How do you change regimes when the head of the old one isn’t leaving?
That will be the question facing Federal Reserve chair nominee Kevin Warsh next month once confirmed by the Senate, now that outgoing Chair Jerome Powell has confirmed he will stick around indefinitely as a voting member of the Fed’s Board of Governors.
Powell’s decision to stay has little precedent in Fed history, but it may be less disruptive to Warsh’s plans than it might otherwise seem. Powell said at a Wednesday press conference that he has no desire to be a “shadow chair” and that his plans for an extended tenure at the Fed are aimed squarely outside the infamously crumbling walls of the Marriner S. Eccles headquarters building.
Powell’s rejection of the shadow chair idea is fitting given that it was an idea floated specifically to undermine him. Treasury Scott Bessent proposed the plan for a shadow Fed chair in October 2024 when he was still a private citizen. Now-President Donald Trump was fed up with Powell before he’d even won election that year, so Bessent proposed designating a replacement far in advance. “Based on the concept of forward guidance, no one is really going to care what Jerome Powell has to say anymore,” Bessent said.
