The Arthur Burns Nightmare Returns: Why Warsh Can’t Save the Fed From Trump
(SeaPRwire) –
By: Gavin Thorne
The White House is treating the Eccles Building like a campaign office again. Kevin Warsh walked into a trap the moment he accepted the nomination. Trump thinks he installed a loyalist, but the markets are smelling a puppet show. The independence of the central bank is the only thing keeping the dollar from collapsing. Yet, the President cannot help himself. He needs an enemy to blame when the bills come due. Warsh is trying to thread a needle that doesn’t exist. You cannot serve two masters in this town.
Trump returned to office last year and immediately started a war on rates. He threatened to fire Jerome Powell and launched a DOJ investigation. He tried to oust Governor Lisa Cook, sparking a Supreme Court case. The goal was simple: force rates down. Speaking to CNBC, Trump called Warsh a “great guy” and a “great pro.” He claimed to know where the chairman wants to be. This flattery is actually a poison pill. It destroys the credibility Warsh needs to function. The market sees a sock puppet, not a steward.
Warsh insists he made no promises about monetary policy. He told the European Central Bank Forum that the economy’s strength comes from constitutional design. Meanwhile, Trump calls the FOMC board “hostile” and claims they want to “do the wrong thing.” Warsh publicly praised the “warm welcome” from colleagues. He is trying to distance himself from the Arthur Burns playbook. Burns was the worst chairman in history because he bowed to Nixon. Stagflation was the price of that weakness. Warsh knows this history well.
The real battle is happening in the courts right now. The Supreme Court ruled 5-4 that Trump was wrong to try and remove Cook. They cited a lack of due process. Warsh read the opinion on his flight to Europe. He publicly affirmed his belief in Article 3 judges. He wants to call balls and strikes without political interference. But Trump isn’t backing down. He says the case was sent back on “process and procedure.” He intends to win it eventually. This creates a lingering shadow over the board.
Trump believes the Fed exists solely to juice growth numbers. He thinks low rates built the country. He ignores the mandate for price stability and maximum employment. If growth threatens stability, the Fed must act. That is the law. But this President doesn’t care about the dual mandate. He cares about the Dow Jones. He is setting Warsh up for a fall. If rates stay high, Trump blames the “hostile” board. If they drop, the Fed loses its independence. It is a lose-lose scenario designed for chaos.
The Fed will break before the ego does.
Author bio: Gavin Thorne, an investigative journalist tracking special interests and legislative affairs based in Washington, D.C.