Bloomberg reported today that President Trump spoke with Keven Warsh yesterday regarding candidacy for the Chair of the Federal Reserve according to the first revision of the posted article. The second revision states that the meeting took place, but that the topic of the meeting was undetermined or undisclosed.

Included in the article is a quote from Warsh from this past May supposedly criticizing the Fed’s policy normalization strategy:

“I’m confused frankly about Fed’s normalization strategy,” he told Bloomberg Television’s Vonnie Quinn and Mike McKee in May. “My judgment is, ultimately the Fed’s biggest job is to mitigate the risks of an exponential shock. I see way too much complacency.”

It may be that the quote is missing an essential element of context because I am confused frankly about what it means. So I looked up the meaning of the word ‘complacent’:




showing smug or uncritical satisfaction with oneself or one’s achievements:

synonyms: smug · self-satisfied · self-congratulatory · self-regarding · conceited · gloating · triumphant · proud · pleased · satisfied · content · contented

This definition is not particularly helpful to understanding what is intended to be communicated simply because the Fed has consistently forecast many more rate hikes than actually occur and there has been many public expressions of exasperation by Fed officials when economic conditions appear to frustrate these plans. Who is to say that in pausing the strategy from time to time the Fed has not been attempting to avoid “exponential shock” that could arise from doing too much too fast? I see no “complacency” there.

Overall, without context this statement has virtually no meaning at all and, with what little context that is provided, it is at least vaguely inaccurate. It’s not exactly Warsh at his best. Or is it? Either way, this is hardly a statement I’d want to hang my hat on and say, “This is guy we need.” Because a top qualification for the top Fedster is to be able to communicate the Fed’s intentions, I see little value in someone who has a stunning ability to use only two sentences to contradict obvious reality.

My personal take is that if Trump’s intention is to politicize the Fed, Warsh would be the perfect person for the job, but in a more sinister and unexpected sort of way.