Story perspectives

New Fed Chair Warsh Targets $3 T Balance-Sheet Cut

5/18/2026

Summary

Warsh Cuts Balance

Kevin Warsh became Federal Reserve (Fed) chair on May 17, 2026, succeeding Jerome Powell and plans to cut $6.7 trillion balance sheet to $3 trillion, arguing it favors owners.
He will sell Treasury bonds and mortgage-backed securities to lower prices, raise yields and costs, and could pressure the S&P 500’s P/E of 21.
Market entered 2026 with Shiller P/E of 42.18 on May 14, near its 44.19 peak, while Warsh faces opposition from Powell and four governors.

Summary

Trump Nominates Warsh

President Donald Trump nominated Federal Reserve (Fed) governor Kevin Warsh to replace Fed Chair Jerome Powell.
Warsh’s Federal Open Market Committee (FOMC) voting record from Feb. 24 2006 to March 31 2011 was hawkish, warning against cuts as unemployment rose in the 2008-2009 crisis.
Analysts warn his hawkish stance may clash with Trump’s push for lower rates as April’s producer price index (PPI) rose to 6%, highest since Jan 2023, pressuring the Fed.

Summary

Warsh Proposes Cuts

Kevin Warsh proposed a new framework and tools to cut back Federal Reserve (Fed) briefings.
A Brookings survey this month found economists want the Fed to keep post-meeting press conferences.
One-third of survey respondents say regional Fed presidents should speak publicly less often.
The Fed began regular statements under Alan Greenspan in 1994 and held its first formal news conference under Ben Bernanke in April 2011.

Summary

Warsh Sparks Volatility

Market volatility is expected as investors react to Kevin Warsh of the Federal Reserve’s markedly different vision.
Analysts advise investors to increase cash holdings to be ready for the anticipated turbulence.
They also stress keeping a long-term perspective despite short-term price swings.
A shrinking Fed balance sheet is not projected to cause a catastrophic impact on the broader economy.

History

Historical Context

After the 2008 crisis, Fed Chair Ben Bernanke ordered a $600 billion mortgage-backed-security purchase in November 2008 and added $750 billion of agency assets in March 2009, swelling the balance sheet to several trillion dollars. Former governor Kevin Warsh now urges halving that sheet to roughly $3 trillion, a move echoed by Trump-aligned hawks in the policy debate.

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Warsh Cuts Balance

Kevin Warsh became Federal Reserve (Fed) chair on May 17, 2026, succeeding Jerome Powell and plans to cut $6.7 trillion balance sheet to $3 trillion, arguing it favors owners.
He will sell Treasury bonds and mortgage-backed securities to lower prices, raise yields and costs, and could pressure the S&P 500’s P/E of 21.
Market entered 2026 with Shiller P/E of 42.18 on May 14, near its 44.19 peak, while Warsh faces opposition from Powell and four governors.

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