Podcast Summary: Unhedged – "The Next Fed Chair"

Date: February 3, 2026
Hosts: Katie Martin (FT Markets Columnist, London) & Robert Armstrong (Senior EVP, Unhedged Newsletter, New York)
Theme: A smart, lively discussion of Kevin Warsh’s nomination as the next Federal Reserve Chair—why markets care, Warsh’s views, political implications, and what (if anything) may change at the Fed.

Episode Overview

The episode delves into the breaking news of Kevin Warsh’s selection as the next Federal Reserve Chair by President Trump. Katie Martin and Robert Armstrong unpack Warsh’s monetary policy stances, the market’s reaction to his nomination, potential political implications, and the possible future direction of U.S. central banking under his leadership. The hosts blend insight, skepticism, and humor as they explore what it means to have a "central casting" Fed chair and whether the institution is facing real regime change.

Key Discussion Points & Insights

1. The "Central Casting" Chair: Market Reactions & Trump's Choice

• Market Reaction (03:05):

  • Unlike more radical nominees, news of Warsh’s nomination didn’t cause significant movement in asset prices.
    • “We know it because neither short term interest rates nor the dollar weakened on the announcement, which if it had been the other Kevin, Kevin Hassett, we might have anticipated some weakness suggesting a Fed that is fully in the thrall of the President and willing to cut rates and loosen monetary policy willy nilly.” —Robert (03:40)
  • “Nothing bad happened. And that is these days, a win.” —Robert (04:25)

• Warsh as a Political Figure

  • There's concern that Warsh is more politically aligned, potentially slamming the brakes on the economy under Democrats and running things “hot” under Republicans. (05:44)
  • Robert offers a skeptical take: “All people are hypocrites and that they respond to the incentives that they're exposed to in a given moment.” (06:35)

2. Warsh’s Monetary Policy Record: Contradictions & Rorschach Test

• Warsh holds two seemingly opposite policy views:
  • He’s recently voiced that interest rates can be lower (looser policy).
  • For decades, he’s argued the Fed’s balance sheet should shrink (tighter policy).
  • “This guy both has a loose money view and a tight money view. So you can totally Rorschach on him and see whatever image you want.” —Robert (04:30)

3. Becoming the Dog Who Caught the Car

• Warsh has long been a Fed outsider and critic:
  • Robert: “He’s basically been a professional fed critic for 15 years... Now he has to get off the sidelines and get in the game.” (06:35)
  • Katie: “Now he has to put his money and ours on the table.” (08:07)
  • The Fed chair’s role is designed to insulate from executive pressure. (08:34)

4. The Productivity/AI Argument for Lower Rates

• Warsh believes the AI revolution will boost productivity and lower inflation, much like Greenspan’s “bet” in the 1990s internet era.
  • Robert: “He wants to be Greenspan 2 for the AI revolution.” (11:10)
  • Katie raises a skeptical note: “That might be right, that might be wrong, but currently we don't know, which makes it a bit of a sketchy thing to base policy on.” (09:23)

5. Fed Balance Sheet: Is Shrinking it Risky or Benign?

• Warsh advocates further running down the Fed’s balance sheet, believing it won’t disrupt the markets.
  • Robert gives historical context: “Between 2022 and just recently... about 25% of the Federal Reserve's balance sheet disappeared, right? And nothing terrible happened.” (12:01)
  • The danger is if liquidity shrinks too fast, causing cash shortages and market disruptions. (14:13)
  • Katie points out: The pace matters. Simply letting bonds mature is benign; active selling could be disruptive. (13:39)
• Warsh believes shrinking the balance sheet could help reduce federal deficits, reversing the usual causality most economists see. Robert is skeptical: “I think that may be a fantasy.” (15:05)

6. Central Bank Independence & The Prospect for Regime Change

• Warsh has not been vocal defending the Fed’s independence from the executive. (16:10)
• There are insider reports his appointment is part of a push for “regime change” at the Fed.
  • Katie brings up: Will the Fed’s core mandates change? (17:04)
  • Robert thinks major mandates will stay but expects Warsh may want to “bare bones” the Fed, reduce research, staff, and focus solely on core tasks. (17:28)
  • Warsh’s support for more Fed-Treasury policy cooperation raises alarms for markets about the risk of the Fed becoming a “servant of the Treasury.” (18:32)
    • “Warsh's talk about higher Fed treasury cooperation absolutely. Should make you jumpy. And it is the camel's nose getting into the tent and I don't like it.” —Robert (18:39)

Notable Quotes & Memorable Moments

• “Kevin Walsh does have central casting hair.” —Katie (03:00)
• “This guy both has a loose money view and a tight money view. So you can totally Rorschach on him and see whatever image you want to in a certain way.” —Robert (04:30)
• “For 15 years, Walsh has been able to criticize the Fed from the outside with nothing at stake. Now he has to put his money and ours on the table.” —Katie (08:07)
• “He wants to be Greenspan 2 for the AI revolution.” —Robert (11:10)
• “Warsh's talk about higher Fed Treasury cooperation... is the camel's nose getting into the tent and I don't like it.” —Robert (18:39)

Segment Timestamps

• [03:40] – Discussion on market reaction to Warsh’s nomination
• [05:44] – Concerns over Warsh’s political biases
• [06:35] – Warsh's history as a Fed critic/dissident
• [08:07] – Transition from critic to leader and accountability
• [09:23] – Difference between Powell’s “data dependence” and Warsh’s conviction
• [11:10] – The AI-productivity thesis, and Greenspan analogy
• [12:01] – Shrinking the Fed’s balance sheet: history and risks
• [13:39] – Comparing balance sheet runoff strategies (US vs. Bank of England)
• [15:05] – Fiscal deficits, monetary policy, and the contested direction of causality
• [17:04] – Potential for regime change at the Fed
• [18:39] – Concerns about Fed-Treasury cooperation

Tone & Style

• The hosts maintain a direct, irreverent, and conversational tone, blending sharp financial analysis with market-savvy skepticism and dry British-American humor.

Long/Short (Closing Fun Section)

• Long: Theme parks, because in the AI future, “we’re just basically going to theme parks all day.” (19:32)
• Short: "Grindcore" (ultra-work culture), criticizing Silicon Valley's “996” work ethic as joyless and self-defeating. (20:32)
  • “If you are 23 and you're eating eggs and going to bed early and not drinking and having zero fun, you're doing it wrong.” —Katie (21:27)

Final Takeaway

Kevin Warsh’s nomination signals a potentially significant but ambiguous shift at the Fed. Markets seem reassured for now, but Warsh’s complex views, history of external criticism, comfort with regime change, and attitudes toward Fed-Treasury cooperation spark both uncertainty and debate. The next months—and Warsh’s decisions—will show whether the “dog who caught the car” can drive it responsibly.