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Source document· February 1, 2026

Warsh’s Return Revives Tensions Over the Fed’s $6.6 Trillion QE Hangover

Warsh’s Return Revives Tensions Over the Fed’s $6.6 Trillion QE Hangover Photographer: Tierney L…

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Aggressive bond buying artificially depressed borrowing rates for extended periods, fanned Wall Street risk-taking and encouraged lawmakers to pile on more debt
80% confidence
Run printing press less, let balance sheet come down, let Treasury handle fiscal accounts to achieve materially lower interest rates
80% confidence
Kevin Warsh has been very critical of the Fed's balance sheet expansion
80% confidence
There is a bit of wiggle room within Fed definition of ample reserves
80% confidence
Demand for bank reserves and Fed balance sheet size is determined by banks' regulatory and internal liquidity needs
80% confidence
Need new Treasury-Fed accord like 1951 where Fed chair and Treasury secretary describe objective for Fed balance sheet size to markets
80% confidence
For now it's status quo, but markets will remain on edge until Warsh makes his views clearer
80% confidence
Addition of another balance-sheet hawk on FOMC should help keep check on future asset purchases or reinvestment policies
80% confidence
Fed can move short rate to offset balance sheet actions; shrinking balance sheet on principle allows offsetting rate cuts if long rates increase
80% confidence
Significantly smaller balance sheet would likely require major shift in Fed's existing bank regulatory framework
80% confidence
If Warsh dislikes balance sheet expansion as a way to compress yields, then responsibility falls onto Treasury
80% confidence