What is the connection between Kevin Warsh, who was considered by Trump for the position of Treasury Secretary and may become Powell's successor?
Written by: Karen, Foresight News
On November 12, Beijing time, the Wall Street Journal cited sources revealing that U.S. President-elect Trump is considering appointing former Federal Reserve Governor Kevin Warsh as Treasury Secretary. The report also indicated that Kevin Warsh could be nominated as the Federal Reserve Chair after the current chair Jerome Powell's term ends in 2026.
Some insiders stated that Trump is considering appointing Scott Bessent to lead the White House Economic Council, and if Kevin Warsh becomes the Federal Reserve Chair, Trump may nominate Scott Bessent as Treasury Secretary later in his term.
On Polymarket, the prediction market regarding "Who will Trump choose as Treasury Secretary?" shows Kevin Warsh's probability of winning has risen to 52%, while Scott Bessent stands at 29%.
The Wall Street Journal quoted an insider stating that during a meeting on Wednesday, Trump also asked Kevin Warsh about his past positions on tariffs. Kevin Warsh has previously criticized trade protectionist policies, stating in a 2018 article in the Wall Street Journal that Trump's tariff plans could lead to what he termed "economic isolationism," which would significantly harm economic growth prospects.
In fact, Kevin Warsh, who was considered a candidate for the Federal Reserve leadership during Trump's first term, has once again entered Trump's sights as a potential appointee for Treasury Secretary and may succeed Powell as Federal Reserve Chair in the future. This move could not only have profound implications for U.S. economic policy but could also trigger a series of fluctuations in financial markets and even the cryptocurrency sector.
Who is Kevin Warsh?
Kevin Warsh was born in 1970 in Albany, New York. He studied public policy at Stanford University, focusing on economics and statistics, and graduated with honors in 1992. He then attended Harvard Law School, concentrating on the intersection of law, economics, and regulatory policy, earning his law degree in 1995. Additionally, he completed relevant courses in market economics and debt capital markets at Harvard Business School and the MIT Sloan School of Management.
In February 1995, Kevin Warsh joined Morgan Stanley's mergers and acquisitions department, serving as a financial advisor to several companies across various industries, including manufacturing, basic materials, professional services, and technology. He also helped build capital market transactions and facilitated fixed income and equity financing.
In February 2002, Kevin Warsh resigned from his position as Vice President and Executive Director at Morgan Stanley to join George W. Bush's administration. He served as a special assistant to the president for economic policy and as executive secretary of the National Economic Council. Warsh provided advice to the president and senior government officials on issues related to the U.S. economy, particularly in areas such as capital market funding flows, securities, banking, and insurance.
During this time, he was also a member of the President's Financial Markets Working Group. In 2006, President Bush nominated Kevin Warsh to serve as a Federal Reserve Governor (until 2011). At that time, Kevin Warsh was only 35 years old, making him the youngest Federal Reserve Governor.
Kevin Warsh is currently a visiting fellow at the Hoover Institution at Stanford University and also a lecturer at the business school.
Notably, according to a 2017 report by Politico, Kevin Warsh's father-in-law Ronald Lauder is a longtime friend of Trump and the heir to the cosmetics giant Estée Lauder. Trump even collaborated with Estée Lauder in 2004 to launch a cologne called "Donald Trump Fragrance."
What has been Kevin Warsh's stance on economic and financial policy?
As mentioned, Kevin Warsh is an expert with extensive experience and a strong background in finance and public policy. His career spans multiple fields, from academia and finance to government. So what has been Kevin Warsh's stance on economic and financial policy?
In terms of monetary policy, Kevin Warsh has criticized the Federal Reserve's long-term quantitative easing policies. He believes that such policies could lead to an excessively loose monetary environment, potentially triggering inflation or bubbles in financial markets. Kevin Warsh has also advocated for the Federal Reserve to maintain its policy independence and not be influenced by political pressure, contrasting with Trump's approach of exerting influence over the Federal Reserve.
Regarding economic growth and trade policy, Kevin Warsh has consistently been an advocate for free trade, emphasizing its importance as a glue connecting the global economy and asserting that free trade is crucial for economic growth and global economic stability.
Additionally, Kevin Warsh has advocated for controlling fiscal spending and opposed significant increases in debt burdens, arguing that such increases could negatively impact U.S. economic growth.
What is Kevin Warsh's connection to Crypto?
Kevin Warsh has a cautious attitude towards the volatility of Bitcoin and most stablecoins but is open to wholesale central bank digital currencies (CBDCs). As early as 2018, Warsh stated, "If cryptocurrencies and blockchain technology are indeed the future of money, then central banks around the world need to get involved. If he returns to the Federal Reserve, he would appoint a team to consider creating Fedcoin."
In March of the same year, Kevin Warsh published a commentary in the Wall Street Journal, stating that the price volatility of cryptocurrencies significantly undermines their practicality as a reliable unit of account or effective means of payment. However, a new generation of cryptocurrencies is on the horizon, some of which may possess more monetary attributes and better fulfill the founding purposes of Bitcoin.
As an investor, Kevin Warsh has also invested in two Crypto companies or projects, investing in the algorithmic stablecoin project Basis (formerly Basecoin, now defunct) in 2018 and in the cryptocurrency index fund management company Bitwise in 2021. At that time, Basis completed a $133 million funding round, with investors including Bain Capital Ventures, GV, Stanley Druckenmiller, Kevin Warsh, Lightspeed, Foundation Capital, and Andreessen Horowitz. Bitwise's website still lists Kevin Warsh among its advisors and investors.
In November 2022, Kevin Warsh published an article titled "Money Matters: The US Dollar, Cryptocurrency, and the National Interest," in which he argued, "Cryptocurrency is not mysterious; it is not money, but software. The emergence of stablecoins has made this revolutionary new software more like money. By improving operational efficiency, a small portion of stablecoins may become immensely valuable. However, most stablecoins will be worthless. The Federal Reserve should establish a wholesale digital currency that will enhance the economic and political standing of the United States while ensuring that volatility does not jeopardize the dollar's dominance. The U.S. and its allies need sound and stable currency more than ever to emerge from periods of weak output, high inflation, and geopolitical confrontation. A narrow, resilient, and efficient digital dollar, fully backed by U.S. trust and credit, should be an essential component of reforms to the U.S. financial and monetary architecture."
Conclusion
Kevin Warsh's potential appointment could have far-reaching implications for U.S. economic policy, financial markets, and the Crypto industry. Market participants and cryptocurrency enthusiasts need to closely monitor his policy direction and potential regulatory changes.
If Kevin Warsh can influence Trump's trade policy, it may lead to a more open and stable U.S. trade policy, benefiting global trade and economic growth. Moreover, Warsh's appointment could instill confidence in investors, but there may also be concerns about whether his policies can align with Trump's economic philosophy.
References:
https://www.wsj.com/politics/policy/trump-considers-warsh-serving-as-treasury-secretaryand-then-fed-chair-827207e0
https://www.federalreservehistory.org/people/kevin-m-warsh
https://x.com/YahooFinance/status/1859271737306739288
https://www.hoover.org/profiles/kevin-warsh
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