Lock the White House Watch Newsletter for free
Your Guide to What Trump’s Second Season Means Washington, Business and World
The top candidate who will replace Jay Powell as the next Federal Reserve Chairman has denounced the US Central Bank for making “systematic errors” and failing to control the worst inflation surge of generations.
Kevin Wersch, former Fed governor and ally of President Donald Trump, accused the US central bank of acting “as a general-purpose government institution rather than a narrow central bank.”
“Since the panic of 2008, central bank control has become a new feature in American governance,” Wash said in a group of 30 events in Washington on Friday.
“For every season and for all reasons, far-reaching progress has led to systematic mistakes in the implementation of macroeconomic policies.”
He added that the Fed’s $70 balance sheet allowed for rampant federal spending that left the US financial position on a “dangerous trajectory.”
“Fiscal policymakers, or elected members of Parliament — knowing that government funding costs will be subsidized by the central bank, decided it would be fairly easy to allocate the money,” he said, referring to the Treasury’s debt purchase under the central bank’s quantitative easing.
Comments from Wash, which Trump deemed to be Treasury Secretary, come in a moment of urgent tension between the Fed and the president, who last week said he could not wait for Powell to be “dismissal” as the central bank chairman.
Trump has partially returned his comments, saying he has no intention of firing Powell and has no intention of causing bailouts in the global market.
Warsh, who was with the Fed when QE began, was a critic of central bank policy last year, but his remarks were his first statement on monetary policy for months.
Worsh also attacked the Fed’s involvement in issues such as climate change and inclusion, but he admitted that the central bank “changed that song” in January by leaving the network to green its financial system.
Powell’s current term as Fed chair ends in May 2026, with Treasury Secretary Scott Bescent said earlier this month that a search for his replacement would begin in the fall.
Warsh and head of the National Economic Council Kevin Hassett are considered favorites to take over him.
Powell’s recent criticism of his refusal to cut interest rates, coupled with suggestions that the White House believes it has the authority to fire the Fed’s chair, and caused fears of central bank independence, has led to a sharp sale of the stock and dollar.
Warsh strongly believed in “operational independence” for the Fed to set interest rates freely from political pressure, but that doesn’t mean that central bankers should be treated as “spoiled princes.”
“If financial outcomes are poor, the Fed should be exposed to serious questions,” he said.
