Kevin Warsh, the presumptive next chairman of the Federal Reserve, has devoted his professional life to opposing expansive monetary policies. But Warsh’s instincts seem to conflict with the preferences of U.S. President Donald Trump, who nominated him for his new role. Warsh’s pending promotion thus raises questions about what happens when an inflation hawk takes the chair under a president demanding rate cuts.

How has Warsh’s biography shaped his economic views? How might Warsh’s communication strategies affect financial markets? What does Warsh mean when he says the Fed should “stay in its lane”?

Kevin Warsh, the presumptive next chairman of the Federal Reserve, has devoted his professional life to opposing expansive monetary policies. But Warsh’s instincts seem to conflict with the preferences of U.S. President Donald Trump, who nominated him for his new role. Warsh’s pending promotion thus raises questions about what happens when an inflation hawk takes the chair under a president demanding rate cuts.

How has Warsh’s biography shaped his economic views? How might Warsh’s communication strategies affect financial markets? What does Warsh mean when he says the Fed should “stay in its lane”?

Those are just a few of the questions that came up in my recent conversation with FP economics columnist Adam Tooze on the podcast we co-host, Ones and Tooze. What follows is an excerpt, edited for length and clarity. For the full conversation, look for Ones and Tooze wherever you get your podcasts. And check out Adam’s Substack newsletter.

Cameron Abadi: How might Warsh’s biography have shaped his views on monetary economics?

Adam Tooze: Warsh is a symptomatic figure. He’s not a central banker in the mode of a Ben Bernanke or Janet Yellen. In other words, a heavy-duty econ technocrat, nerd, monetary policy or monetary economics star. He’s a smooth, very well-connected Republican insider, and he’s a lawyer. So he’s more in the Jerome Powell kind of vein.

He was born in 1970, so he is younger than me. He attended Stanford and Harvard Law, which in itself may be telling. He then moved to Morgan Stanley. And then with the Bush presidency in 2002, he was appointed as special assistant to the president for economic policy and then executive secretary to the National Economic Council. I think he was too young at that point to have a commanding role. At least at that stage, the Republicans weren’t appointing people of his age to, say, the senior roles. But in those positions, he played a key role in sorting out some of the accounting scandals of the early 2000s.

But then in January 2006, Bush nominated Warsh to serve on the Federal Reserve Board of Governors. And at that moment, he was the youngest ever Fed governor when he was appointed. And between 2006 and 2011, he was really the kind of markets liaison, the markets fixer man for Ben Bernanke, because he was in the thick of the 2008 financial crisis, and his experience at Morgan Stanley was widely considered to be important.

And at this point, a sort of doctrinal Warsh begins to emerge, which is a man who is preoccupied essentially with private sector solutions, with problems of moral hazard, and therefore is entangled in all of the difficult and, in many cases, disastrous decisions that were taken by the Fed in 2008, the first initial move, namely to stabilize the situation by way of a private sector deal between JP Morgan absorbing Bear Stearns. And then it seems that Warsh was reluctant, to say the very least, to support Lehman, with catastrophic consequences when Lehman actually then failed.

And in 08-09, he was responsible for brokering the deals that were done that recapitalized the American banking system, which are in some sense by many people regarded both as, of course, dubious from a social equity point of view or from a Democrat accountability point of view, but highly effective in terms of........

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