NEW YORK, NY – OCTOBER 12: Kevin Warsh, Mark Oldman and Jane Warsh attend Mark Oldman Book Launch for “How to Drink Like a Billionaire” Hosted by Regan Arts’ Judith Regan and Lucas Wittmann at Private Residence on October 12, 2016 in New York City. (Photo by Sylvain Gaboury/Patrick McMullan via Getty Images)
Sylvain Gaboury/Patrick McMullan via Getty Images
It turns out Kevin Warsh has a lot of money. Which is like saying it turns out Victor Wembanyama is tall.
Of course Warsh is rich. He’s married to an heiress tied to a major cosmetics fortune measured in the billions. All that, plus he worked in finance before going into government. He must have done well there too. Except that by all media accounts Warsh isn’t just former investment banker rich, he’s major investor rich, with holdings that can apparently be measured in the hundreds of millions.
About Warsh’s immense wealth, normally it wouldn’t be problem. And individually to him, it shouldn’t be a problem.
Where it arguably becomes disturbing is in contemplating what his finances looked like when he was first appointed to the Federal Reserve’s board of governors in 2006. Without knowing for certain, it’s difficult to believe they looked anything like what they do twenty years later.
About what you’re reading, it can’t be said enough that this should not be construed as a comment on Warsh the person, or his ethics. While there’s substantial disagreement with Warsh about the Federal Reserve, its economic relevance, and what its enormous or irrelevant power should be utilized for, there’s nothing being said here that should be taken as evidence of something untoward about the nominee for the Fed Chair.
Just the same, what’s being written here should be taken as a speculation that the work and investment opportunities available to Warsh in 2006 were nothing like those available to him when he left the central bank in 2011. And that’s a problem.
While the view here is that Fed’s power to influence markets (particularly equity markets in upward fashion) is well overstated, it’s still a view. And a popular one at that.
Precisely because the Fed’s power in the marketplace is viewed as substantial, former Fed officials logically enjoy a rather gilded working life after their time in the upper reaches of the central bank. If this is doubted, it’s worth contemplating yet again the finances Warsh reported in 2006 versus what he’s reporting now.
While wealth advances are almost invariably things to celebrate, they don’t rate as much cheering when they’re an effect of time spent in government, and knowledge gained while in government about what those still in government will do in response to all manner of economics-related happenings. It’s no insight to say that at least some of Warsh’s substantial wealth is related to just this.
To use but one example, his financial disclosures include income measured in the millions from working for Stanley Druckenmiller. Druckenmiller, as most readers are aware, is one of the most successful macro investors in history. Which perhaps makes it unsurprising that Druckenmiller would handsomely pay someone knowledgeable about the inner workings of a central bank capable of making decisions that could affect the economy.
Yet even here, the critique of Warsh’s wealth to some degree born of time spent in government is not a knock on Warsh himself. To blame Warsh for perhaps expanding his net worth based on past work done inside government is the equivalent of yelling at the scoreboard for reflecting a game’s outcome. Don’t shoot the messenger, and don’t critique Warsh for having taken a job in government that carries with it impressive income opportunities once out of government.
Still, the critiques that Warsh will be spared here need to be directed somewhere, particularly to a government that’s too powerful and politicians who’ve allowed it to become too powerful. In other words, the problem isn’t Kevin Warsh’s wealth, it’s Kevin Warsh’s wealth.