By Nick Timiraos

President Trump chose a Federal Reserve chair, Kevin Warsh, he thinks he can count on to lower interest rates. History suggests three different ways presidents have come to regret that bet.

The chair could deliver the lower rates the president wants and unleash inflation, which is what happened to Richard Nixon with Arthur Burns. He could be loyal but unable to bring his colleagues along, as Jimmy Carter discovered with G. William Miller. Or he could turn independent and raise rates against the president's wishes, as Harry Truman learned with William McChesney Martin Jr. Their experiences offer a road map for how Warsh's chairmanship could unfold -- for Trump and the nation.

Trump made clear what he expects from Warsh at Saturday night's Alfalfa Club dinner in Washington. After asking Warsh to stand, Trump wisecracked that he would sue him if he failed to lower rates. It was a loaded joke given his public attacks on the current chair, Jerome Powell, which includes a Justice Department criminal investigation. Powell, whom Trump appointed in 2018, was in attendance.

Nixon and Burns

It isn't the first time a president used humor to tell his Fed chair appointee what he wants. At Burns's swearing-in in 1970, Nixon quipped that the audience's applause was "a standing vote of appreciation in advance for lower interest rates and more money."

Burns had been Nixon's longtime economic adviser, and Nixon made no effort to hide his expectations: "I respect his independence. However, I hope that -- independently -- he will conclude that my views are the ones that should be followed."

Burns delivered, holding rates low before the 1972 election. Inflation shot from below 4% that year to over 12% in 1974. The Fed raised rates sharply and a punishing recession followed, punctuated by Nixon's resignation over Watergate. Inflation moderated, but the Fed then lost its nerve and abandoned the tight policy. Inflation rebounded.

Burns's failure is a familiar cautionary tale. The experiences of two others -- Miller and Martin -- may be more instructive because they illustrate how a Fed chair can disappoint a president even when inflation isn't the reason.

Carter and Miller

When Carter nominated Miller at the end of 1977, he thought he was getting a successful corporate executive who would work cooperatively with the administration. Miller had run industrial conglomerate Textron for more than a decade.

He soon found himself out of step with the central bank's culture. At one of his first meetings, Miller voted with the minority against raising rates -- a move that destroyed confidence in his leadership.

"Bill Miller had a terrible time -- particularly, his first four or five months -- because it didn't occur to him that he had to get a majority," recalled Nancy Teeters, a Fed governor who served with him, in a 2008 interview by the Fed. "He thought he could tell us what to do, and we'd do it. And we said, 'Huh?'"

After 17 months, Carter sacked his Treasury secretary and moved Miller into that job, which gave him an opportunity to find a more effective Fed chair. Carter tapped Paul Volcker, who raised rates high enough to break inflation. The ensuing recession helped end Carter's presidency.

Warsh arrives at the Fed with advantages Miller lacked. He served five years on the board during the financial crisis and understands the institution in ways Miller never did.

But he faces a version of Miller's problem. Warsh built his reputation as a hawk by warning for years that easy money would fuel inflation. Now he has the job because he told the president he'd support lower rates, even though inflation is above the Fed's 2% target. If he pushes for cuts without a clear economic justification, he may find his colleagues on the rate-setting Federal Open Market Committee skeptical that his conversion to inflation dove is genuine.

"He's very poised," said William Dudley, who worked with Warsh while serving as New York Fed president from 2009 to 2018. "But I think he's going to have trouble at first to win the hearts and minds of the Fed staff and the FOMC because" some of his policy ideas "are just very underdeveloped."

For example, in 2010, Warsh voted for a bond-buying stimulus program known as "quantitative easing," or QE, then days later published an op-ed questioning the decision. When Warsh wrote another opinion article years later describing the Fed's policies as confusing and erratic, he drew a pointed rebuttal from Minneapolis Fed President Neel Kashkari.

"Kevin, confusing and erratic is voting for QE and then criticizing it," he said in a post linking to the essay on his social-media account. Kashkari is a voting member of the FOMC this year.

Truman and Martin

History teases at a third possibility: Warsh succeeds as chair and still disappoints Trump. That's what happened to Truman with Martin.

Until 1951, the Fed was effectively under the Treasury's control. When Truman's advisers negotiated the accord that freed the Fed from that arrangement, they also secured the resignation of the Fed chair. Truman replaced him with the Treasury official, Martin, who had helped secure the accord. The initial reaction in Washington and on Wall Street was that the Fed had won a battle but lost the war. The Treasury was installing its own man, according to an account published by the Richmond Fed.

But Martin made clear to Truman that he wouldn't be a pushover. At a White House meeting before officially offering Martin the job, Truman asked if he'd commit to keeping rates stable. Martin didn't give in. Without more responsible policies, rate increases "will probably happen again. Markets will not wait on kings, prime ministers, presidents, secretaries of the Treasury, or chairmen of the Federal Reserve," Martin said, according to Robert P. Bremner's biography.

Truman appointed him anyway -- and quickly regretted it. The Fed continued to raise rates. Martin would later coin the phrase that it was the Fed's job to "take away the punch bowl just as the party gets going." When they saw each other on the street in 1952, Martin greeted the president, who responded with one word: "Traitor!"

Martin served under four more presidents over 19 years. Martin's early defense of the Fed's independence and Burns's later surrender are deeply imprinted into the Fed's institutional memory.

As a Fed governor, Warsh preached those lessons himself. "The only popularity central bankers should seek, if at all, is in the history books," he said in a 2010 speech on Fed independence.

Warsh now faces a tightrope act. "He is genuinely, sincerely committed to the Fed remaining a respected and independent institution," said Daleep Singh, a former New York Fed official who also was an economic and national security aide to President Joe Biden.

If preserving the institution's autonomy puts him at odds with Trump, Warsh risks Powell's fate. "This gets to the question of how he manages the relationship in private," said Singh. "If it becomes open conflict, then it's game over."

At the World Economic Forum last month, before announcing his pick, Trump mused about how Fed chairs can disappoint. "It's amazing how people change once they have the job," he said.

Write to Nick Timiraos at Nick.Timiraos@wsj.com

(END) Dow Jones Newswires

February 06, 2026 20:00 ET (01:00 GMT)

Copyright (c) 2026 Dow Jones & Company, Inc.