Kevin Warsh soars ahead of Kevin Hassett in Polymarket, Kalshi odds on next Fed chair after Trump signal

Former Federal Reserve Governor Kevin Warsh soared ahead of National Economic Council Director Kevin Hassett on prediction markets betting on the next Fed chair after President Trump on Friday hinted that Hassett might be out of the running.

Trump did not reveal his final choice to replace Fed Chairman Jerome Powell, but said he would like to keep Hassett in his current role.

“I see Kevin’s in the audience, and I just want to thank you. You were fantastic on television today,” the president said during remarks at the White House on Friday.

The odds of Warsh clinching the nomination jumped to 60% on Polymarket as of Friday afternoon, while traders placed just a 17% chance that Hassett would land the job – following weeks in which markets placed better odds on Hassett.

Current Fed Governor Christopher Waller, who has been considered a long shot, came in at 15%. Traders saw just a 6% chance that BlackRock exec Rick Rieder could win the role.

Warsh also jumped to 59% odds on Kalshi, another prediction market. Hassett and Waller got 18% and 14% odds, respectively.

Trump has not set a specific date to name his pick for the next chairman. Powell’s term at the helm expires in May, though he could choose to stay on the board through 2028. He has so far declined to comment on whether he will remain a Fed governor.

On Sunday, Powell publicly shared that he’s under criminal investigation for allegedly lying during congressional testimony last summer — a stunning development that came after years of Trump blasting the chair for failing to lower interest rates quickly enough.

Here’s a quick intro to the background of Kevin Warsh, the current favorite to become the Fed Chair. This is from a Financial Newsletter I subscribe to:

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As of last week, Kevin Warsh emerged as the front-runner to succeed Jerome Powell as Chair of the Federal Reserve. His potential selection is a significant point of discussion for financial markets due to his unique blend of Wall Street experience and hawkish economic views.

Warsh was appointed to the Federal Reserve Board of Governors by President George W. Bush. He was sworn in on February 24, 2006, at the age of 35, making him the youngest person ever appointed to the Board of Governors in the history of the Federal Reserve. Bush nominated him on January 27, 2006, to fill the unexpired term previously held by Ben Bernanke, who had just become Fed Chair.

At the time, his appointment was controversial due to his age and perceived lack of experience compared to typical Fed governors. However, he became a central figure during the 2008 financial crisis, serving as the Fed’s primary liaison to Wall Street and a key advisor to Chairman Bernanke. While appointed by Bush, Warsh continued to serve into the Barack Obama administration before resigning in March 2011.

Warsh’s experience during that 2007-2009 financial crisis provides the best clues for how he might lead the Fed in 2026. While only in his late thirties during the crisis, Warsh held an outsized influence that surpassed many of his more senior colleagues.

Prior to his public service, he was an Executive Director at Morgan Stanley in Mergers and Acquisitions. Because of his background at Morgan Stanley, he was the Fed’s primary point of contact for the CEOs of the major investment banks. When the system began to “freeze,” Warsh was the person on the phone with terrified bank executives, translating the chaos of the trading floor for the academic economists at the Fed.

He was a key architect in the forced takeovers and bailouts of 2008. He helped negotiate JPMorgan’s acquisition of Bear Stearns and was a central figure in the discussions surrounding the AIG bailout and the fateful decision to let Lehman Brothers fail. He spent a significant amount of time on Capitol Hill, acting as a salesman for the Fed’s emergency measures to skeptical Republican lawmakers, who were wary of government intervention.

Although he initially supported the emergency measures (like cutting rates to zero), Warsh eventually became one of the first and most vocal critics of the Fed’s long-term reliance on “easy money.” In 2010, he publicly broke with Ben Bernanke in a Wall Street Journal op-ed, questioning the second round of Quantitative Easing (QE2). He worried that printing money to buy bonds would lead to long-term inflation and “market distortions.”

He famously referred to Quantitative Easing as a “reverse Robin Hood” policy, arguing that it benefited wealthy asset holders (stock and real estate owners) while doing little for the average “Main Street” worker. He resigned from the Fed in 2011, seven years before his term was set to expire, largely because he disagreed with the direction of monetary policy and felt the Fed was becoming too entangled with political and fiscal goals.

Historically, Warsh is known as an “inflation hawk.” He has famously stated that “inflation is a choice,” arguing that price levels are driven by the decisions of fiscal and monetary authorities rather than just external shocks. While traditionally hawkish, he recently expressed support for interest rate cuts combined with aggressive balance sheet reduction (quantitative tightening). This “rate cuts + QT” approach is seen as a pragmatic compromise that aligns with current political desires for lower rates while maintaining long-term price stability.

If Warsh is confirmed as Chair in May 2026, his past suggests a strategic reset. He has recently argued that the Fed has “strayed from its remit.” He would likely prioritize shrinking the Fed’s balance sheet more aggressively than Jerome Powell has. He prefers using market signals (like bond yields and commodity prices) to guide interest rates, rather than relying solely on the Fed’s internal economic models, which he believes often fail to predict inflation.

Warsh has proposed a specific strategy called “Pragmatic Monetarism” to help manage this burden. His plan focuses on a dual-track approach: shrinking the Fed’s own balance sheet to lower the cost of the debt, rather than just the debt itself. Unlike some who want to raise the inflation target to 3%, Warsh remains a staunch advocate for a strict 2% (or lower) target, viewing price stability as the “North Star” for a healthy economy.

Warsh argues that for the last 15 years, the Fed has practiced “fiscal dominance” — essentially keeping interest rates artificially low to make it easier for the government to borrow trillions. He wants to end the “printing press” era. He believes that by stopping the Fed’s massive purchase of government bonds, he can force a clearer separation between the Treasury (which spends) and the Fed (which manages money).

This is his most distinctive proposal. He argues that the Fed’s $7 trillion balance sheet is actually keeping interest rates higher than they need to be. He reasons that if the Fed aggressively sells off its assets in the form of quantitative tightening, it “quiets the printing press.”

Warsh believes that a smaller, more disciplined Fed balance sheet reduces inflation expectations so effectively that the Fed can then lower interest rates for households and businesses without causing inflation to spike. Lower interest rates, in turn, reduce the interest expense the government has to pay on that $38 trillion.

His current activities include serving as the Shepard Family Distinguished Visiting Fellow in Economics at Stanford University’s Hoover Institution. He is a lecturer and Dean’s Visiting Scholar, where he teaches and conducts research on economics and finance. He remains a member of the Board of Directors of UPS and Coupang. He is a partner at Duquesne Family Office LLC, working alongside billionaire investor Stanley Druckenmiller. He is a member of the Group of Thirty (G30), an international body of leading financiers and academics, and serves on the Panel of Economic Advisers for the Congressional Budget Office (CBO).

Based on his experience in financial crisis management, his understanding of Wall Street, his communicative skills demonstrated on Capitol Hill and his passion to reign in the $38 trillion debt and drive inflation lower, Kevin Warsh is squarely in the spotlight to be the next Fed Chair.

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