Warsh's take on Fed independence is met with confusion and some concern

kevin warsh, trump's pick to lead the fed, is drawing confusion from six former fed officials over his views on fed independence. the sticking point: he draws a line between monetary policy — which he says should be "strictly independent" — and "non-monetary matters" like international finance, where he's willing to work with congress and treasury. a particular gray area is currency swap lines, which warsh has not clearly classified. swap lines added nearly $600 billion to the fed's balance sheet during the 2008 crisis and $450 billion during covid.

former richmond fed president jeffrey lacker said a new treasury-fed accord could be welcome if it limited the fed to buying only treasurys, but warned it could also let treasury use the fed's balance sheet to bypass congress. another former official said, on condition of anonymity, that followed to its logical conclusion "the fed could lose control of its balance sheet." treasury secretary scott bessent said he and warsh agree that too many political decisions moved from treasury to the fed, but added "i'm not sure exactly what he means about the treasury-fed accord."

jpmorgan's chief us economist michael feroli noted the other 11 fomc members will act as a brake on any quick policy shift. warsh himself said at his hearing: "presidents want lower rates, but fed independence up to the fed."

source: cnbc_topnews
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