically, that’s not done anymore. It used to be done routinely. It should be done. I’m a smart voice and should be listened to.”
The pressure campaign against Powell has been relentless. Trump has called him “incompetent,” threatened to sue him, and mused publicly about firing him. In August, he tried to remove Fed Governor Lisa Cook in an attempt to secure a majority on the board. When that failed, the DOJ opened a criminal investigation into Powell over a building renovation, subpoenaing the Fed just three weeks ago.
Powell called it what it was: “This unprecedented action should be seen in the broader context of the administration’s threats and ongoing pressure. The threat of criminal charges is a consequence of the Federal Reserve setting interest rates based on our best assessment of what will serve the public, rather than following the preferences of the President.”
Warsh’s nomination comes in this environment. Anyone who believes he’ll push back against presidential pressure hasn’t been paying attention.
Turkey: The Cautionary Tale We Should Be Talking About
Want to see what happens when a president decides he knows better than his central bankers? Study Turkey.
President Recep Tayyip Erdogan held a belief that mirrors Trump’s: that low interest rates stimulate growth and high rates are bad for the economy. He leaned on Turkey’s central bank to cut rates even when inflation was rising. When central bankers resisted, he fired them. Since 2019, Turkey has gone through six different central bank governors.
The results were catastrophic. Inflation soared to 85% in 2022. The Turkish lira collapsed from 5 lira per dollar in 2019 to 38 per dollar today. Ordinary Turks watched their savings evaporate. A factory worker named Bilal told reporters he couldn’t afford meat for an entire year. Cooking oil that cost 49 lira jumped to 170 lira. Bakeries operated on the edge of bankruptcy.
The economic literature is clear on this. Independent central banks produce better inflation outcomes than politically captured ones. When Turkey finally returned to orthodox monetary policy last year, it was too late. Interest rates had to be jacked up to 50% to begin controlling inflation, and the damage to the economy and the currency had already been done.
The American Enterprise Institute published a study last year titled “A Cautionary Turkish Economic Tale” specifically warning that Trump’s approach mirrors Erdogan’s. “A principal factor in Turkey’s poor economic performance over the past decade was President Erdogan’s misguided belief that interest rates were the cause of rather than the cure for inflation,” the AEI wrote. “This induced him to lean heavily on the Central Bank of Turkey to cut interest rates even at a time when inflation was rising.”
Why This Should Worry You
The United States isn’t Turkey. The dollar is the world’s reserve currency. U.S. Treasuries are the bedrock of global finance. We have deeper capital markets, stronger institutions, and more economic resilience.
But we also have more to lose. If markets begin to doubt Fed independence, the consequences ripple globally. Long-term interest rates could rise as investors demand a premium for uncertainty. The dollar could weaken. Inflation expectations could become unanchored.
Economic research consistently shows that independent central banks maintain lower inflation over time. The Fed’s credibility, built over decades under both Republican and Democratic administrations, is one of America’s most valuable economic assets. That credibility is what allows the Fed to fight inflation through communication alone sometimes. Markets believe the Fed will do what it says.
If Warsh becomes chair and repeatedly defers to presidential preference on rates, that credibility erodes. And once lost, it’s very hard to rebuild.
The Confirmation Fight Ahead
Warsh still needs Senate confirmation, and it won’t be smooth. Republican Senator Thom Tillis has already said he’ll block any Fed nominee until the DOJ investigation into Powell is resolved. “Kevin Warsh is a qualified nominee with a deep understanding of monetary policy,” Tillis wrote on X. “However, the Department of Justice continues to pursue a criminal investigation into Chairman Jerome Powell based on committee testimony that no reasonable person could construe as possessing criminal intent.”
That’s a Republican senator effectively calling BS on the pretext for the Powell investigation. If Warsh’s confirmation gets caught up in the investigation controversy, this could drag out for months.
The Bottom Line
Kevin Warsh is not an obvious disaster pick. He has credentials. He has experience. Wall Street knows him. Markets aren’t crashing.
But the circumstances of his nomination tell a story. A president who has spent a year attacking Fed independence, threatening the current chair with criminal prosecution, and openly stating he wants to be consulted on rate decisions, has selected someone who conveniently flipped from inflation hawk to rate-cut advocate at exactly the right moment.
Maybe Warsh will surprise everyone and maintain Fed independence. Maybe he’ll stand up to Trump the way Powell has. Maybe his convenient conversion on rates was genuine intellectual evolution rather than positioning.
Or maybe we’re watching the early stages of a Turkey scenario, where the world’s most important central bank slowly becomes an instrument of presidential preference rather than economic judgment.
The answer will determine a lot more than interest rates. It will determine whether the architecture of American economic policy, built over generations, survives this administration intact.
