Another noneconomist Fed chair isn't what the country needs right now

• Key insight: Kevin Warsh, like Jerome Powell, is not an economist. This matters because a Fed chair overseeing 400 Ph.D. economists needs to speak their language, challenge their models and interrogate their assumptions.
• Supporting data: Trump broke a 30-year tradition of Fed chairs with Ph.D.s in economics (Greenspan, Bernanke and Yellen) by appointing Powell in his first term and now Warsh.
• Forward look: Warsh's eminence front may work in a Senate hearing or the Oval Office, but not at the Federal Open Market Committee with seasoned economists or in a post-meeting presser with veteran financial journalists.

Every Senate Banking Committee member knew the answer, but none would ask Fed Chair nominee Kevin Warsh what should have been their first question: "Do you have an economics Ph.D.?"

Not whether he considers himself an "economist," which he has long implied, but whether he actually is one.

This question matters because Warsh has harshly criticized current Fed Chair Jerome Powell, who also lacks an economics Ph.D., for presiding over the highest inflation in over 40 years.

Any senator looking deeper would realize Warsh is a younger version of Powell. Almost a clone.

Powell and Warsh both attended prestigious universities, Princeton and Stanford, respectively, but neither majored in economics. Powell studied political science and Warsh public policy.

Both later got degrees from prestigious law schools, Georgetown and Harvard, respectively.

Both made Wall Street fortunes: Powell's net worth exceeds $50 million and Warsh's surpasses $225 million, portending the wealthiest Fed chair ever.

Lawyers and financiers, but not economists.

The similarities don't stop there. They're both Republicans and, at different times, connected to President Trump, who nominated each to chair the Fed after serving five to six years on its board.

Speaking of clones, both are around six-feet tall and, according to Trump, have "good looks," straight out of "central casting."

Neither, however, holds an economics Ph.D., unless defined as "Pretty Handsome Dude."

Trump eventually tried to fire Powell, even using legal threats, for, among other things, failing to contain record inflation and then refusing to slash rates, which would have boosted the economy but worsened inflation.

Perhaps Trump, like a new divorcee, thinks it will be better the "second time around" with a nearly 20-year younger version of Powell?

If neither Powell nor Warsh deserve the job, then who?

How about a Yale Ph.D. economist with a proven inflation and unemployment Fed chair track record, who would arguably be best positioned to assess and respond to the risks of unprecedented post-pandemic fiscal and monetary expansion?

First-term Trump had the opportunity to renominate the first female Fed Chair, Janet Yellen, but he made the mistake of nominating Powell, who will likely be remembered as the worst Fed chair since the 1970s.

The Washington Post reported that 5-foot-3-inch Yellen was not reappointed by Trump because she was "the shortest Federal Reserve chair we've ever had." Another financial journalist noted Trump had made one thing clear: Unlike Powell, Yellen was not from "central casting."

Trump apparently didn't know that the greatest economist of our time, Nobel laureate Milton Friedman, was five feet tall.

Tokenization

Fed's Cook: Tokenization won't replace traditional finance

Federal Reserve Gov. Lisa Cook said Friday that she believes tokenization could improve efficiency across the financial system, including faster settlement times and more effective recordkeeping. But those advantages will take place within traditional finance rather than supplanting it, she said.

By Maria Volkova

May 8

Trump broke 40 years of bipartisan tradition by not reappointing Yellen. Reagan reappointed Carter's Paul Volcker; Clinton reappointed Reagan's Greenspan; and Obama reappointed George W. Bush's Bernanke.

Besides breaking that tradition, Trump also broke the 30-year tradition of Fed chairs with economics Ph.Ds.: Greenspan, Bernanke and Yellen.

Trump, however, will be remembered for his central casting tradition.

Full disclosure: I have an economics Ph.D. from Wharton, taught economics and finance there for 42 years, and have been a Fed watcher since 1965.

The economics Ph.D. matters because a Fed chair overseeing 400 Ph.D. economists needs to speak their language, challenge their models and interrogate their assumptions. Instead, those economists will soon be led by a noneconomist who's spent the last 15 years saying they don't know what they were doing.

Warsh, however, is comfortable without an economics Ph.D., because he's long adopted what I call an economist "eminence front," referencing The Who's song about people projecting a status they don't hold: "It's a put-on."

The Washington Examiner headlined "Kevin Warsh, Candidate for Federal Reserve Chair, Is Not Even an Economist," explaining that an economics Ph.D. "has become de rigueur for the position" and that Harvard Law's curriculum "has nothing to do with the macroeconomy." NYU economist Mark Gertler confirmed to PBS: "Warsh isn't an economist and doesn't speak or necessarily reason like one."

During his hearing Warsh not only failed to correct senators calling him an "economist" but gave the impression he is one. At least Powell never tried to be someone he wasn't, doing his best with on-the-job learning.

Warsh was well prepared for the Ph.D. question that never came but, nonetheless, volunteered deprecating answers. First, he ingratiated himself with his current billionaire boss who "never got a Ph.D. in economics, but I don't know a finer economic thinker." He then paraphrased former Fed Chair Paul Volcker about needing a "Ph.D. from an elite institution" regarding certain inflationary beliefs. Finally, Warsh quoted economist George Shultz: "It's fine to get a Ph.D., but make sure that's not the last day you were learning."

Warsh name-dropped famous economists like Friedman, Shultz, and Volcker as if they were fellow economists, and spoke of being "in the company of some of the most highly accomplished economists and policymakers."

Besides repeatedly using economic buzzwords in his hearing, he recalled how "we ended up in economics" and the "economics business," including five references to the "economics profession." He referenced the "economic history that I've studied" and how "we tend to think in economics" as well as referencing "modern economic history," as if he were an economics professor.

Warsh's eminence front has existed since at least his 2006 Fed board appointment. His 2008 speech, for example, referenced "the old joke about economists and can-openers," as though the punchline was his.

Warsh's put-on is carefully constructed from borrowed names, lifted language, and a career that's moved through the orbit of economics without ever earning its beginning undergraduate or ending Ph.D. degree.

Speaking about, quoting, or being around economists doesn't make you one. I've been around NBA stars, but I can't play like one.

Warsh's eminence front may work in a Senate hearing or the Oval Office. But, not at the Federal Open Market Committee with seasoned economists or in a post-meeting presser with veteran financial journalists. Perhaps that's why he didn't commit to continuing post-FOMC pressers?

Call me an academic snob, but I'll always take a five-foot Ph.D. economist as Fed chair to prevent runaway inflation or manage the next economic crisis over a six-foot, central-casting, noneconomist, especially one with an eminence front. This is not Fox News. It's the Federal Reserve.