05/22/2026
After recent senate confirmation, Kevin Warsh has been sworn in as the new chairman of the Federal Reserve. There are a lot of things to worry about in the world right now, but the new Fed chair is not on my list.
Much like the Supreme Court, members of the Federal Reserve Board of Governors are nominated by the president and must be approved by the Senate. The pick of Kevin Warsh came as a surprise to many in the financial world because he was known to be biased towards higher interest rates in the past. This seems to completely contradict the president’s explicit desire for lower interest rates which he has publicly lambasted the outgoing Fed chair for not carrying out.
Because of this contradiction, some have theorized that Warsh made promises to Trump behind closed doors to essentially be a “yes-man” for the White House instead of acting as an independent steward of the financial system and economy. The problem with this theory is it doesn’t line up with how the Federal Reserve actually functions especially as it relates to setting interest rates.
The Federal Reserve is structured as a seven-member board of governors, including the chairman, based out of Washington, DC. In addition, there are twelve regional Federal Reserve Banks (one is in Minneapolis) each with its own president.
When it comes to setting interest rates, there is a committee (the Federal Open Market Committee) comprised of the seven Fed board members, the president of the New York Fed, and four other Fed bank presidents that serve on a rotating basis. Therefore, the committee that sets interest rates is comprised of 12 people.
The Open Market Committee meets eight times annually (roughly every 6 weeks) to discuss the economy with a particular focus on inflation and employment. They vote each meeting to decide whether to raise short-term interest rates, lower them or leave them unchanged.
Because the committee is comprised of 12 people that each get an equal vote, the Fed chair alone cannot decide to raise or lower interest rates unilaterally. There must be a majority vote on the committee. This is one of the main reasons why I’m not worried about a new Fed chair even if he did persuade the president he was in favor of lower interest rates.
It’s also important to understand the Fed’s current structure was designed to insulate it from politics. Although the Fed chair comes up for reappointment every 4-years, board members serve 14-year staggered terms. This means the board is generally comprised of a mix of people that were appointed by various presidents across parties. This is true now with the current board members being appointed by Obama, Trump and Biden.
It’s also notable that Kevin Warsh doesn’t come to the Fed as a complete novice. In 2006 he was confirmed by the Senate for the Board of Governors after being nominated by President Bush. He served as one of seven board members through the global financial crisis in 2008-2009. I view that experience as a positive because you don’t want a Fed chair that dithers or freezes when a crisis comes.
Finally, it’s also notable that Warsh seems to have a solid reputation in the financial world across the political continuum. Numerous world-class investors and business leaders that I personally respect have stated publicly that he is a serious person and good pick to lead the Fed.
Of course, you never really know how someone will do until they’re in the job. But given how the Fed is structured and Warsh’s experience and reputation, I won’t be losing any sleep about this leadership change.
