What would Kevin Warsh’s Federal Reserve look like?

Summary

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FT News Briefing – "What would Kevin Warsh’s Federal Reserve look like?"

Date: February 2, 2026
Host: Victoria Craig (Financial Times)
Key Contributors: Claire Jones (US Economics Editor), Madeline Speed (Consumer Industries Reporter)

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Episode Overview

In this episode, the FT News Briefing covers three major global business stories:

• Impending shareholder payout cuts at Europe’s oil majors amid low crude prices
• A deep dive into the potential shifts at the US Federal Reserve if Kevin Warsh becomes Fed Chair
• An in-depth look at the infant formula recall crisis impacting consumer giants Nestle, Danone, and Lactalis, with global health and regulatory implications

The episode provides expert insights into market sentiment, monetary policy debates, public trust in brands, and volatile commodities markets—all crucial issues for the global business landscape.

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Europe’s Big Oil Majors Brace for Cuts

[00:50–02:08]

• Europe’s largest oil companies (Shell, BP, Total Energies) are expected to cut billions from shareholder payouts.
• Share buybacks, a major tool used to support stock prices, may be reduced by up to 25%.
• The decision is a response to ongoing low oil prices, stemming from geopolitical uncertainty.
• Quote/Highlight:

  "UBS says the industry has cut its share count by about a fifth since 2021.” — Victoria Craig [01:40]

• The move signals a shift in priorities toward protecting company balance sheets and preparing for continued price weakness.

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If Kevin Warsh Runs the Fed: Policy Shifts Ahead?

[02:08–06:54]
Guests: Claire Jones (US Economics Editor)

Warsh’s Record and Reformist Stance

• Kevin Warsh, former Fed governor during the 2008 crisis, is nominated to be the next Fed Chair.
• Warsh is critical of the Fed’s expanded remit (“mission creep”) and massive balance sheet growth since 2008.
• Quote/Highlight:

  "A key aspect of what he's brought to the table is this idea that the Fed needs a fundamental overhaul..." — Claire Jones [02:41]

Focus on Fed Independence and the Treasury Accord

• Warsh acknowledges the need for central bank independence but wants a “rethink of the Fed Treasury Accord,” originally established in the 1950s.
• He envisions a “smaller role for the US central bank and a bigger role for the US Treasury.”
• Quote/Highlight:

  "He wants it rethought in a way where there'd be a smaller role for the US central bank and a bigger role for the US Treasury." — Claire Jones [03:28]

Alignment with Treasury Secretary Scott Besant

• Warsh’s critique echoes Treasury Secretary Scott Besant’s warning that the Fed has become "too powerful" ("gain of function").
• Both advocate for reining in the central bank’s influence.

Pushback from Within

• Fed officials dispute Warsh and Besant’s criticism of quantitative easing (QE), calling it an essential part of their toolkit.
• Shrinking the balance sheet rapidly could trigger turmoil in money markets, causing higher long-term US interest rates and raising borrowing costs for households and the government.
• Quote/Highlight:

  "Fed officials are really, really reluctant to do this. They think it'd cause a lot of turmoil in money markets..." — Claire Jones [04:53]

Feasibility and Political Will

• Warsh faces potential internal resistance from the Federal Open Market Committee, other Fed board members (e.g., possibly Jay Powell), and even the White House.
• Trump’s own goals may conflict with rapid moves that raise rates and government borrowing costs.
• Quote/Highlight:

  "I don't get the impression that that is what Trump wants from his Federal Reserve chair either." — Claire Jones [06:32]

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Infant Formula Crisis: Global Recall and Fallout

[07:03–11:02]
Guest: Madeline Speed (Consumer Industries Reporter)

Discovery and Scope of Contamination

• Traces of the dangerous toxin cereulide found in an ingredient sourced from China (Ara oil), initially discovered by Nestle in the Netherlands.
• The recall rapidly expanded, implicating Nestle, Danone, and Lactalis, with potentially hundreds of product lines affected and distribution in over 65 countries.

Company Responses and Market Reaction

• Nestle acted swiftly to notify stakeholders; Lactalis emphasized strict protocols, while Danone declined to comment.
• Stock prices for affected companies plummeted; Nestle could lose up to €1.6 billion in revenue, Danone faces smaller but notable losses.
• Quote/Highlight:

  “Something like this can irreparably destroy a reputation of a brand for years and years to come until that company can rebuild back the trust of parents.” — Madeline Speed [09:35]

Regulatory Fallout and Public Health

• Calls grow for tighter controls amid criticism that current regulations have not prevented recurring crises.
• The European Food Safety Authority responded by updating its safety guidance for cereulide in infant formula, establishing new thresholds for action.
• Quote/Highlight:

  “The industry always points out that this sector is already incredibly highly and intensely regulated. That being said, there are still regular and frequent recalls, crises, shortages and regulatory scandals…” — Madeline Speed [10:02]

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Flash Update: Precious Metals Market Mayhem

[11:09–12:17]

• Silver surged to a record, then plunged 20% to 2008 levels; New York’s Diamond District saw panic selling and refineries closed to retailers.
• Drivers cited: inflation worries, weaker dollar, and unpredictable US policymaking.
• Quote/Highlight:

  “One dealer called it insane. Crazy times, but an exciting moment to be in the metals game.” — Victoria Craig [11:54]

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Notable Quotes (w/ Timestamps)

• “A key aspect of what he's brought to the table is this idea that the Fed needs a fundamental overhaul...” — Claire Jones [02:41]
• "He wants it rethought in a way where there'd be a smaller role for the US central bank and a bigger role for the US Treasury." — Claire Jones [03:28]
• “Something like this can irreparably destroy a reputation of a brand for years...” — Madeline Speed [09:35]
• “The industry always points out that this sector is already incredibly highly and intensely regulated. That being said, there are still regular and frequent recalls...” — Madeline Speed [10:02]
• “One dealer called it insane. Crazy times, but an exciting moment to be in the metals game.” — Victoria Craig [11:54]

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Key Takeaways

• Europe’s oil majors prioritize stability over shareholder returns amid prolonged oil price weakness.
• Kevin Warsh proposes a fundamental transformation of the Fed—shrinking its balance sheet, redefining independence, and realigning with Treasury.
• The infant formula scandal underscores both the risks of globalized supply chains and the persistent challenges for industry regulation and consumer trust.
• Precious metals markets are experiencing extreme volatility in response to macroeconomic uncertainty.

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Transcript

[Barclays Brief Host]

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[Victoria Craig]

Good morning from the Financial Times. Today is Monday, February 2nd, and this is your FT news briefing. Low crude prices are prompting some belt tightening for Europe's oil majors. And what could the Federal Reserve look like under a chair? Kevin Warsh plus Consumer giants are facing a growing crisis after a widespread infant formula recall.

[Madeline Speed]

Something like this can irreparably destroy a reputation of a brand for years and years to come.

[Victoria Craig]

I'm Victoria Craig and here's the news you need to start your day. Europe's biggest oil companies are expected to slash billions of dollars in shareholder payouts. Shell, BP and Total Energies report their full year earnings this month, and analysts predict the companies will slow share buybacks by as much as 25%. It's in a move to protect their balance sheets as oil prices are expected to continue weakening due to geopolitical tensions. In recent years, European oil majors have plowed more than half their cash FL into repurchasing their shares. That shrinks the number of them in circulation and supports the stock price. Overall. UBS says the industry has cut its share count by about a fifth since 2021. In the days since US President Donald Trump nominated Kevin Warsh to head up the Federal Reserve, plenty of Wall street heavyweights have piled on the praise. But others are wary about Warsh's desire to radically transform the world' most important central bank. And there's still a long road between.

[Claire Jones]

Warsh and the top seat at the Fed. My colleague Claire Jones, the FT's US economics editor, is here to talk about.

[Victoria Craig]

What monetary policy might look like if Warsh is confirmed by the Senate.

[Claire Jones]

Hi, Claire.

Hi, Victoria.

[Victoria Craig]

So Warsh himself was a Fed governor during the 2008 financial crisis when the Fed started its massive and controversial bond buying program. But in the years since, he's been much more critical of what he sees as the sort of mission creep at the Fed. What kind of changes does he want.

[Claire Jones]

To make to the central bank?

I think something that's been really interesting about Walsh's candidacy is that a key aspect of what he's brought to the table is this idea that the Fed needs a fundamental overhaul and in particular it needs regime change on its bloated balance sheet. Now, the Fed's balance sheet really has soared in in size since the global financial crisis of 2008. And that's something that Walsh really wants to challenge.

[Victoria Craig]

The other issue here is Fed independence.

[Claire Jones]

Which has been a key focus over the past year or so. We've talked so many times with you about this, as President Trump has put a constant pressure on Jerome Powell to lower rates. Where does Warsh come down on this issue?

Walsh is someone who really understands that the central bank needs to be free from political interference when it sets interest rates. However, he has been advocating for a rethink of the Fed treasury accord, which is a document that came about in the 1950s and is seen as one of the underpinnings of the Fed's independence to set interest rates free from political pressure. No, to be sure, Walsh isn't talking about ripping up that accord, but he wants it rethought in a way where there'd be a smaller role for the U.S. central bank and a bigger role for the U.S. treasury.

And how does that align with Treasury Secretary Scott Besant's thinking about the role of the Fed in the economy?

A lot of what Walsh has been saying chimes closely with what Scott Besant has been arguing as well. Besant said in quite a long and detailed article last year that, you know, the Fed had been susceptible to what he referred to as gain of function. He thought it'd really become too powerful. And both he and Wash think that's something that they really need to challenge now.

[Victoria Craig]

So how are people within the Fed.

[Claire Jones]

Now reacting to this view of Warsh's desire to shrink the central bank's role?

So I think there's two aspects of this. I mean, a lot of the criticism of Besant and of Warsh has been about quantitative easing, which is the program under which the US Central bank has bought trillions of dollars worth of US Government and US Government agency bonds. Fed officials very much think qe, as it's known, is part of the usual central bank toolkit. So they really disagree with what Walsh and Besant have been saying about this. The other aspect is shrinking the balance sheet. Right now, Fed officials are really, really reluctant to do this. They think it'd cause a lot of turmoil in money markets in the US And I think there will be a very strong pushback if Walsh wants to push through measures that would lead to a shrinking of the balance sheet very quickly.

How likely is it that Warsh will be able to make these changes that he wants to?

I think it's going to be tough. I think he's going to face a lot of internal resistance within the Federal Open Market Committee. Which sets US Interest rates. I think he could face resistance from other members of the Fed board, including perhaps Jay Powell, if he stays on as governor. I think he also could face resistance from the White House on this. If he rapidly shrinks the US Central bank's balance sheet, that's going to push up most likely longer term US Interest rates. It's going to lead to people who want to buy a house in the US Having higher mortgage borrowing costs. And it's also going to lead to the US Government having to pay more to borrow potentially. So I don't get the impression that that is what Trump wants from his Federal Reserve chair either.

I'm sure there will be plenty more for us to dissect in the months ahead. Claire Jones, the FD's US economics editor, thanks so much for chatting about this.

No problem. Great to be on the show.

[Victoria Craig]

Three of the world's biggest baby formula makers are facing a growing backlash. That's after an ingredient they sourced from a single supplier in China was was contaminated with a dangerous toxin. Nestle, Danone and Lactalis potentially added the toxin to hundreds of product lines before shipping them out to more than 65 countries across five continents. To break all of this down, I'm joined by the FT's Madeline Speed, who's been reporting on this story. Hi, Madeline.

[Madeline Speed]

Hi, Victoria.

[Victoria Craig]

So just walk us through this timeline. How was this contamination first discovered?

[Madeline Speed]

So the contamination was first discovered by Nestle, which is the world's biggest infant formula maker, back in December when they were doing routine checks on one of their factories in the Netherlands and they found traces of this toxin called cereulide, which can be very dangerous. It can cause vomiting and food poisoning in infants who consume it. They then told authorities and then started trying to get to the bottom of where this had come from. This took a number of weeks because they had to test literally every single ingredient in multiple different product lines and they eventually traced it to an ingredient called Ara oil, which they had bought from a supplier in Wuhan in China.

[Victoria Craig]

Now we should mention Nestle told the FT it acted swiftly to notify all.

[Claire Jones]

Stakeholders about this issue.

[Victoria Craig]

Lactalis told us it applies applies strict quality and safety protocols. And it pointed out that this particular toxin isn't on a list of required regulatory controls for infant products. Danone declined to comment. But widening this out a little bit, Madeline, there's been a big market reaction to this discovery. What's been happening?

[Madeline Speed]

Yeah. So after Nestle flagged this, a number of other companies realized that their products were also potentially affected because they use the same supplier. So we've seen Nestle as well as French group Danone have both seen their share prices fall significantly since they announced quite widespread recalls. Analysts have been estimating the revenue losses that might happen as a result of these recalls. So in the case of Nestle, Jeffrey's analysts estimated that they could lose up to 1.6 billion euros of revenue. For Danone, it's a bit smaller. It just affected sales of about 40 million because it's a more limited recall. But beyond those, you have the financial, less quantifiable financial impact. Something like this can irreparably destroy a reputation of a brand for years and years to come until that company can rebuild back the trust of parents.

[Victoria Craig]

And you reported that public health charities are calling for tighter controls on the sector. Does this point to wider problems with regulating this industry?

[Madeline Speed]

The industry always points out that this sector is already incredibly highly and intensely regulated. That being said, there are still regular and frequent recalls, crises, shortages and regulatory scandals that seem to occur on a very regular basis. So last week the European Food Safety Authority announced that it was updating its scientific advice on cereulide, the toxin that was found in the ingredient. And this is essentially going to establish a safe amount of the toxin that can be used in an infant formula and detected in a formula before it is then going to be triggering a recall. That's quite a quick turnaround and a quick reaction to an incident like this which shows the sort of severity and urgency of this global crisis.

[Victoria Craig]

Certainly a story for all of us to keep our eyes keenly focused on. Madelyn Speed is the FT's consumer industries reporter. Thanks so much for your time, Madeline.

[Madeline Speed]

Thanks so much for having me.

[Victoria Craig]

Before we go, there's been a lot of volatility in the price of gold and silver recently. The latter surged to a record high on Wednesday and then plunged 20% on Friday to a 2008 low. Our reporter found that that has caused pandemonium in New York's famed Diamond District. At least three large refineries on the so called jewelers row took the unusual step last week of closing to retailers. That's after one shop owner described what he saw as panic selling, worries over inflation, a weaker dollar and unpredictable US Policymaking are behind the severe price swings. One dealer called it insane. Crazy times, but an exciting moment to be in the metals game. You can read more on the Precious Metals roller coaster and all of today's stories for free when you click the links in our show Notes. This has been your daily FT News briefing. Check back tomorrow for the latest business news.

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