New Federal Reserve Chair Kevin Warsh has formally initiated his reform agenda. In his first internal memo to the central bank's more than 20,000 employees, he pledged to uphold the Fed's "finest traditions" while clearly stating his intention to seek changes. Concurrently, he has appointed two conservative policy figures as transition advisors, one of whom co-authored a policy blueprint advocating for a "complete overhaul of the Federal Reserve."

According to the memo obtained on June 2, Warsh wrote: "Our primary task is to formulate the right policies within our mandate and the framework of the national interest." He added that the institution "will not rely on past practices when we identify better alternatives," and previewed an "open, clear-eyed discussion" on the Fed's strategy, policies, and operations in the coming quarters.

The appointment of the two advisors has drawn market attention. According to informed sources, Paul Winfree was a lead author of the Federal Reserve reform chapter in the conservative policy blueprint known as Project 2025. That chapter proposed a series of radical ideas, including eliminating the Fed's dual mandate, significantly shrinking its balance sheet, and even abolishing the central bank.

Warsh's first policy-setting meeting as chair is scheduled for June 16-17, which will mark his first substantive remarks on the economy and monetary policy since taking office.

Initial Internal Memo: Balancing Reform Intent with Reassurance

Warsh was sworn in at the White House on May 22, officially succeeding Jerome Powell as Fed Chair for a four-year term. The memo, issued on Tuesday and reviewed, represents his first direct communication of his governing approach to the institution's staff.

The memo's wording seeks a balance between a desire for reform and organizational cohesion. Warsh wrote: "This new chapter for the Federal Reserve comes at a time of significant choices for our nation. New technologies and business models are emerging at an unprecedented pace." He stated, "I am confident in all that we can achieve together."

This tone contrasts with his previous public stances. During his nomination period, Warsh frequently criticized the policy direction of the Fed under Powell and critiqued the broader Federal Reserve System, including its 12 regional banks, for straying from its core monetary policy responsibilities. Now leading the institution, his memo adopted a more unifying tone.

Advisors Hold Conservative Backgrounds, Lack Fed Experience

According to reports, the two transition advisors appointed by Warsh are serving on temporary contracts to assist in planning his initial priorities. No decision on longer-term appointments has been made.

Daniel Heil is currently a policy fellow at Stanford University's Hoover Institution. He previously served as an economic policy advisor for Jeb Bush's 2016 presidential campaign, and his recent research has focused on cutting federal healthcare spending and Social Security reform. Warsh was a distinguished fellow at the Hoover Institution for many years prior to his confirmation, making the two colleagues.

Paul Winfree served as a domestic policy specialist in the Trump White House during the first term, later joining The Heritage Foundation. In 2023, he founded the conservative fiscal policy think tank Economic Policy Innovation Center (EPIC), which announced it was ceasing operations last week.

It is notable that Warsh's recent predecessors also appointed one or two senior policy advisors upon taking office, but those individuals were typically drawn from current or former Fed staff with monetary policy expertise. Both Winfree and Heil lack professional experience within the Federal Reserve, and their expertise lies outside the core areas of monetary policy or bank supervision.

Project 2025 Advisor's Radical Proposals and Subsequent Distancing

Winfree's appointment has garnered particular scrutiny due to his association with Project 2025, as he is a named author of the blueprint's Federal Reserve reform chapter.

That chapter put forward a series of radical proposals: eliminating the Fed's dual mandate of price stability and maximum employment, requiring it to focus solely on an inflation target; drastically compressing the Fed's $6.7 trillion asset portfolio; and limiting its role as lender of last resort during financial crises. The chapter also listed "free banking"—abolishing the Fed and replacing it with privately issued commodity-backed currency—as a potential reform option.

However, Winfree has since distanced himself from some of these proposals. In a 2024 interview, he stated: "I do think the Fed should be reformed, but I don't subscribe to the 'nuke the Fed' idea." His recent research stances have also moderated. A paper he authored for EPIC last year argued that the Fed's bond purchases did not drive a sustained expansion of the federal deficit, a conclusion that contradicts common conservative criticism of the central bank.

Earlier this year, he also warned that the Trump administration's strong support for cryptocurrencies could fuel a bubble comparable in scale to the 2008-2009 housing crisis.

First Policy Meeting Approaches Amid Multiple Uncertainties

Warsh's tenure begins under unusual circumstances. The June 16-17 policy meeting will be his first as chair. Markets expect the Fed to hold interest rates steady, but the updated economic projections released then will provide crucial clues for judging the policy direction under Warsh and the committee's assessment of the inflation outlook—with inflation still above the Fed's 2% target.

Simultaneously, the Fed awaits a Supreme Court ruling on the Trump administration's attempt to dismiss Governor Lisa Cook, a move widely seen as a direct threat to the Fed's monetary policy independence. Furthermore, Powell's decision to remain on the Board of Governors following the administration's intervention means Warsh will share the decision-making body with his predecessor.

On the reform agenda, Warsh has publicly expressed interest in several areas: reducing the Fed's $6.7 trillion balance sheet, scaling back forward guidance on future rate decisions, and exploring whether alternative inflation measures might more accurately reflect price pressures.