COLUMN: Carney Praises Warsh as the Trade War Escalates

From the world of finance to the highest monetary authority in the United States

Kevin Warsh is a 55-year-old American financier and banker who previously served on the Federal Reserve Board of Governors from 2006 to 2011. Born on April 13, 1970, in Albany, New York, Warsh attended Stanford University, where he earned a bachelor’s degree in public policy with a concentration in economics and political science in 1992. He then went on to Harvard Law School, from which he graduated with a Juris Doctor degree cum laude in 1995. Before joining the Fed, Warsh worked for Morgan Stanley in New York, where he rose through the ranks to become an executive director in the mergers and acquisitions department. From 2002 to 2006, he served as Special Assistant to the President for Economic Policy and Executive Secretary of the National Economic Council under President George W. Bush. This combination of experience in the private sector and government allowed him to develop a deep understanding of financial markets and the mechanisms of monetary policy.

Look at this career path and tell me if it doesn’t resemble the very archetype of the American financial elite: Stanford, Harvard, Morgan Stanley, the White House, Bush. It’s as if every step of his career had been designed to prepare him for this very moment. What fascinates me is how someone with this pedigree is perceived as capable of understanding the “real” economic struggles of ordinary Americans. There’s a glaring disconnect between this elite world and the reality most of us experience on a daily basis, and yet it’s these very same elites who make the decisions that affect our portfolios, our mortgages, and our financial futures.

A key player in managing the worst economic crisis since the Great Depression

During his first stint at the Federal Reserve, Kevin Warsh played a significant role in navigating the 2008 financial crisis. During and after the crisis, he served as the central bank’s primary liaison with Wall Street and represented the Fed at the Group of Twenty (G20), as well as acting as the Board’s envoy to emerging and advanced economies in Asia. Former Fed Chair Ben Bernanke wrote in his memoirs that Warsh was one of his “most frequent companions” during the countless phone calls that shaped the strategy to combat the crisis. According to Bernanke, Warsh, with his “numerous contacts on Wall Street and his knowledge of practical finance,” was invaluable during that tumultuous period. During the crisis, Warsh attempted to orchestrate mergers between Citigroup and Goldman Sachs, as well as between Wachovia and Goldman Sachs—efforts that ultimately failed but demonstrated his proactive approach to troubled markets.

When I think back on that period, I recall the anxiety that was everywhere. People were losing their homes, their jobs, and their life savings. And all the while, those same bankers who had created the chaos were inside the command center, saving the very system they themselves had put at risk. Warsh was right there in the thick of it, orchestrating mergers and acquisitions as if it were a game of chess, while real lives were being destroyed. It is this irony that will always haunt me—how the architects of the disaster found themselves positioned as its saviors, and how we ended up accepting this absurdity as an inevitable necessity.

A hawk who opposed quantitative easing

Kevin Warsh’s tenure at the Federal Reserve was marked by positions that sometimes put him at odds with the institution’s mainstream leadership. Throughout 2008, Warsh predicted that inflation would rise despite financial turmoil and economic weakness, stating in March 2008 that there was “little reason to be confident that inflation will decline” and that inflationary pressures “are likely to become more pronounced and persistent.” Many economists and observers have argued that this focus on inflation and the failure to recognize the risk of deflation significantly exacerbated the crisis. In November 2010, at the FOMC meeting, Warsh was extremely skeptical of the Fed’s plan to stimulate economic activity and job creation by attempting to lower long-term interest rates. Although unemployment was near 10%, Warsh told his colleagues that he would vote for QE2 only out of deference to Chairman Bernanke, stating, “If I were in your shoes, I would not lead the Committee in this direction, and frankly, if I were in the shoes of most people in this room, I would abstain.”

What strikes me most about these positions is this blind obstinacy in defending an economic theory even as the empirical data screamed the opposite. Warsh was so convinced that inflation was about to skyrocket that he continued to predict it long after the evidence had shown otherwise. It is this ideological rigidity that terrifies me about our economic policymakers—this inability to admit that their models might be flawed, that their certainties might be challenged by a complex and unpredictable reality. And yet it is these very same people who are put back in charge as if nothing had happened, as if their past mistakes had no bearing on their legitimacy to lead.

Positive reactions that transcend traditional political divides

President Trump’s nomination of Kevin Warsh has drawn largely positive reactions from various figures and international financial institutions. Senator Tim Scott, chairman of the Senate Banking Committee on Housing and Urban Affairs, stated that “Kevin has a deep understanding of the markets and monetary policy that will be essential in this role,” adding that “the independence of the Federal Reserve remains paramount, and I am confident that Kevin will work to instill confidence and credibility in the Fed’s monetary policy.” The Wall Street Journal wrote in its editorial that “This is the best nomination of President Trump’s second term,” noting that Warsh “knows what he’s getting into” and that he is “the right choice for a central bank in need of reform after a generation of overstepping its proper monetary mandate.” Jamie Dimon, CEO of JPMorgan Chase, praised a “highly respected and experienced leader” whom he has seen “act with integrity and a dedication to improving our country.”

This wave of synchronized endorsements leaves me perplexed. Everyone seems to agree that this is a fantastic, wonderful, brilliant choice. It’s like a perfectly choreographed choir where everyone knows their part and sings in unison. But in this cacophony of praise, where are the critical voices? Where are those who point out past mistakes, misjudgments, and the disastrous consequences of certain decisions? It is this uniformity of discourse that frightens me the most—this apparent impossibility of having a genuine, adversarial debate within the circles of economic power. We’re supposed to believe that everyone agrees that everything will turn out fine and that there’s no reason to worry. It’s precisely when they tell us that that we should be most concerned.

Support that stands in contrast to U.S. trade threats

Mark Carney’s approval comes amid particularly tense economic relations between Canada and the United States. Bank of Canada Governor Tiff Macklem recently warned that Trump’s actions could “derail the central bank’s economic forecasts,” pointing to the U.S. president’s repeated threats of tariffs against Canada and other actions abroad. “There is an unusual potential for a new shock—a new disruption,” he said, adding that “geopolitical risks are high.” Macklem also expressed his support for current Fed Chair Jerome Powell, telling him in a private conversation that he was “doing a good job under difficult circumstances.” Several global central bank governors recently issued a joint statement in support of Powell and the Federal Reserve after the Department of Justice launched a criminal investigation into the Fed chair. They warned that political pressure on central banks could undermine global financial stability.

This dichotomy drives me crazy. On one hand, we have terrifying warnings about the economic consequences of Trump’s policies on Canada, and on the other, we have open support for his choice to lead the central bank that will implement those very same policies. It’s as if Canadian policymakers are trying to walk a tightrope between the need to maintain diplomatic relations and the reality of imminent economic damage. But I wonder how long they can maintain this precarious balance before the tensions become unsustainable. How long can they applaud those who threaten their economy before this hypocrisy becomes obvious to everyone?

An Institution Under Political and Economic Pressure

Kevin Warsh’s nomination comes at a time when the Federal Reserve is facing unprecedented challenges. The institution must balance its traditional independence with growing political pressure from the Trump administration. Republican Senator Thom Tillis, who serves on the Senate Banking Committee, has stated that he will oppose Warsh’s nomination until the federal investigation into Powell is “fully and transparently resolved.” Since the Senate Banking Committee currently consists of 13 Republicans and 11 Democrats, Tillis has the power to block the committee from voting to move Warsh’s nomination forward to a full Senate confirmation vote. Senate Majority Leader John Thune stated that Warsh “will likely not” be confirmed without Tillis’s support. Despite these obstacles, the financial markets appear to be welcoming the nomination, with CNBC analyzing that Warsh’s nomination would be welcomed by the markets due to his past experience at the Fed and Wall Street’s perception that he would not always follow Trump’s orders.

When I look at these political maneuvers, I see a system that is tearing apart at the seams. Republicans are pitted against Republicans; senators are blocking nominations; institutions are being held hostage in power struggles that have nothing to do with the public good. And in the midst of it all, the Federal Reserve—an institution that was supposed to be above politics—has become a partisan battleground. It’s like watching a train wreck in slow motion, unable to look away, knowing exactly how it’s going to end but powerless to do anything to stop it.

Between Convergence of Interests and Strategic Divergences

The appointment of Kevin Warsh to head the Federal Reserve and the support it received from Mark Carney raise fundamental questions about the future of international economic relations in an increasingly fragmented world. On the one hand, Carney’s endorsement can be interpreted as a sign that, despite trade tensions, there is still a convergence of views between Canada and the United States on fundamental economic issues. On the other hand, it can be seen as a pragmatic compromise on Canada’s part, as it seeks to maintain a constructive dialogue with its powerful southern neighbor despite deep trade disagreements. As Carney said, Warsh is a “fantastic choice to lead the world’s most important central bank at this crucial moment”—a statement that could be interpreted as an attempt to reassure international financial markets about continuity and stability despite the current political turbulence.

I wonder if this isn’t the last gasp of an economic order that is slowly collapsing before our eyes. All these gestures of cooperation, these statements of support, these attempts to maintain a facade of unity in a world that is becoming increasingly fractured. It’s as if everyone knows the system is changing but no one wants to be the first to admit it. So we keep playing along—clapping, congratulating, pretending that everything is fine—while the foundations are cracking. And somewhere deep down, I know that when the final breakdown comes, it will be brutal and sudden, and no one will truly be ready to face it.

Between Political Pragmatism and Economic Realities

Mark Carney’s approval of Kevin Warsh’s nomination to head the Federal Reserve marks a significant moment in economic relations between Canada and the United States at a time of unprecedented tensions. Carney, with his unique experience as a central banker who has led both the Bank of Canada and the Bank of England, lends considerable credibility to this nomination, which might otherwise seem surprising given the contentious trade context. Warsh, with his career spanning Morgan Stanley, the Bush White House, and his first stint at the Fed during the 2008 crisis, undoubtedly possesses the experience and skills necessary to lead the world’s most powerful monetary institution. Yet the challenges ahead are immense, ranging from political pressures and the need to maintain the Fed’s independence to managing a global economy facing growing geopolitical risks. Time will tell whether this appointment will succeed in calming the markets and stabilizing the global economy, or whether it will mark the beginning of a new era of international financial turbulence.

When I look at everything that has happened in recent weeks, I can’t help but feel a mixture of exhaustion and resignation. We’ve seen the nominations, the statements, the threats, the approvals—all this political theater unfolding before us as if our lives didn’t really depend on what’s happening. Carney endorses Warsh, Trump threatens Canada, senators block nominations—and we’re supposed to believe that all of this is part of some grand, coherent plan. But I don’t believe it. I think we’re powerless witnesses to a chaotic transition from a world that once existed to a world that’s emerging—and that no one really knows how to navigate this new space we’re collectively creating without even realizing it. And that scares me because, amid this confusion, it’s always the same people who pay the price, while the architects of the chaos continue to pat each other on the back for their “fantastic” work.

Signed, Jacques Provost