by Matthew Rusling
WASHINGTON, Feb. 5 (Xinhua) -- U.S. President Donald Trump's recent nomination of Kevin Warsh as the next Federal Reserve chief received mixed reactions from experts and politicians.
Some said Warsh, who believes the central bank needs to change the way it has operated over recent decades, is the right man for the job. Others doubted if he would just be a "yes man" for the president.
Warsh has "a judicious temperament and both the intellectual understanding but also the hopefully diplomatic talents to navigate what is a challenging position at this point," said Raghuram Rajan, an economics professor at the University of Chicago and formerly head of India's central bank.
Trump wrote on social media that he has "known Kevin for a long period of time, and (I) have no doubt that he will go down as one of the GREAT Fed Chairmen, maybe the best."
Warsh, who attended Harvard and Stanford, disagrees with the Fed's assumption that fast growth can ramp up inflation. In contrast, inflation "is caused when government spends too much and prints too much," he wrote in an article last November in The Wall Street Journal.
Richard Saperstein, chief investment officer of Treasury Partners, was quoted by CNBC as saying: "Kevin Warsh's nomination for Fed Chair is exactly what markets were hoping for, as he's a steady hand, well known in market circles and is expected to maintain the independence of the central bank, which is critical for markets."
However, some have spoken out against Warsh. Democratic Sen. Elizabeth Warren has echoed others who have lambasted Warsh for changing his views in a bid to placate Trump.
"That's exactly what a sock puppet does. If Donald Trump says it, then Kevin Warsh echoes it, even though it contradicts everything he had done for years," said Warren, a ranking member of the Senate Committee on Banking, Housing, and Urban Affairs.
Indeed, Warsh has shifted his public stance on interest rates. He was an inflation hawk during his 2006-2011 Fed tenure but later became a proponent of rate cuts. Critics charge him with simply following Trump, who has long demanded that the Fed lower rates.
Gary Clyde Hufbauer, a nonresident senior fellow at the Peterson Institute for International Economics, told Xinhua: "Essentially, Warsh will be a 'yes man' for the White House, while doing his best to look independent."
Dean Baker, co-founder of the Center for Economic and Policy Research, told Xinhua: "Warsh has largely followed Trump's course in both his first term and his current term."
"I'm not sure which Warsh will show up at the Fed. I generally prefer lower rates, but not at the behest of Trump," Baker said.
On the other hand, monetary policy is set by the 12-person Federal Open Market Committee, and the Fed chief only has one vote.
"Warsh would probably come there with less standing than any Fed chair in many decades, maybe ever. He will have to argue his case. People will not just defer to him," Baker said.
Trump has railed on current Fed chief Jerome Powell for months, hurling personal insults and calling Powell a "numbskull," a "moron," and a "jerk" for not lowering interest rates more rapidly. ■
