President Trump's nomination of Kevin Warsh for Federal Reserve Chair, aimed at promoting lower interest rate policies, contrasts with historical precedent suggesting that presidential attempts to secure a compliant Fed leader often fall short. The experiences of the last three presidents illustrate three typical scenarios: a chair who complies but triggers runaway inflation; a chair who professes loyalty but fails to persuade fellow committee members; or a chair who asserts policy independence, ultimately raising rates against the president's wishes.

Trump recently articulated his expectations for Warsh at a Washington Alfalfa Club dinner. After asking Warsh to stand, the president joked that he would sue him if he failed to cut rates. This remark carries significance given Trump's public criticism of Jerome Powell, his own appointee as current chair, and the prior criminal investigation into Powell by the Justice Department.

Warsh's nomination itself exists within a policy tension. Long known for his hawkish stance, having repeatedly warned about inflation risks from loose monetary policy, his nomination now stems from expressing rate-cutting inclinations to the president, despite inflation remaining above the Fed's 2% target. This shift in position may lead to questions within the Federal Open Market Committee regarding his true policy intentions.

**Nixon and Burns: The Cost of Compliance** Presidents using humor to convey policy expectations to Fed chairs is not new. At Arthur Burns's 1970 swearing-in, Nixon quipped that the audience's applause was "votes in advance for lower interest rates and more money." As Nixon's long-time economic advisor, Burns understood the president's desires.

Burns ultimately delivered, maintaining loose monetary policy before the 1972 election. However, this led to inflation surging from below 4% that year to over 12% by 1974. The Fed was forced to hike rates aggressively, causing a severe recession, while Nixon resigned amid the Watergate scandal. Although inflation subsided temporarily, it resurged after the Fed later abandoned its tight stance.

The Burns episode stands as a classic warning against political interference in monetary policy. Yet the experiences of two other chairs, G. William Miller and William McChesney Martin, might be more instructive, showing that even without severe inflationary pressures, a Fed chair can still fail to meet a president's policy expectations.

**Carter and Miller: An Unmanageable Institution** In late 1977, President Carter nominated G. William Miller, former CEO of Textron, as Fed Chair, hoping for a pragmatic leader who would cooperate with the administration. However, Miller quickly encountered a cultural clash upon entering the central bank. Voting against rate hikes in his initial FOMC meetings, often in the minority, he rapidly lost internal credibility.

Seventeen months later, Carter moved Miller to Treasury Secretary and appointed Paul Volcker to lead the Fed. Volcker's aggressive rate hikes tamed inflation but the resulting recession hurt Carter's re-election prospects.

Unlike Miller, Kevin Wash possesses significant institutional experience from his start, having served as a Governor for five years during the financial crisis. Yet, he too faces consensus-building challenges.

**Truman and Martin: The Triumph of Independence** History reveals a third possibility: even a competent Fed chair may ultimately act contrary to the president's desires, as seen in the relationship between President Truman and William McChesney Martin.

Before 1951, the Fed was largely subservient to the Treasury Department. When Truman's advisers negotiated an accord restoring Fed independence, the incumbent chair resigned. Truman appointed Martin, a Treasury official involved in the accord. Conventional wisdom held this was merely "the Treasury controlling the central bank by other means."

However, Martin made his stance clear to Truman before the nomination. When Truman asked if he promised to keep rates stable, Martin did not yield, stating that if policies were imprudent, "higher interest rates might again become necessary. The market will not wait for kings, prime ministers, presidents, treasury secretaries, or Fed chairmen."

Truman appointed him anyway but soon regretted it. The Fed under Martin pursued tight policies. Martin's later metaphor about "taking away the punch bowl just when the party gets going" became a classic expression of central bank independence. In 1952, the two men met on the street; Martin greeted the president, to which Truman replied with one word: "Traitor!"

Martin subsequently served for 19 years under four presidents. His early defense of central bank independence, contrasted with Burns's later capitulation to political pressure, is deeply embedded in the Fed's institutional memory, serving as a crucial reference for chairs balancing policy autonomy against political expectations.

**Warsh's Tightrope** During his tenure as a Fed Governor, Warsh himself emphasized the important tradition of central bank independence. In a 2010 speech on the Fed's role, he stated, "The only acclaim that a central banker should seek, if he must seek any, is the acclaim that comes from the history books."

Now, if appointed Chair, Warsh would face a complex balancing act. Maintaining the institution's autonomy could create friction with Trump, potentially leading to a situation similar to Powell's. The key will be how he manages this relationship privately, as a public confrontation would be difficult to reverse.

Last month at the World Economic Forum, before formally announcing his choice, Trump commented on the phenomenon of Fed chairs "changing" once in office, noting, "It is amazing. People, when they get that position, they tend to change." This reflects his understanding of the central bank's independent tradition and hints at potential future policy tensions.