Trump Taps Kevin Warsh for Fed Chair, Signaling Aggressive Push for Bank Deregulation

By Pete Schroeder

WASHINGTON, Jan 30 (Reuters) – President Donald Trump’s nomination of Kevin Warsh to chair the Federal Reserve sets the stage for a significant acceleration in the deregulation of Wall Street, granting the administration greater influence over the nation’s financial rulebook, regulatory experts told Reuters.

The decision, announced Friday, concludes months of speculation over who would succeed current Chair Jerome Powell when his term expires in May. Warsh, a Republican who served as a Fed governor from 2006 to 2011, is expected to champion a sweeping review of capital and supervision rules for large banks, an agenda already being advanced by Vice Chair for Supervision Michelle Bowman.

"The Powell Fed was cautiously permissive on deregulation. Warsh represents a philosophical shift," said Jeremy Kress, a University of Michigan professor and former Fed attorney. "His stated view that bank regulation shouldn't be insulated from political oversight means he'll be a powerful ally for Treasury Secretary Bessent and Vice Chair Bowman's ambitious rollback plans."

Warsh, a lawyer and distinguished visiting fellow at Stanford University's Hoover Institution, helped steer the Fed's crisis response in 2008 but later voiced criticism of the regulatory framework that emerged. In a 2010 speech, he argued that "regulation is too important to be left to regulators alone," advocating for a larger role for the private sector.

More recently, in a Wall Street Journal op-ed last year, he blamed the Fed for "regulatory failures" that contributed to the 2023 regional banking turmoil and called for strong support for Bowman's efforts to ease capital rules—the most significant such push since the financial crisis.

Wall Street banks welcomed the nomination, citing Warsh's crisis-era experience and his private-sector background as a former investment banker as positive signals for the industry.

Some analysts also note Warsh's past advocacy for a smaller Fed balance sheet, which would reduce the central bank's market footprint and increase the role of private banks. "The flip side is his expected focus on banks as the primary lever for injecting liquidity into the system," said Gary Paulin, Chief Investment Strategist at Northern Trust Asset Management. "Banking reforms will undoubtedly be front and center."

While Warsh has defended the Fed's independence on monetary policy, he argued at a Group of 30 event last April that its regulatory and supervisory functions should not be independent from political oversight—a stance that aligns with the Trump administration's hands-on approach to financial regulation.

"We can expect a Fed under Warsh to take direction from the administration on a wide range of regulatory issues, from international coordination to day-to-day bank supervision," said Columbia University law professor Todd Baker.

The administration's deregulatory drive, led by Treasury Secretary Bessent, contends that lighter rules will spur economic growth and enhance stability. Warsh echoed that sentiment in a March interview with Fox Business, stating, "Bank regulation has been very bad for the last four or five years. It's provided a huge amount of sand in the gears of the economy."

Reporting by Pete Schroeder; additional reporting by Chris Prentice, Yoruk Bahceli and Manya Saini; writing by Michelle Price; Editing by Anna Driver

Reaction & Analysis

Michael Thorne, Financial Policy Analyst at the Brookings Institution: "This nomination isn't just about a change in personnel; it's about a fundamental reorientation of the Fed's regulatory mission. Warsh's academic and practical background suggests he will pursue a systematic, not piecemeal, review of the post-Dodd-Frank framework."

David Chen, Portfolio Manager at Granite Peak Capital: "The market is reading this as a clear positive for large financial institutions. Warsh understands the mechanics of both crises and regulation from the inside. His likely focus on balance sheet normalization could, however, introduce new volatility in funding markets."

Senator Elizabeth Rourke (D-MA), member of the Senate Banking Committee: "This is a disastrous choice. Nominating a figure who openly calls for politicizing bank supervision is an invitation for the same lax oversight that crashed the economy in 2008. It's a blatant gift to Wall Street executives at the expense of financial stability and Main Street accountability."

Priya Sharma, Chief Economist at Midwest Community Banks Association: "There's cautious optimism among smaller institutions. Warsh has criticized one-size-fits-all rules that disproportionately burden community banks. The hope is that his agenda includes meaningful tiered regulation, not just deregulation for the largest players."