Trump's Fed chair nominee is a 'political animal' and a 'hack': Nobel economist

When President Donald Trump was weighing his options for a U.S. Federal Reserve nominee to replace the current chairman, Jerome Powell — whose term ends in May — his search was described as a "tale of two Kevins": National Economic Policy (NEC) Director Kevin Hassett, and financier/attorney Kevin Warsh (who served on the Fed's Board of Governors under former Presidents George W. Bush and Barack Obama).

Trump announced his decision early Friday morning, January 30, nominating Warsh rather than Hassett.

Liberal economist Paul Krugman analyzes Trump's Warsh pick in a January 30 column posted on Substack, and he isn't enthusiastic. The former New York Times columnist views Warsh as a "political" partisan who won't serve the Fed well.

"The Fed is a republic, not a dictatorship; key decisions are made by a committee in which the chairperson has only one vote," Krugman explains. "Fed chairs can only drive policy through persuasion — and Warsh lacks the intellectual and moral credibility to be effective on that score. But God help us if we enter a crisis that requires decisive Fed leadership, the kind Fed Chair Ben Bernanke showed during the financial crisis, or Jay Powell is now showing against Trump's attacks."

Krugman adds, "Absent a crisis, my prediction is that the majority of Warsh's colleagues will largely ignore him, albeit without expressing their contempt openly…. While I don't think Warsh will do too much damage to monetary policy, he, along with his fellow Trumper Michelle Bowman, the vice chair for financial supervision, may well eviscerate the Fed's role as a financial regulator."

The Nobel laureate economist disagrees with reporters who are describing Warsh as a "monetary hawk."

"That's a category error," Krugman writes. "Warsh is a political animal. He calls for tight money and opposes any attempt to boost the economy when Democrats hold the White House. Like all Trumpers, he has been all for lower interest rates since November 2024. Depressingly, some Democratic-leaning economists are stepping up to reassure us about Warsh's qualifications. This is reminiscent of the way many economists rallied around the selection of Kevin Hassett as chair of the Council of Economic Advisers in 2017, although he was an obviously ludicrous hack."

Krugman describes Warsh as a "Republican loyalist" who "always wants to slam the economic brakes when Democrats are in power and step on the gas when Republicans rule."

"It's a humiliating day for the Federal Reserve, which has always prided itself on its professionalism and has been hugely respected around the world," Krugman laments. "But even the Fed can't insulate itself from the derangement sweeping America."

Paul Krugman's full Substack column is available at this link.