Gold plunged and the dollar rallied after Donald Trump soothed markets with the appointment of Kevin Warsh as the world’s most powerful central banker.
Considered a relatively mainstream choice, Warsh was selected by Trump on Friday to succeed Jerome Powell as chairman of the US Federal Reserve when his current tenure ends in May.
But the appointment of Warsh, 55, was partially overshadowed by the emergence of his name just hours later in a trove of newly released files linked to the sex trafficker, Jeffrey Epstein. There is no suggestion of any wrongdoing by Warsh or his wife.
Warsh and his wife, Jane Lauder – granddaughter of Estée Lauder and an heir to the Lauder cosmetics empire – appeared to be in Epstein’s social circle, documented on lists of invitees to events including a 2010 Christmas party on the Caribbean island of St Barths.
The role requires Senate confirmation, but the appointment is not expected to face widespread opposition.
The announcement capped a five-month search for a successor to Powell, who Trump has repeatedly assailed as a “moron” and a “numbskull” for failing to loosen US monetary policy aggressively enough.
In response, Powell enlisted the support of fellow central bankers, including the Bank of England’s governor, Andrew Bailey, as they rebuffed what a joint statement described as the president’s dangerous effort to politicise the independence of the US central bank.
The appointment of Warsh triggered a 0.7% climb in the value of the US dollar against a basket of peers, while gold, considered a safe haven for investors, plunged 8%.
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An American financier and bank executive who served as a member of the Fed’s board of governors from 2006-2011, Warsh’s career was forged in the heat of the 2008 financial crisis, when he adopted an instrumental role as one of then chairman Ben Bernanke’s closest advisers.
At the time, Warsh acted as the US central bank’s primary go-between with Wall Street, helping to supervise the bailout and recapitalisation of major banks.
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In the past, Warsh has been a vocal critic of ‘overreach’ by the Fed, including its quantitive easing programme
In the past, Warsh has been a vocal critic of ‘overreach’ by the Fed, including its quantitive easing programme
Bernanke later heaped praise on Warsh for “his many Wall Street and political contacts and his knowledge of practical finance”, adding that he was among his most frequent companions “on the endless conference calls through which we shaped our crisis-fighting strategy”.
Among the critical decisions taken at the time was the fateful decision to allow Lehman Brothers to collapse.
“I have known Kevin for a long period of time, and have no doubt that he will go down as one of the GREAT Fed Chairmen, maybe the best,” Trump wrote in a Truth Social post announcing his appointment.
The father of Warsh’s wife is Ronald Lauder, who is believed to have been the first person to suggest Trump seek to acquire Greenland. He has business interests in the island.
A fellow of Stanford University, since 2011, Warsh has served as a partner in the family office of billionaire Stanley Druckenmiller.
In the past, Warsh has been a vocal critic of what some have described as overreach by the US Federal Reserve, including its extensive programme of quantitative easing – the creation of electronic money to buy vast quantities of bonds.
Critics of QE claim it strays too far into the policy realm of the US Treasury, and away from the Federal Reserve’s core remit of setting interest rates.
Trump’s Treasury Secretary Scott Bessent has also expressed criticism of the Fed’s push into QE as a remedy for the economic fallout from the 2008 financial crisis.
Photograph by Alastair Grant/AP