The richest chairman of the Federal Reserve in 112 years has arrived: Kevin Warsh is rewriting the rules
Kevin Warsh becomes the Federal Reserve Chairman, proposing a 'balance sheet reduction + interest rate cut' policy aimed at reshaping the Fed's monetary policy. His reforms could impact global capital markets and the US dollar credit system. Although Warsh lacks a traditional academic background, he has extensive Wall Street experience and understands capital market operations. His policy proposals face challenges from fiscal expansion and resistance to monetary tightening, potentially leading to volatility in the US Treasury market and loosening of US dollar credit. Warsh emphasizes the Fed's independence, but the flexibility of his policies has drawn attention.
On the 22nd local time, Kevin Warsh was appointed as the Chairman of the U.S. Federal Reserve.
Coming from Wall Street investment banking and having experienced the handling of the 2008 financial crisis, Warsh lacks the traditional academic background of central bank officials but has proposed an alternative policy of “balance sheet reduction + interest rate cuts,” aiming to reshape the operational rules of the Federal Reserve’s monetary policy.
His reform demands for the Federal Reserve’s decision-making mechanism and tightening of policy communication provide a new breakthrough approach for the Federal Reserve, which is trapped in the dilemma of “fiscal expansion and monetary contraction,” and introduce unknown variables to global capital markets, the U.S. dollar credit system, and even the global asset allocation landscape.
This seemingly simple personnel change is by no means a routine power transfer; rather, it will reshape the decision-making logic of the Federal Reserve, disturb the trends of core assets such as U.S. Treasuries, the dollar, and commodities, and further rewrite the global monetary and financial order. Below, enjoy:
Source | Mi Kuang Investment
On April 21, 2026, the hearing room of the U.S. Senate Banking Committee was packed.
The person sitting in the witness chair had a personal asset declaration exceeding $130 million, and his wife is an heir of the Estée Lauder family, with a combined wealth of about $2.7 billion. He is the wealthiest chairman candidate in the 112-year history of the Federal Reserve.
His name is Kevin Warsh .
(Elizabeth Frantz/Reuters)
On Friday, May 22, Trump hosted a swearing-in ceremony at the White House, officially handing the Federal Reserve’s baton to Warsh. Warsh became the person in control of the world’s most powerful financial institution.
01 How Does the Federal Reserve Decide Interest Rates?
Many people think that the Federal Reserve Chairman has the final say, but that is not the case.
The interest rate decisions of the Federal Reserve are voted on by the Federal Open Market Committee ( FOMC ), with 12 voting members each casting a vote, and a majority is required. The Chairman’s power lies in setting the agenda and guiding public opinion.
In other words, he decides what to discuss and how to discuss it, but ultimately it still relies on the vote count.
After the FOMC meetings in March, June, September, and December each year, the Federal Reserve releases two key tools:
One is the Dot Plot . Each committee member anonymously marks their expectations for future interest rates, which are compiled into a chart. The market reads signals of dovishness or hawkishness from it.
Source: Federal Reserve Dot Plot
The other is called the Summary of Economic Projections ( SEP ), which includes forecasts for GDP growth, unemployment rates, and inflation rates. Market traders typically use the Chicago Mercantile Exchange’s FedWatch tool to convert this information into probabilities of rate cuts or hikes, and this chart is quite common (as shown below).
Understanding this mechanism is important because the first thing Warsh will change upon taking office is this very mechanism.
02 The Wealthiest Federal Reserve Chairman: A Voice for Wall Street?
Let’s take a look at Warsh’s resume. While reading it, I had a feeling: this is not a government official’s resume, but more like a list of Wall Street celebrities.
Warsh was born in 1970 in Albany, New York, holds a bachelor’s degree in public policy from Stanford University and a J.D. from Harvard Law School. After graduating, he joined Morgan Stanley, working in mergers and acquisitions, later serving as vice president and executive director. In 2002, he was appointed by George W. Bush to the White House as the executive secretary of the National Economic Council.
In 2006, at the age of 35, Warsh was appointed as a Federal Reserve Governor, becoming one of the youngest governors in the history of the Federal Reserve at that time. During his tenure, he was a core team member in Ben Bernanke’s handling of the 2008 financial crisis, responsible for communication and coordination with major Wall Street financial institutions, such as the acquisition of Bear Stearns, the collapse of Lehman Brothers, and the bailout of AIG , where he was a key intermediary.
After leaving the Federal Reserve in 2011, Warsh joined the family office of legendary investor Stanley Druckenmiller, earning over $10 million a year. He also serves as a director for UPS and South Korean e-commerce giant Coupang , and is a researcher at Stanford University’s Hoover Institution.
The financial disclosure in April 2026 showed that Warsh’s personal assets ranged from $131 million to $226 million, holding a large position in the hedge fund Juggernaut Fund , as well as shares in Polymarket , SpaceX , and several cryptocurrency companies. His wife, Jane Lauder , is the granddaughter of the founder of Estée Lauder, with Forbes estimating her personal wealth at about $1.9 billion. Jerome Powell, confirmed in 2018, was considered the wealthiest chairman in Federal Reserve history, with assets ranging from $19 million to $75 million. Warsh’s asset scale is several times that of Powell.
From his resume, I believe he has a deep understanding of the operational logic of capital markets, such as liquidity, leverage, and the transmission chain of balance sheet expansion.
03 A Non-Technical Bureaucrat?
Frankly speaking, Warsh is not an academic-type central bank governor.
He does not hold a Ph.D. in economics and has not published influential papers in academia. Compared to Bernanke, who handled the subprime crisis and was a Princeton economics professor, and Yellen, who was a professor at the University of California, Berkeley, Warsh’s academic background is clearly thin.
However, he has proposed a policy that the market is very concerned about: balance sheet reduction + interest rate cuts .
Warsh’s theoretical logic is as follows: since September 2024, the Federal Reserve has cumulatively cut interest rates by 175 basis points, but long-term Treasury yields have risen instead of falling. He believes the problem lies in the Federal Reserve’s massive $6.7 trillion balance sheet; the expansion of the balance sheet itself is equivalent to implicit interest rate cuts. His original words were, “If the printing press can quiet down, the policy rate can be lower,” so theoretically, balance sheet reduction is needed to create space for the interest rate tool to truly take effect.
Interest rate cuts and balance sheet reduction are two completely different things.
Interest rate cuts are a price tool, adjusting the federal funds rate; balance sheet reduction is a quantity tool, reducing the size of the balance sheet. Interest rate cuts are easing, while balance sheet reduction is tightening; the two directions are opposite. Warsh means to tighten the quantity first and then ease the price, but this requires extremely high operational precision.
There is a more critical issue: It is almost impossible for the Federal Reserve to reduce its balance sheet again.
The quantitative tightening of the Powell era officially ended in December 2025. The balance sheet has been reduced by over $2 trillion from its peak of nearly $9 trillion during the pandemic and is currently stable at around $6.7 trillion. The Federal Reserve is currently in a status quo situation: purchasing enough Treasuries to match the growth in bank reserves, neither expanding nor reducing the balance sheet.
Warsh and Federal Reserve Governor Miran advocate restarting balance sheet reduction. But the problem is that the fiscal side is stepping on the gas in the opposite direction. The deficit is expanding, and the tax cuts from the Inflation Reduction Act need to be increased, requiring the Treasury to continuously issue new debt. If the Federal Reserve restarts balance sheet reduction at the same time, it could lead to situations where it no longer buys maturing Treasuries or even sells them, effectively creating two sellers competing for the same buyers, which would cause long-term rates to spiral out of control. The dismal results of the 20-year Treasury auction in May 2025 serve as a warning signal.
The current core contradiction is that fiscal policy is expanding while monetary policy faces obstacles in balance sheet reduction.
At historically extreme levels, fiscal policy is expanding, and the Federal Reserve cannot reduce its balance sheet. Therefore, the real surgical knife that Warsh can wield is not on the balance sheet but within the monetary policy framework; he can redesign the inflation target framework, reduce reliance on forward guidance, and tighten the speaking discipline of Federal Reserve officials. In simple terms, he cannot change the size of the Federal Reserve, but he can change the way the Federal Reserve communicates and the logic behind its decision-making.
Analyzing Warsh’s public speeches, congressional testimonies, and media interviews from 2009 to 2025 reveals a clear picture: during the Obama era, he was a staunch hawk.
Citadel Securities published a report titled: " A Framework for Chair Warsh ," which mentioned that during his tenure, Warsh made 13 public speeches specifically emphasizing the risks of rising inflation, while during that period, core PCE inflation rarely exceeded 2.5%, and the unemployment rate once reached as high as 10%.
In 2010, he voted in favor of Bernanke’s $600 billion QE2 plan during the FOMC , but simultaneously published an article in the Wall Street Journal attributing the economic weakness to the fiscal and regulatory policies of the Obama administration. During Trump’s first term, his attitude began to shift.
In 2018, after being skipped over by Trump and not nominated as Federal Reserve Chairman, Warsh warned in the Wall Street Journal that Trump’s trade protectionism would harm economic growth. By 2024-2025, his attitude shifted again.
After the Federal Reserve cut interest rates by 50 basis points in September 2024, Warsh criticized this rate cut as “an impulsive action lacking theoretical basis.” Just 13 months later, in November 2025, he wrote in the Wall Street Journal calling for the Federal Reserve to be more aggressive in cutting rates.
Critics have pointed out that Warsh’s monetary policy stance adjusts with the change of the White House occupant, being more flexible when the Republicans are in power and more rigid when the Democrats are in power. However, it can also be viewed from another angle: this is precisely a typical characteristic of a pragmatic monetarist—unbound by any single theoretical framework, making judgments based on the current political and economic environment.
At the hearing on April 21, Warsh laid out this line of thinking, clearly proposing to implement institutional reforms ( regime change ) at the Federal Reserve. He believes that Federal Reserve officials talk too much. In his view, “seeking the truth is more important than repeating statements.”
04 Independence: What He Said and What He Didn’t Say
The core confrontation at the hearing revolved around one question: Can you withstand Trump’s pressure for interest rate cuts?
Warsh’s answer was carefully crafted. In his opening statement, he wrote: “Independence of monetary policy is crucial.” When Senator Kennedy asked him if he would be Trump’s “puppet,” he replied: “Absolutely not. The president has never asked me to pre-set, commit, fix, or decide any interest rate decision.” But he also buried a key phrase: “When elected officials, whether the president, senator, or representative, express their views on interest rates, I do not believe this poses a particular threat to the operational independence of monetary policy.”
The subtext of this statement may be: Trump’s public calls for interest rate cuts do not constitute a threat to independence in Warsh’s view. It is merely an expression of opinion. In contrast, Powell chose to directly ignore Trump’s similar pressures in 2019 and emphasized at a press conference, “We will not be influenced by short-term political considerations.”
Warsh’s expression is more flexible, giving the White House more room for public opinion.
Additionally, Warsh has consistently advocated that the Federal Reserve should “stay in its lane,” narrowing its functional scope and not intervening in discussions of social and fiscal policies. This aligns with Trump’s desire to weaken the Federal Reserve’s administrative powers.
05 What Does It Mean for Asset Allocation?
Returning to the practical issues. The reality that Warsh faces upon taking office is that restarting balance sheet reduction is hindered by fiscal expansion, interest rate cuts are constrained by inflation not meeting targets, and framework reforms require majority support from the FOMC … Regarding these, I have the following thoughts:
First, the volatility of the U.S. Treasury market is likely to remain high. Fiscal expansion and the hindrance of monetary balance sheet reduction mean that the supply pressure on U.S. Treasuries will not dissipate. Warsh wants to reduce the balance sheet but cannot, while the Treasury continues to issue debt, and the market needs more private buyers to absorb the supply. Long-term rates are easier to rise than to fall, and the volatility indicators for U.S. Treasuries may remain elevated. For investors holding U.S. Treasuries, short-duration instruments are more certain than long-duration ones; do not bet on direction in long bonds.
Second, the long-term credit anchor of the U.S. dollar is loosening. This is a structural trend. The strategy team at Huatai Securities recently dissected “de-dollarization” into three levels: de-dollarizing assets (private capital selling off), de-dollarizing reserves (central banks reducing holdings), and de-dollarizing settlements (trade payments shifting). The three reinforce each other but have different rhythms: de-dollarizing assets is impulsive and emotion-driven; de-dollarizing reserves and settlements is a slow process measured in years or even decades.
As of the end of 2025, the U.S. dollar’s share in global foreign exchange reserves had fallen to 56.77%, the lowest since 1994. This figure was 73% in 2001.
Third, the petrodollar system is showing cracks. In terms of data, as of March 2026, the proportion of oil trade with China in renminbi settlement from the Middle East has surpassed 41%, making the renminbi the second-largest settlement currency in Middle Eastern oil trade for the first time; Iran has been settling 100% of its oil trade with China in renminbi since January 2026; the average daily transaction volume of the renminbi cross-border payment system reached 920.5 billion yuan in March, hitting a peak in nearly 12 months.
There is an easily overlooked dimension here: if Warsh can rebuild the Federal Reserve’s policy credibility through framework reforms, it may temporarily delay emotional trading related to de-dollarization, as market confidence is partially restored. However, in the long run, as the pattern of fiscal expansion and monetary balance sheet reduction obstacles does not change, the downward shift of the U.S. dollar’s credit center will not stop, which is largely unrelated to who becomes the Federal Reserve Chairman.
For ordinary investors, the core strategy for coping is diversification. In an environment of increased volatility in U.S. dollar credit, gold, as a reserve asset with no sovereign credit risk, remains an indispensable part of the portfolio. Meanwhile, renminbi assets, especially Chinese government bonds, are being passively elevated in weight during the global asset reallocation.
The recent announcement No. 7 from the China Securities Regulatory Commission is quite interesting and worth contemplating; if there is an opportunity, we can discuss it. In my view, this is an important step in the process of renminbi internationalization.
But the market has already begun to price in the “Warsh era.”
★ Statement : The above only represents the author’s personal stance and is for reference, learning, and communication purposes only.
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