Kevin Warsh, Kevin Warsh, Kevin Warsh

“Go ahead. Make my millennium.”

The Federal Reserve has trimmed its policy target by 175 basis points (1.75%) since September 2024, but longer-term Treasury yields are actually higher today than they were then. This is running counter to President Trump’s transparent desires to bring interest rates down further to help stimulate recoveries in the housing and manufacturing sectors. While presidents have limited abilities to control rates on their own, they do have the power to nominate Governors to the Federal Reserve Board, which does set short-term interest rates.

In the 1988 classic, Beetlejuice, one can summon the titular character by saying his name three times. In doing so, multiple characters unleash a force they were not quite prepared for. The president has now similarly called for help from a source whose views and methods will be difficult to predict: “Kevin Warsh. Kevin Warsh. Kevin Warsh”. In this piece, inspired by the “ghost with the most” himself, we will dive deeper into Warsh’s views, the likely changes coming to the Fed’s approach, and the impact all of this may have on financial markets.

This week’s movie tie-in also affords us the chance to pay a brief tribute to the late Catherine O’Hara. Before she was Kevin’s mom in Home Alone or the iconic Moira Rose in Schitt’s Creek, she was the eccentric Delia Deetz in Beetlejuice, leading a dinner party in a hilarious haunted calypso. In this and every other role, she made us laugh.

“What do you think? You think I’m qualified?”

New Fed Chairs don’t come along that often. Jerome Powell has been in his seat since 2018, originally appointed by President Trump and reappointed in 2022 by President Biden. Chair Janet Yellen served for only one term before Powell, but before her, the Fed only had three different chairs since 1979. This makes President Trump’s nomination of Kevin Warsh to lead the central bank notable and almost certainly consequential. Warsh was the youngest Fed Governor ever, appointed by President George W. Bush in 2006 at the age of 35 and serving until 2011, when he resigned largely due to differences with then-Chair Ben Bernanke over the balance sheet expansion that eventually became known as QE2 (which was neither the first nor the last quantitative easing effort, as the chart below shows). As this decision would indicate, Warsh had a reputation for focusing on price stability (i.e., low inflation) over other factors in the pre- and post-GFC (Great Financial Crisis) period (i.e., high unemployment).