Kevin Warsh, the primary intermediary between the Federal Reserve and Wall Street during the 2008 financial crisis, was confirmed on Tuesday to a 14-year term as Federal Reserve governor and confirmed on Wednesday as Jerome Powell's successor as chairman of the U.S. central bank.
Powell, who was first nominated to the Federal Board of Governors by former President Barack Obama and whose term as chair ends on Friday, wished Warsh well. However, he also provided his replacement with something more valuable than a nice sentiment: examples of what not to do, or at least, what to avoid doing.
Powell has, after all, dropped the ball on numerous occasions — sometimes with catastrophic consequences for the country. Here are just four examples.
Powell stated on March 4, 2021, in the second year of the pandemic, that inflation might increase but that it would likely be "transitory" and not enough for the central bank to raise record-low interest rates — a decision some suspect was geared toward pleasing then-President Joe Biden and thereby securing Powell's reappointment.
'Most of the expected GDP slowdown — from over 3% to 1.5% — was due to Powell's blunder.'
MarketWatch's Greg Robb noted that Powell's wrong-headed "transitory" view of inflation — one that would define his eight years as Fed chair — precluded the Fed from raising interest rates until 2022 while the Fed was also buying up bonds "and swelling its balance sheet."
Thanks to Powell's mistake — which economist Mohamed El-Erian, former PIMCO chief executive, said was "probably the worst inflation call in the history of the Federal Reserve" — the Fed was consistently on the back foot.
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Facing the highest inflation Americans had seen in 40 years — inflation that no longer appeared to be "transitory" — Powell ended up raising interest rates 11 times between March 2022 and July 2023, when its benchmark rate reached a range of 5.25% to 5.5%.
Powell told "60 Minutes" in a Feb. 1, 2024, interview:
In hindsight, it would've been better to have tightened policy earlier. I'm happy to say that. Really, it was this. We saw what we thought was that this inflation, which seemed to be mostly limited to the goods sector and to the supply chain story. We thought that the economy was so dynamic that it would fix itself fairly quickly. And we thought that inflation would go away fairly quickly without an intervention by us. That it would be transitory.
Powell leaves office with inflation well above the Fed's 2% target for five consecutive years.
While reluctant initially to raise interest rates when Biden was in office, Powell previously demonstrated an eagerness to raise rates in 2018 when President Donald Trump was in office and the economy was booming.
"Every time we do something great, he raises the interest rates," Trump said at the time. Powell "almost looks like he's happy raising interest rates."
The repeated hikes, which Trump blamed for coinciding stock market turmoil, were supposedly prompted by concerns that the Republican president's tariffs and tax cuts, the latter of which were framed as a $1.5 trillion fiscal stimulus, might together contribute to inflation.
Powell stated that "fiscal policy is becoming more stimulative. In this environment, we anticipate that inflation ... will move up this year."
Economist Donald Luskin, chief investment officer for Trand Macrolytics LLC, recently noted that "there is no evidence that Mr. Trump’s tariffs in 2018 and 2019 led to any inflation at all."
Economist and Trump trade adviser Peter Navarro wrote last year, "Powell's audition for 'worst Fed chair' began shortly after his February 2018 appointment. Promising President Trump in the Oval Office a supportive posture to secure his nomination, Powell instead aggressively raised rates into the low-inflation, high-growth Trump economy. Powell wrongly believed Trump's tax cuts and tariffs would spark inflation — they didn't."
Powell's bet against Trump's tariffs and tax cuts proved consequential.
"As Powell's Fed hiked interest rates four times in 2018 — despite muted inflation and strong labor market gains — economic momentum slowed sharply," wrote Navarro. "According to the Fed's own September Tealbook, most of the expected GDP slowdown — from over 3% to 1.5% — was due to Powell's blunder."
"It would cost the American economy hundreds of thousands of jobs and hundreds of billions of dollars in lost economic output and tax revenues," added the trade adviser.
Powell reportedly greenlit luxury renovations to the Fed's Washington, D.C, headquarters that exceeded the original budget by roughly $700 million and is set to cost around $2.5 billion.
Controversy over the renovations — which include a rooftop terrace with gardens, VIP dining rooms, "premium" marble, and water features — came to a head in January, several months after U.S. Federal Housing Finance Agency Director William Pulte called for an investigation into Powell and his removal as Fed chair.
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Powell said in a Jan. 11 statement that "the Department of Justice served the Federal Reserve with grand jury subpoenas, threatening a criminal indictment related to my testimony before the Senate Banking Committee last June. That testimony concerned in part a multiyear project to renovate historic Federal Reserve office buildings."
An activist Biden-appointed judge quashed the grand jury subpoenas in March.
"Jerome Powell today is now bathed in immunity, preventing my office from investigating the Federal Reserve," Jeanine Pirro, the U.S. attorney in Washington, said in response to U.S. District Court Judge James Boasberg's rulings. "This is wrong, and it is without legal authority."
Last month, the Trump administration dropped the criminal investigation into Powell over his luxury renovation project.
While apparently off the hook, the controversy nevertheless hangs over Powell as another example of costly mismanagement.
Powell and his underlings also failed to prevent the March 2023 collapses of Silicon Valley Bank and Signature Bank — the third- and fourth-largest bank failures in American history, respectively.
Powell acknowledged weeks after the bank failures that the Fed's efforts to intervene were too little, too late.
"It does kind of suggest there's a need for ... regulatory and supervisory changes, just because supervision and regulation need to keep up with what's happening," said Powell. "My only interest is that we identify what went wrong here ... make an assessment of what are the right policies to put in place so that doesn't happen again, and then implement those policies."
One of Powell's lieutenants, then-Vice Chair Michael Barr, admitted that the "Federal Reserve supervisors failed to take forceful enough action."
A damning April 28, 2023, report on the Fed's bungled supervision and regulation of Silicon Valley Bank — the conclusions of which Powell ultimately accepted — said that:
President Donald Trump's pick to replace Federal Reserve Chair Jerome Powell just got one step closer to confirmation.
The White House can breathe a sigh of relief after the Senate Banking Committee advanced Kevin Warsh's nomination along party lines in a 13-11 vote on Wednesday. Warsh's nomination is now headed to the Senate floor, where he is expected to be confirmed in a simple majority vote.
'This is a necessary and appropriate measure.'
Warsh's main hurdle was none other than Republican Sen. Thom Tillis of North Carolina, who vowed to oppose the nominee until the administration dropped its investigation into Powell's overbudget construction project of the Fed building.
The retiring Republican's calls were heard by the White House, and the DOJ's investigation was punted to the inspector general, which was enough to regain Tillis' support for the committee vote.
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"I welcome the Inspector General's investigation," Tillis said in a post on X, despite his vehement opposition to the DOJ-led investigation into Powell. "This is a necessary and appropriate measure, and I have confidence it will be conducted thoroughly and professionally."
"Only a criminal referral from the inspector general would cause a reopening of the investigation," Tillis added. "With these assurances, I look forward to supporting Kevin Warsh's confirmation."
Powell, whose term expires in May, said he will remain in the role until his replacement is officially confirmed.
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For years, Glenn Beck has called for the abolition of the Federal Reserve, arguing it’s nothing more than a private banking cartel that enables endless government spending, devalues the dollar through inflation, and secretly steals wealth from Americans via corrupt monetary policies.
But new evidence that just surfaced proves the problem is even worse than he thought.
To explain what’s been happening behind the American people’s back, Glenn gives an analogy.
“Imagine the U.S. economy is like one giant, never-ending house party that’s been raging for years, and the Federal Reserve is the bartender in charge of the punch bowl. The punch bowl, that’s liquidity, easy money flowing through the banks and the markets and the businesses,” he begins.
For years, the “punch” was overdistributed, making partygoers drunk and willing to make poor decisions. “This is when stocks and houses get wildly overpriced. Companies borrow stupid amounts ... and everybody starts to do stupid things,” Glenn says.
That’s exactly what happened in 2022 when the Federal Reserve “just printed a whole buttload of money,” he says.
But when things “got ugly,” it suddenly reversed course and announced an initiative called “quantitative tightening,” which essentially “drained the whole punch bowl.”
The Federal Reserve “needed to get rid of $2.3 trillion worth of bonds that they owned, and they said, ‘We’re just going to let them expire,”’ Glenn explains.
“In theory, this drains the money out of the system, makes it harder for you to get loans and everything else. Borrowing is more expensive. The bubbles will pop. It forces the economy to sober up.”
But this was just a ruse, Glenn says.
Instead of actually stopping the flow of “punch,” the Federal Reserve during the COVID-19 pandemic quietly redirected it instead.
“A lot of it ended up in a giant backroom keg called the overnight reverse repo facility. ... These are money market funds, big investors, big banks,” Glenn says, “and they parked about $2.5 trillion in for safekeeping, and they were earning a safe interest rate from the Fed.”
But then the backroom keg finally ran dry.
“By 2023, something had changed. The short-term Treasury bills (super safe government IOUs) started paying higher interest than the keg in the back room, so the big investors said, ‘Why are we letting all the alcohol sit in the keg? We can have a party elsewhere,”’ Glenn says. “So they started draining the backroom keg $100-$200 billion every single month, and they poured that money right back into stocks and bonds and lending.”
What was the result?
“More punch than we started with in the first place!” Glenn exclaims.
“That’s why the Dow Jones keeps hitting new highs, government keeps funding huge deficits. ... The bartender was pretending to cut off the drinks while secretly letting the elite guests go into the back room and get the hidden stash.”
These still-drunk elites, Glenn says, continue to “make stupid, dumb bets,” which just makes the “hangover worse” for the normies.
“Look out, gang — you’ve been lied to yet again,” he cautions, calling the Federal Reserve a “criminal organization” that is “stealing from the American people.”
“End the Fed,” he pleads.
To enjoy more of Glenn’s masterful storytelling, thought-provoking analysis, and uncanny ability to make sense of the chaos, subscribe to BlazeTV — the largest multi-platform network of voices who love America, defend the Constitution, and live the American dream.
The independence of the Federal Reserve System has become a major source of public controversy. As political leaders signal dissatisfaction with monetary policy, officials and commentators rush to defend the central bank’s insulation from democratic pressure. We are told, as if it were self-evident, that central bank independence is a pillar of sound economic governance.
But this confidence is misplaced. The economic case for central bank independence is far weaker than its defenders suggest. And the constitutional case is weaker still.
Officials entrusted with such consequential authority must ultimately answer to elected leadership.
Start with economics. The standard argument is that independent central banks deliver low and stable inflation because they are insulated from short-term political incentives. Elected officials, facing electoral pressures, might be tempted to juice the economy with artificially loose monetary policy. By contrast, independent technocrats can take the long view.
Early empirical studies did show that countries with independent central banks experienced lower inflation. Yet more recent research has cast doubt on this relationship. The correlation is sensitive to different samples and methods. In many cases, the supposed benefits of independence disappear entirely.
A more plausible explanation has emerged. Countries that enjoy low and stable inflation share deeper institutional characteristics: respect for the rule of law, stable political systems, and credible commitments to property rights. These are the real foundations of sound money. Central bank independence accompanies these basic governance norms, but its stand-alone effect is debatable.
This matters for a free-enterprise economy. Monetary policy is not a neutral technocratic exercise. Interest rates are prices: the price of time, risk, and capital. When insulated officials tinker with those prices at their discretion, the result is distorted market signals. Cheap credit can mislead investors, encourage unsustainable projects, and redistribute wealth in opaque ways. Independence does not eliminate politics. It simply hides politics behind a veil of expertise.
If the economic case for independence is overstated, the constitutional case is entirely bunk. The Constitution is clear: Congress holds the power “to coin Money” and “regulate the Value thereof.” Monetary authority, like all legislative power, originates with the people’s representatives. Congress may delegate certain functions to administrative bodies, including by creating a central bank. But delegation is not abdication.
Those who exercise delegated authority remain accountable to the laws Congress passes and, ultimately, to the chief executive charged with enforcing them.
Yet the modern Fed operates as if our constitutional framework were irrelevant. Its leaders enjoy significant protection from removal. Its decisions (targeting interest rates, allocating credit, regulating banks, etc.) have sweeping consequences for the entire economy. If this does not constitute the exercise of executive power, it is hard to say what does.
The Supreme Court has recently emphasized that administrative agencies cannot be insulated from presidential oversight simply because they possess technical expertise. The separation of powers does not yield to convenience, nor to the promise of better policy outcomes. Yet when it comes to the Federal Reserve, the court has signaled a willingness to tolerate precisely such insulation — a “special case” for the most powerful economic institution in the country.
This exception is indefensible. Appeals to history or prudence, however well grounded, are not constitutional arguments. An agency that wields executive power must answer to the chief executive. Concerns about how that works in practice does not justify ignoring the Constitution.
The truth is that central bank independence persists not because it is firmly grounded in law or economics, but because the alternative unsettles us. We worry, not without reason, that elected officials might misuse monetary policy for short-term gain.
But the Constitution does not permit us to resolve that fear by concentrating vast economic power in the hands of unaccountable experts. A free and self-governing people must confront the difficult task of designing institutions that combine competence with accountability.
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That begins with Congress. There are several legislative reforms that can restore the rule of law to monetary policy. First, lawmakers should narrow the Federal Reserve’s mandate to a single, clear objective — price stability — rather than the vague and conflicting goals it currently pursues. A simpler mandate would make it easier to evaluate performance and hold policymakers responsible when they fail.
Second, Congress should revisit the legal protections that shield senior Fed officials from removal. Freedom of judgment is one thing; freedom from oversight is another. Officials entrusted with such consequential authority must ultimately answer to elected leadership. Legislators ought to make it easier to fire central bankers.
Finally, the president should take a more active role in ensuring that the Fed operates within its statutory and constitutional bounds. This does not mean dictating day-to-day interest rate decisions. Instead, it means recognizing that monetary policy, like all exercises of government power, must remain subject to democratic control.
President Trump’s nomination of Kevin Warsh as the next Fed chairman is a good start. The two must work together to restore the Fed’s ordinary day-to-day operations, something missing since the 2007-08 financial crisis.
Economic stability is obviously desirable. But we cannot purchase it at the cost of self-government. Republican principles require officials to be answerable to the people. If we are serious about preserving the constitutional order and free enterprise, we must abandon the comforting myths of central bank independence and restore accountability to the Federal Reserve.
Editor’s note: This article appeared originally at the American Mind.
