Fed Chair Warsh Hires Project 2025 Author in First Staff Move – What It Means
A Quiet Wednesday. A Loud Message.
It was a Wednesday like any other at the Federal Reserve. Coffee cups clinked. Reports shuffled. Economists ran the numbers.
Then the news dropped.
Kevin Warsh, sworn in as Fed chair just weeks earlier on May 22, had made his first hires. And not just any hires. He brought on Paul Winfree, the man who wrote the Federal Reserve chapter in the controversial conservative policy blueprint known as Project 2025.
(Let that sink in for a moment.)
Winfree's chapter didn't just suggest a few tweaks around the edges. It called for stripping the central bank of its dual mandate and replacing it with a single-minded focus on inflation. It even floated the idea of "free banking", a system that would effectively dismantle the Fed as we know it.
Alongside Winfree, Warsh also brought in Daniel Heil, a fellow at Stanford's Hoover Institution, where Warsh himself held a position before stepping into the chair's role.
Now, here's where things get interesting. Warsh has spent years promising "regime change" at the Fed. But he's also, in his first official memo to the central bank's 20,000 employees, spoken warmly about upholding both sides of the dual mandate, the exact framework Winfree's chapter wants to dismantle.
So what's really going on? Is this a slow-motion takeover of the Fed by its conservative critics? Or is it something more subtle, and perhaps more significant?
First Through the Door: Who Warsh Brought In
Before we get lost in policy debates and parliamentary procedures, let's start with the basics: the two men now advising the most powerful central banker in the world.
Both Winfree and Heil are working as temporary contractors, not permanent staff. That's an important distinction. Warsh hasn't yet made any final decisions about who fills the more enduring roles inside his inner circle. But in Washington, personnel is policy. And the people you bring through the door first send a signal.
Neither man has ever worked at the Federal Reserve before. That's unusual. Previous Fed chairs, Powell, Yellen, Bernanke, tended to staff their teams with seasoned central bank insiders. Warsh, by contrast, has chosen advisers whose entire careers have unfolded outside the institution he now leads.
That's not an accident. That's a statement.
Paul Winfree: The Architect Behind the Blueprint
Let's talk about Winfree, because he's the name that's generating most of the headlines.
Paul Winfree isn't some fringe ideologue discovered in a think tank basement. He served on the Domestic Policy Council during Donald Trump's first term. He founded the Economic Policy Innovation Center, a pro-Trump think tank. And yes, he wrote the Project 2025 chapter on the Federal Reserve.
Here's what that chapter actually said:
- End the dual mandate. The Fed currently has two jobs: maximize employment and stabilize prices. Winfree argued the central bank should focus exclusively on "protecting the dollar and restraining inflation".
- Slash the balance sheet. The Fed's $6.7 trillion portfolio of bonds is, in this view, a dangerous distortion of free markets.
- Curb emergency lending powers. During financial crises, the Fed acts as a lender of last resort. Winfree's chapter suggested putting real limits on that authority.
And then there's the idea that really got people talking: "free banking." The concept would replace the Federal Reserve with privately issued currencies tied to commodities. The Wall Street Journal reported that this was floated as the highest-ranked reform option in the chapter.
(Yes, you read that correctly. We're talking about a world without a central bank at all.)
Now, to be fair, Winfree himself has tried to distance his personal views from the chapter's most extreme proposals. In a 2024 interview with Roll Call, he said: "I would not subscribe to the idea of nuking the Fed".
But the fact that he authored that chapter, and that Warsh hired him anyway, is not nothing.
Daniel Heil: The Hoover Connection
Daniel Heil is the quieter half of this duo, but no less interesting. He holds a fellowship at Stanford's Hoover Institution, the same intellectual home where Warsh spent his pre-Fed years.
Heil has written extensively on the fiscal dimensions of federal healthcare programs and Social Security. That might seem unrelated to monetary policy until you realize that Warsh has signaled an interest in rethinking how the Fed interacts with fiscal policy.
More importantly, Heil represents continuity. He's someone Warsh already knew and trusted from his time at Hoover. In a new job with a steep learning curve, that kind of familiar relationship matters.
The Tension at the Heart of Winfree's Playbook
Here's where this story gets genuinely interesting, and where most news coverage stops short.
Winfree's Project 2025 chapter is not a document Warsh has endorsed. In fact, on several key points, Warsh has publicly taken the opposite position.
Take the dual mandate. Winfree wants to eliminate it. But at his White House swearing-in ceremony, Warsh spoke positively about upholding both sides of that mandate, maximum employment and price stability.
That's a genuine tension. And it raises a question: Is Winfree advising Warsh to move in a direction Warsh doesn't actually support? Or is Warsh's public embrace of the dual mandate just political positioning?
We don't have a definitive answer yet. But the fact that Warsh hired someone with such radically different views suggests one of two things:
- He wants intellectual diversity. A leader who only hires yes-men is a leader who never hears hard truths.
- He's more aligned with Winfree than he's letting on. In Washington, sometimes the people you hire speak louder than the words you say.
Warsh has already tempered his own rhetoric since taking office. During his candidacy, he famously told an interviewer that achieving "regime change" at the Fed would require "breaking some heads". By the time he was sworn in, that language had softened considerably: "My goal now is to create an environment in which the best people can do their life's best work".
Whether that shift reflects genuine pragmatism or merely strategic restraint remains to be seen.
"Nuke the Fed" – And Everything in Between
Let me pause here and unpack something important.
Project 2025 was published by the Heritage Foundation ahead of the 2024 election. It's a sweeping conservative policy blueprint, hundreds of pages covering everything from the Department of Justice to the Environmental Protection Agency.
The Fed chapter is just one small piece of that puzzle. But it's a revealing piece.
The chapter's ranking of reform options is particularly telling. "Free banking", the most radical idea, was placed at the top. That suggests the authors wanted to push the Overton window as far as possible, even if they didn't expect immediate implementation.
Winfree's personal disavowal of the "nuke the Fed" idea is important context. He's not a revolutionary. He's a reformer, one who believes the Fed has strayed from its mission and needs a course correction.
But here's the thing about reformers: they often move incrementally. You don't start with free banking. You start by questioning the dual mandate. You start by shrinking the balance sheet. You start by limiting emergency lending.
And those are exactly the ideas Winfree has championed, and Warsh has signaled openness to.
Warsh's "Regime Change" – What He Actually Wants
So beyond the hires and the headlines, what does Kevin Warsh actually want to accomplish?
Let's move beyond the speculation and look at what he's actually said, and done.
The $6.7 Trillion Elephant in the Room
Warsh has been remarkably consistent on one point: the Fed's balance sheet is too damn big.
At $6.7 trillion, the central bank's portfolio of bonds has ballooned over years of quantitative easing. Warsh wants to shrink it, aggressively.
He's not alone. Treasury Secretary Scott Bessent and Fed Vice Chair for Supervision Michelle Bowman share this goal. Bloomberg's Paul J. Davies described them as a "trio of related aims": pulling the Fed back from heavy market involvement, restoring interest rates as the primary monetary policy lever, and changing bank liquidity rules.
The catch? Those goals may be mutually reinforcing or mutually exclusive. Draining reserves from the banking system to shrink the balance sheet could inadvertently tighten credit in ways Warsh doesn't intend.
Shrinking a $6.7 trillion balance sheet is like trying to lose weight while eating birthday cake every weekend. You can do it, but it requires discipline, and the cooperation of everyone at the table.
Less Talking, More Doing
If you've ever sat through a Fed press conference and wondered, "Does anyone actually understand what they're saying?" , Kevin Warsh agrees with you.
He thinks Fed officials talk too much. He's particularly skeptical of "forward guidance", the practice of signaling where interest rates are heading weeks or months in advance. In his view, this locks policymakers into a predetermined path and reduces their flexibility to respond to changing conditions.
At his confirmation hearing, he told senators that the Fed's communications need "big changes". He's even signaled openness to scaling back post-meeting press conferences, though PIMCO analysts doubt he'll actually go that far.
This isn't just stylistic preference. Clearer, leaner communication could actually change how markets interpret Fed policy. And that, in turn, could affect everything from mortgage rates to stock prices.
Rules Over Discretion
Warsh has long advocated for rules-based monetary policy.
What does that mean? Instead of Fed officials making seat-of-the-pants decisions based on intuition and discretion, they would follow a clear framework, like the Taylor Rule, which dictates interest rate adjustments based on inflation and output data.
The appeal is obvious: predictability. Markets hate uncertainty. A rules-based approach reduces the guesswork.
The drawback is also obvious: what happens when the rule doesn't fit the moment? The 2008 financial crisis wasn't in anyone's model. The COVID pandemic wasn't in anyone's playbook. Discretion exists for a reason.
Warsh's challenge will be finding the balance between a disciplined framework and the flexibility to handle the unexpected.
The Constraints No Fed Chair Can Escape
Now, a dose of reality.
Kevin Warsh may talk about "regime change," but he doesn't run a dictatorship. The Fed operates by committee. The Federal Open Market Committee (FOMC) has 12 voting members. Warsh is just one of them.
To shrink the balance sheet, he needs a majority vote. To change interest rates, he needs a majority vote. To overhaul communications, he needs a majority vote. Probably multiple votes.
And right now, the FOMC isn't exactly marching in lockstep with Warsh's ambitions.
With inflation running hot, annual headline PCE rose to 3.8% in April, core inflation at 3.3%, many officials are more concerned about tightening than easing. Some have even warned that the Fed's next move might be a rate hike, not a cut.
The geopolitical backdrop doesn't help. The Iran war has pushed energy prices higher, feeding inflationary pressures. Meanwhile, the labor market is in a strange "low-hire, low-fire" equilibrium that offers few clear signals about the economy's true trajectory.
Warsh's challenge isn't just designing reforms. It's selling them to a skeptical committee.
Former Fed staffer Jon Faust put it this way: "If that's a top priority, then he won't want to go out of his way to alienate the FOMC. He'll have an incentive to curry goodwill as much as possible".
Translation: regime change, if it happens, will be slow. Incremental. And probably less dramatic than the headlines suggest.
What This Means for the Economy and You
Let's bring this down to ground level. You're not a Fed governor. You're not a hedge fund manager. But you do have a mortgage, a 401(k), and a vague sense that "interest rates" affect your life in ways you can't quite articulate.
Here's what Warsh's hires mean for you.
If you're a borrower. The immediate outlook is unchanged. Markets expect the Fed to hold rates steady through the rest of 2026. But Warsh's long-term goal, a leaner, more rules-based Fed, could mean lower rates in a stable economy or higher rates when inflation spikes. Less discretion means less room for the Fed to "save" borrowers in a downturn.
If you're an investor. The balance sheet reduction Warsh wants could drain liquidity from markets. That's not necessarily bearish, but it adds a layer of uncertainty. Watch how the bond market reacts to any hints of QT (quantitative tightening) resuming.
If you're just a person who wants prices to stop going up. You might actually like Winfree's single-mandate idea. A Fed focused exclusively on inflation would probably be more aggressive about rate hikes. That would cool prices faster, but also risk tipping the economy into recession.
There's no free lunch. There never is.
The first real test comes June 16-17, at Warsh's inaugural FOMC meeting as chair. The Fed is expected to hold rates steady, but the projections will tell the real story.
Will the "dot plot" show a committee united behind Warsh? Or a fractured group pulling in different directions?
And then there's the Supreme Court. The justices are expected to rule soon on Trump's attempt to fire Governor Lisa Cook, a case that could fundamentally reshape the Fed's independence.
If the Court sides with Trump, the Fed loses one of its most important traditions: insulation from political control. If the Court sides with Cook, the precedent remains intact.
Either way, Warsh will be leading an institution in flux.
Why Personnel Is Policy
I want to leave you with one final thought.
In Washington, there's an old saying: personnel is policy. The people you hire reveal your priorities more clearly than any press release ever could.
Kevin Warsh had a choice. He could have filled his first hires with seasoned Fed insiders, people who knew the building, knew the culture, knew the unwritten rules. He could have signaled continuity.
Instead, he hired Paul Winfree, the Project 2025 author who wants to rethink everything about the central bank. He hired Daniel Heil, a Hoover colleague who shares his worldview.
That's a choice.
Whether Winfree's ideas become actual policy or remain merely advisory is an open question. Warsh's public embrace of the dual mandate suggests he's not ready to burn the house down. His tempered rhetoric suggests he understands the political realities of leading a committee.
But the hires are made. The signal is sent. And the direction, even if the speed is uncertain, is toward change.
Not revolution, perhaps. But definitely not more of the same.
Kevin Warsh's first hires as Fed chair aren't just staffing decisions. They're a window into the future, a future where the central bank may look very different than it does today.
Will Winfree's Project 2025 vision become reality? Probably not in its most extreme form. The Fed's institutional inertia is immense. The FOMC won't be steamrolled. And Warsh himself has moderated his tone since taking office.
But the Overton window is shifting. Ideas that seemed radical a year ago, ending the dual mandate, aggressively shrinking the balance sheet, pulling back from emergency lending, are now being discussed inside the Eccles Building. That's not nothing.
For now, watch the June FOMC meeting. Watch the Supreme Court's Cook decision. And watch who Warsh hires next.
Because in Washington, personnel is policy.
And this policy is just getting started.
Comments
Post a Comment