Kevin Warsh, the newly installed Federal Reserve Chair, is already making clear that the central bank’s balance sheet is firmly in his crosshairs. In recent remarks, Warsh stated the Fed can achieve different balance sheet levels, a seemingly innocuous comment that carries significant weight for anyone holding risk assets, crypto included.
The balance sheet backdrop
The Fed’s balance sheet currently sits somewhere in the range of $6.7 to $7 trillion. That’s down considerably from the nearly $9 trillion peak hit during the pandemic-era money printer era.
Warsh, who was confirmed as Fed Chair on May 13 following a 54-45 Senate vote and took his oath around May 22, has long advocated for a smaller central bank balance sheet. During his previous stint as a Fed Governor from 2006 to 2011, he consistently pushed for tighter monetary conditions.
For context, before the 2008 financial crisis, the Fed’s balance sheet was under $1 trillion. The current level, even after years of gradual reduction, remains roughly seven times that pre-crisis figure.
