00:00You asked the question, who is Kevin Warsh? And I think the answer comes from the president.
00:04He's someone well known on both Wall Street and in Washington.
00:09He began his career after graduating from Harvard Law and Stanford at Morgan Stanley,
00:14then moved from there to the George W. Bush White House in 2002 as an economic advisor.
00:20And then Bush appointed him as the youngest Fed governor ever in 2006.
00:24Since then, he's lectured at Stanford, but his primary job is advising the legendary investor Stan Druckenmiller at Duquesne Capital.
00:33What does Warsh think? Well, Warsh is a critic of the Fed, a harsh critic of the Fed, has been since he left.
00:39One of the reasons he left, he said, was because he did not like QE.
00:43He thought it was going too far and it expanded the Fed's remit by too much.
00:48He wants them to concentrate on fighting inflation.
00:52He has that hawkish reputation that you were talking about, but recently has been talking about the idea that AI is going to give us the higher productivity needed to bring inflation down.
01:03And therefore, maybe the Fed can do a little bit more.
01:07He does want the smaller balance sheet.
01:08Now, he could go back to the old system of scarce reserves at the Fed.
01:14He says the Fed's guilty of mission creep, and he thinks Fed officials overcommunicate.
01:19And he's praised Mickey Bowman's reforms for bank regulation, but thinks the Fed could give that role up if necessary.
01:27He's also willing to work with the Treasury Department, perhaps a new Treasury Fed accord, to try to keep the economy in as top shape as possible.
01:37Mike, what has he changed his mind about?
01:39You touched on it briefly.
01:40What's the big one for you?
01:41Well, the big one seems to be he's not as hawkish as he was.
01:46I mean, he will tell you that inflation is the key to everything, and the Fed has to focus on bringing inflation down.
01:52But he thinks it's more possible.
01:54I think that at this point, what Kevin Warsh is telling the president is we can probably continue cutting rates, and it may not be as immediate as you think.
02:03But as AI comes online, we'll be able to go lower than other people think.
02:07Our star will fall.
02:10But perhaps the biggest appeal to the president is the fact that Warsh kind of wants to blow up the Fed and make some major changes in the way it operates.
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