According to insiders, US President elect Trump has proposed to choose financier Kevin Warsh as the US Treasury Secretary. And when Federal Reserve Chairman Powell's term ends in 2026, Walsh may still be nominated as Federal Reserve Chairman.
The insider mentioned above stated that Trump discussed this potential arrangement during his meeting with Walsh at Mar-a-Lago, a private club in Florida, on Wednesday.
Walsh has become one of the most popular candidates for the US Treasury Secretary in the past week. However, as of Thursday evening, Trump has not officially decided who to choose for this crucial cabinet position. Insiders say that Trump is still weighing how to handle the vacancy in the Federal Reserve and is likely to wait until Powell's term ends in May 2026 before making a final decision.
Some insiders revealed that Trump is still considering appointing Wall Street investor Scott Bessent to lead the White House Economic Committee, with the aim of nominating Bessent as Treasury Secretary later after Walsh becomes the future chairman of the Federal Reserve.
After the above news was released, the probability of Kevin Walsh becoming the next US Treasury Secretary on the encrypted prediction platform Polymarket quickly jumped to around 55%.
Of course, as often reminded by Trump's aides, Trump is still likely to change his mind at any time before the official announcement. He may still decide not to choose Walsh or Besant for these positions, but to choose one of the other popular candidates to lead the Treasury Department, such as another popular candidate for finance minister - Marc Rowan, CEO of Apollo Global Management. In recent days, Trump has been discussing the selection of the Treasury Secretary behind closed doors.
Bessent has publicly stated that Trump should announce as soon as possible who he plans to choose as Powell's successor, so that this "shadow" chairman can try to weaken Powell and make him a "lame duck".
How will Walsh affect Powell 2.0's policy direction?
According to a person familiar with the situation, during Wednesday's meeting, Trump asked Walsh about his past stance on tariffs. Walsh has always been a critic of trade protectionism policies.
In a commentary article published in the media in 2018, Walsh suggested that Trump's tariff plan could lead to what he called American "economic isolationism". Walsh wrote at the time, "Trump's mercantilist rhetoric may prove to be more than just a negotiation strategy, it heralds new tariffs and trade restrictions around the world. Economic isolationism will cause significant damage to our economic growth prospects
At present, it is unclear whether Walsh's long-standing support for free and open trade will change Trump's stance.
Although industry insiders generally believe that imposing tariffs is an inevitable theme of the Trump 2.0 era, regardless of who becomes the next US Treasury Secretary. But if Walsh takes up this position, the market will be concerned whether this will soften Trump's tough tariff stance.
The 54 year old Walsh previously worked at Morgan Stanley and later served as an economic advisor in the Bush administration. In 2006, he entered the Federal Reserve Board of Governors as the youngest director in history. It is worth mentioning that Walsh was one of the candidates Trump considered for the position of Federal Reserve Chairman during his first term. But Trump later chose Powell, although his views on Powell quickly changed after the Fed raised interest rates at the time.
For a long time, Walsh has also been seen by the outside world as a potential candidate to replace Powell, and some of Trump's economic advisers have previously urged Trump to choose him for this position.
Public information shows that Walsh has a close personal relationship with Trump, and Walsh's network and Republican background may be seen as an additional factor by Trump and his allies.
In fact, apart from his stance on tariffs, from multiple perspectives, Walsh is actually a relatively favorable candidate for the position of US Treasury Secretary or Federal Reserve Chairman for market stability. Although Trump advocates for the president to have a say in monetary policy issues, former Federal Reserve governor Walsh has repeatedly emphasized the importance of the Fed's independence.
Walsh also advocates reducing the burden of government debt. Bob Savage, the head of market strategy and insights at Bank of New York, believes that "if Walsh is expected to be nominated, then people's concerns about how the Federal Reserve and the Treasury can cooperate to help the government finance will be reduced
David Wessel, director of the Hutchins Center for Fiscal and Monetary Policy at the Brookings Institution, said that although Walsh is not an economist, he has a lot of experience in dealing with how the economy operates and how it interacts with policies. His main skill is dealing with people. He is very good at getting along with people