At a rally in Iowa this week, President Trump heaped praise on Treasury Secretary Scott Bessent, declaring that he had “become a real star” who knows his business.
That star status could be at stake if Mr. Trump ends up being disappointed with Kevin M. Warsh, whom the president plans to nominate as the next chair of the Federal Reserve. Mr. Bessent led the drawn-out vetting process, which started months ago with nearly a dozen candidates.
On Friday, Mr. Trump announced his selection of Mr. Warsh, who has reinvented himself as an interest-rate-cutting “dove” after years of expressing caution about the inflationary risk of lowering borrowing rates when he was a Fed governor from 2006 to 2011.
Mr. Warsh’s true beliefs on inflation and interest rates are unclear, a situation that raises the possibility that the choice could haunt Mr. Trump and, therefore, Mr. Bessent.
“The president risks getting duped,” said Neil Dutta, head of economic research at Renaissance Macro, who said Mr. Warsh’s dovishness “stems from convenience.” He recalled that after the 2008 financial crisis, Mr. Warsh criticized Ben Bernanke, the Fed chair at the time, for being too aggressive in stimulating the economy by lowering borrowing costs.
“Even if the economy were to weaken somewhat further, we should be inclined to resist expected, reflexive calls to trot out the hammer again,” Mr. Warsh said in May 2008. His comments about “the hammer” referred to lowering interest rates.
Mr. Dutta added that Mr. Warsh, who was appointed to the Fed Board by President George W. Bush after working in his National Economic Council, does not have the populist credentials that Mr. Trump publicly embraces.
“A member of the MAGA movement he is not,” he said.
The process of selecting a new Fed chair has proved to be a minefield for those in charge of it. Mr. Trump’s first-term Treasury secretary, Steven T. Mnuchin, pushed for the current chair, Jerome H. Powell, who has become a frequent target of Mr. Trump’s anger over his reluctance to slash interest rates aggressively.
As a result, Mr. Trump never forgave Mr. Mnuchin for suggesting Mr. Powell.
“Steve ‘Manouychin’ really gave me a ‘beauty’ when he pushed this loser,” Mr. Trump, who had also considered Mr. Warsh for the Fed chair opening in 2017, wrote on Truth Social last August. “The damage he has done by always being Too Late is incalculable.”
Mr. Bessent was careful to publicly avoid playing favorites and instead presented Mr. Trump with a list of four final candidates. Kevin Hassett, the director of the National Economic Council, was widely viewed as a likely contender who would be most amenable to pushing for lower interest rates.
“I don’t make recommendations,” Mr. Bessent said on CNBC this week. “I give the president options and outcomes.”
The Treasury Department would not say if Mr. Bessent had any reservations about Mr. Warsh. The secretary did not release a statement about the selection on Friday.
Mr. Bessent and Mr. Warsh know each other personally from their work as private investors. Mr. Warsh works with the billionaire investor Stanley Druckenmiller as a partner at Duquesne Family Office. Mr. Bessent was a protégé of Mr. Druckenmiller at Soros Fund Management in the 1990s.
“Trump would not have picked Warsh without Bessent’s approval,” said Stephen Moore, an economist who advised Mr. Trump’s 2016 presidential campaign.
Mr. Moore said Mr. Warsh’s history of hawkishness was a good thing for the economy despite Mr. Trump’s appeals for the central bank to lower borrowing costs.
“That’s what we need,” he added. “Someone who will restore the value of the dollar and keep inflation in check.”
Although Mr. Bessent made clear that the final decision was Mr. Trump’s to make, he has not been shy about expressing his views about the state of the central bank.
Before Mr. Trump was re-elected in 2024, Mr. Bessent pitched the idea of having Mr. Trump pick a “shadow” Fed chair as a way to sideline Mr. Powell, whose term as chair runs through May. Last year, Mr. Bessent accused the Fed of being political for factoring in the potential for tariffs to raise prices as it considered whether to cut rates.
“I guess this tariff derangement syndrome happens even over at the Fed,” Mr. Bessent told Fox News.
Despite that criticism, Mr. Trump has said Mr. Bessent is frequently a voice of moderation, urging him not to fire Mr. Powell.
If Mr. Warsh is confirmed, he will work closely with Mr. Bessent. By tradition, the Fed chair and Treasury secretary dine weekly. Last summer, as the interview process was getting underway, Mr. Warsh called for closer coordination between the Treasury Department and the Fed when it comes to shrinking the Fed’s balance sheet.
In recent months, Mr. Warsh has been calling more forcefully for lower interest rates and for the Fed to reduce its $6 trillion bond holdings as a way to lower borrowing costs without fueling more inflation.
If the Senate confirms Mr. Warsh, what remains to be seen is how his independent streak will play out when he becomes chair and how he will respond to pressure from Mr. Trump and Mr. Bessent.
“Having been at the Fed at a crucial time, that imbued him with knowledge of the Fed and hopefully respect for the institution,” said Alan Blinder, a former vice chair at the Fed.
Noting that Mr. Warsh’s views on interest rates have evolved over the years, Mr. Blinder said the president’s pick might not always do what he expected.
“Kevin Warsh has several times over the past couple of years argued for tighter monetary policy not looser policy, which is the opposite of what Trump wants,” he said.
If Mr. Warsh does disappoint Mr. Trump, Mr. Bessent is likely to bear the blame. At an event in November, the president joked that the Treasury secretary’s job was at stake if he did not do more to persuade Mr. Powell to lower interest rates more quickly.
“The only thing Scott’s blowing it on is the Fed,” Mr. Trump said. “The rates are too high, Scott, and if you don’t get it fixed fast I’m going to fire your ass.”
Colby Smith contributed reporting.
Alan Rappeport is an economic policy reporter for The Times, based in Washington. He covers the Treasury Department and writes about taxes, trade and fiscal matters.
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