The Fed Chair Battle: How Kevin Warsh Outmaneuvered Kevin Hassett with Scott Bessant's Support

In the corridors of Washington’s financial establishment, a pivotal struggle is quietly unfolding over who will lead the Federal Reserve in 2026. President Trump has narrowed the field to two heavyweight contenders: Kevin Warsh, a former Fed governor and Wall Street veteran, and Kevin Hassett, the administration’s chief economic advisor. What few observers initially realized is that this nomination race has become a broader proxy fight between two competing visions for central banking—and Treasury Secretary Scott Bessant has emerged as a crucial kingmaker in determining the outcome.

Since Trump’s return to the White House, administration officials have been quietly jockeying over whether the next Fed Chair should prioritize political alignment with the president’s pro-growth agenda or maintain the Federal Reserve’s traditional institutional independence. This tension came to a head recently when Trump revealed in early December that his selection had narrowed to “two Kevins.” What began as Hassett’s apparent monopoly on the position suddenly shifted when Warsh unexpectedly surged into the conversation as a formidable alternative candidate.

From Wall Street to the Inflation Hawk’s Pedestal: Warsh’s Unlikely Rise

Kevin Warsh’s professional trajectory defies easy categorization. Born into a New York business family in 1970, he followed a circuitous path through some of America’s most prestigious institutions before arriving at the epicenter of financial policymaking. After graduating from Stanford University with an undergraduate degree and earning his law degree from Harvard University, Warsh gravitated toward Wall Street. He spent years at Morgan Stanley’s investment banking division, specializing in mergers and acquisitions, eventually rising to executive director before his interests pivoted toward public service.

His entry into government came in 2002 when he joined President George W. Bush’s National Economic Council as a special assistant, focusing on financial and capital market policy. This role provided him with valuable inside knowledge of how Washington translates economic theory into actionable policy. But his real breakthrough came in 2006 when, at just 35 years old, President Bush nominated him to the Federal Reserve Board of Governors—making him one of the youngest governors in the institution’s history.

During his time at the Fed, Warsh earned the reputation as an “inflation hawk” through both his words and actions. When the 2008 financial crisis erupted, he worked alongside Chairman Ben Bernanke and New York Fed President Tim Geithner to stabilize the system through emergency lending facilities and quantitative easing. However, even as these measures proved essential for containing the financial panic, Warsh harbored deep reservations about the long-term consequences of massive balance sheet expansion. He worried that aggressive monetary accommodation, while necessary in crisis conditions, risked planting the seeds of future inflation.

These concerns crystallized into action in March 2011, when Warsh resigned from the Fed Board shortly after the launch of quantitative easing’s second iteration (QE2). His departure was widely interpreted as a principled stand against what he viewed as an overly accommodative monetary policy. This decision cemented his image as someone willing to prioritize price stability concerns over short-term political pressures—a profile that would become increasingly relevant as the Trump administration sought its next Fed leader.

After stepping back from central banking, Warsh migrated to Stanford University, where he became a distinguished visiting scholar at the Hoover Institution and an instructor at the business school. There, he developed deeper expertise in monetary policy and financial stability, while simultaneously building an extensive intellectual and professional network. He participated in groups like the Group of Thirty and regularly contributed articles to leading media outlets, often critiquing the Federal Reserve’s overly lenient stance during the post-2008 recovery.

Beyond his professional credentials, Warsh possessed another asset: social connections that bridged political and business worlds. His wife comes from the Estée Lauder family, and his father-in-law, Ronald Lauder, has maintained a long-standing relationship with President Trump. This family connection provided Warsh access to circles of influence that few other potential Fed candidates possessed.

The Political Chess Game: Why Scott Bessant and Wall Street Backed Warsh

Initially, the nomination race appeared to be Kevin Hassett’s to lose. As Trump’s chief economic advisor and former chairman of the Council of Economic Advisers during Trump’s first term, Hassett was the natural frontrunner. With the media dubbing him the “shadow chairman” for his consistent alignment with Trump’s policy preferences, Hassett seemed positioned to advance the president’s agenda of aggressive interest rate cuts designed to stimulate growth.

But by mid-December, the landscape had shifted dramatically. Warsh not only entered the race but began gaining ground through a combination of strategic positioning and elite support. The turning point came when Trump revealed that he had personally met with Warsh at the White House, during which Warsh signaled strong support for lower interest rates—a message perfectly calibrated to appeal to the president’s pro-growth instincts. Trump himself noted that Warsh believed current rates “should be lower,” language that suggested this former inflation hawk was adapting to the political moment.

Simultaneously, Wall Street’s most powerful voices mobilized behind Warsh. Jamie Dimon, CEO of JPMorgan Chase, privately conveyed to Trump’s team that while Hassett might deliver faster interest rate cuts in the short term, Warsh’s deeper experience as a central banker and market veteran made him the more prudent long-term choice. This endorsement from one of America’s most respected financial leaders carried significant weight within Trump’s inner circle.

However, the most consequential support for Warsh came from within the administration itself. Treasury Secretary Scott Bessant emerged as a crucial advocate for the Fed candidate, backing Warsh against Hassett in internal administration discussions. Unlike political operatives who prioritized loyalty above all else, Bessant and other economic officials recognized the technical complexity of the Fed chair role and worried that Hassett lacked the necessary decision-making experience. Reports indicated that some officials privately questioned whether Hassett, despite his proximity to Trump, possessed the expertise required for such a technically demanding position.

This created a hidden power struggle within the Trump camp: political advisors valued Hassett’s unwavering loyalty to the president, while Treasury Secretary Scott Bessant and fellow economic policymakers favored Warsh’s institutional credibility and professional standing. The divide ultimately turned on a fundamental question about governance: Should the Fed chair be someone who reliably implements the president’s policy preferences, or someone with independent expertise who could make technically sound decisions even if they sometimes diverged from political preferences?

Warsh’s strategic intelligence proved decisive. Rather than retreating into an abstract defense of central bank independence—a stance that would have guaranteed Trump’s opposition—Warsh positioned himself as someone willing to align with Trump’s growth agenda while maintaining sufficient independence to sustain financial market confidence in the Fed’s credibility. This calculated flexibility, combined with Wall Street support and Treasury Secretary Scott Bessant’s backing, created a momentum that gradually shifted the race in his favor.

Monetary Policy Showdown: Two Fundamentally Different Visions

The competition between Warsh and Hassett goes far deeper than personal ambition or internal White House politics. It reflects two competing philosophies about how central banking should operate in a polarized political era.

Warsh remains fundamentally committed to the role of central banks as independent institutions primarily responsible for maintaining price stability and financial system health. His intellectual framework emphasizes that inflation is not an external force beyond policy control, but rather a choice—the result of deliberate policy decisions. He has been vocally critical of the Powell-era Federal Reserve for what he characterizes as policy mistakes in managing inflation. Warsh argues that policymakers failed to recognize early enough that post-pandemic price pressures reflected demand-side overheating rather than temporary supply shocks, and that hawkish monetary action earlier could have prevented the high inflation of 2022-2023.

This inflation-fighting philosophy translated into a specific policy proposal. In a November Wall Street Journal article, Warsh outlined a nuanced two-pronged approach: cutting interest rates while simultaneously shrinking the Federal Reserve’s balance sheet. This combination—lower rates paired with quantitative tightening—represented a careful balance: it would provide some monetary accommodation to support growth while simultaneously withdrawing excess liquidity to prevent inflation from reemerging. It was vintage Warsh: seeking a middle path that acknowledged political realities while maintaining principled concern for price stability.

In stark contrast, Hassett advocates for a more straightforward and aggressive approach to rate cuts. From Hassett’s perspective, lower interest rates represent the surest path to reigniting economic growth, and he sees minimal risk in this strategy. His position aligns more directly with Trump’s repeated calls for dramatic rate reductions, and he shows less internal conflict about accommodating political pressure on monetary policy.

The difference extends to their views on central bank independence itself. Hassett has publicly argued that the Federal Reserve has become “politicized” and that new leadership is needed to better align with presidential priorities. Although he has recently begun offering reassurances about preserving central bank independence upon taking office, his fundamental stance suggests that monetary policy should more closely service the goals of the ruling administration. This squares perfectly with Trump’s own public statements that the next Fed chair “should listen to me” and should seek presidential input before making rate decisions.

Warsh, by contrast, represents the traditional central banking establishment. Despite his recent adjustments to align with Trump’s growth agenda, he is recognized as someone who values institutional independence and has previously resigned on principle rather than accept policies he viewed as misguided. Treasury Secretary Scott Bessant and other financial professionals recognized this distinction—that Warsh could be trusted to make technically sound decisions rather than simply rubber-stamping political instructions.

The Broader Stakes: Market Confidence and Financial Credibility

The outcome of this selection will reverberate far beyond Washington. The international financial system depends on confidence that the Federal Reserve makes decisions based on economic data and institutional expertise rather than political pressure. A Fed chair who is seen as subordinate to presidential preferences risks undermining the dollar’s status as the world’s reserve currency and could destabilize global financial markets.

Market participants have signaled their preferences through various channels. The Wall Street elite’s support for Warsh reflects their concern that a Hassett-led Fed might prove too accommodative, potentially rekindling inflation and driving up long-term interest rates in compensation for inflation risk. Conversely, administration political operatives favor Hassett precisely because he would be more reliable in cutting rates aggressively.

Warsh’s ability to maintain credibility in both worlds—demonstrating flexibility on Trump’s rate-cut agenda while preserving the respect of financial market professionals—makes him a formidable candidate. Treasury Secretary Scott Bessant’s public and private support carries special significance because Bessant, as the administration’s chief financial officer, must maintain relationships with both domestic and international capital markets. His backing of Warsh signals that the administration’s highest financial officials recognize the importance of preserving the Fed’s institutional credibility.

As Trump indicated in December that a decision would likely come in early 2026, the two Kevins represent fundamentally different futures for the Federal Reserve. Whether American and global investors will see the next Fed chair as a guardian of price stability and institutional independence—or as primarily responsible for advancing the president’s economic preferences—will shape financial markets and economic policy for years to come. Treasury Secretary Scott Bessant’s role in this process underscores that even within an administration skeptical of traditional institutions, serious financial professionals recognize why the Federal Reserve’s reputation for independence remains essential to its function.