Kevin Warsh’s Past Policy Positions Have Commercial Real Estate Guessing

As the commercial real estate industry adapts to a likely future of Kevin Warsh leading the Federal Reserve, the former Fed governor’s past record provides only mixed signals on how his monetary policy may dictate transaction activity.

President Donald Trump nominated Warsh for the Fed chairmanship at the end of January. The parsing of Warsh’s public record for clues on how he might lead began immediately. (He still needs Senate approval before his term can begin in mid-May.)

Warsh pressed for the central bank to lower interest rates in a July 2025 interview on CNBC’s “Squawk Box” Yet, he also took a hawkish stance during his five years as a Fed governor from 2006 to 2011, resisting rate cuts despite facing an economic downturn.

Warsh also morphed into a vocal critic of the Fed’s bond-buying program, leading to his resignation from the central bank. But this was only after initially supporting quantitative easing (QE) efforts to jump-start the economy in the wake of the 2008 financial crisis. The former Goldman Sachs investment banker has said in past speeches that the Fed’s balance sheet purchases should be reduced, criticizing previous usage of QE as too aggressive and leading to “artificially depressed” borrowing rates.

Sam Chandan, director of the Chao-Hon Chen Institute for Global Real Estate Finance at New York University, said Warsh’s past background with the Fed and efforts to curb inflation will aid his credibility when seeking more interest rate cuts. Chandan cautioned that Warsh’s past stances may not dictate his current views on monetary policy. 

“Circumstances were quite different when he was on the board as compared to where we are today,” Chandan said. “My suspicion is he’s sensitive to the increasingly evident weakness in the labor market.” 

Chandan noted that about one-third of the Fed’s balance sheet consists of mortgage-backed securities, and if the new chairman opts to support reversing these bond holdings it could have repercussions for the CRE space.

“If he seeks to unwind those positions quickly, residential mortgage rates will rise, with secondary effects in multifamily markets and elsewhere,” Chandan said. “If they lean into unwinding of Treasurys, we will also see an impact in commercial real estate.” 

The selection of Warsh as Fed chair comes just over eight years after he was a finalist for the job in Trump’s first term before the president opted instead for Jerome Powell. Since assuming office a second time in January 2025, Trump has waged war on Powell for keeping interest rates higher for longer to fight inflation.

Warsh’s past experience at the central bank has helped alleviate some concerns in the CRE industry over the past year about the Fed losing its long-standing independence from political influence. Still, his July 2025 CNBC interview calling for lower interest rates while criticizing the Fed’s restrictive policies under Powell cast doubt on whether he will truly govern independently. But such views then were more in the mainstream, said Briggs Elwell, CEO and co-founder of RLTYco, which provides financial and tax services to real estate clients. 

“A lot of people had opinions then that there should have been an acceleration toward rate cuts. But, today, if you were to poll people across the board in both real estate and finance, there’s less of a pressure to decrease rates versus where it was a year ago,” Elwell said. “Inflation has stabilized and there is less of a need to put some more buying power into the system, so I would say that his opinion then is probably very different from what it is today, and my gut is he would be for a slight reduction but definitely not anything aggressive.” 

Trump announced Warsh’s nomination on social media platform Truth Social in the early morning hours of Jan. 30, two days after the Federal Open Market Committee (FOMC) voted 10-2 to maintain its benchmark interest rate at between 3.5 percent and 3.75 percent. The FOMC under Powell had previously cut rates a quarter point three meetings in a row to end 2025.

The central bank established a 2 percent inflation target in 2012 measured by the Personal Consumption Expenditures (PCE) price index as part of long-term goals and policy strategy announced under then-Fed chair Ben Bernanke. PCE inflation has dropped sharply from its 7 percent peak in June 2022 (the highest level at time since 1981) but remained well above the Fed’s 2 percent goal. The latest data in November showed a 2.8 percent annual increase. 

Brian Bailey, a former senior policy adviser on CRE matters for the Federal Reserve Bank of Atlanta who joined CRE loan servicer Trimont as a researcher last year, said Warsh will likely examine whether the Fed’s inflation gauge should be adjusted. 

“I think conversation on that front is healthy,” Bailey said. “It is a critical question not only for the commercial real estate industry, but for the rank-and-file consumers.”

Reshaping the FOMC to bring down interest rates has been a chief focus of Trump over the past year. That included his ongoing attempt to fire Fed governor Lisa Cook over alleged mortgage fraud. The U.S. Supreme Court heard oral arguments on Jan. 19 over whether Trump had the power to remove Cook, and indicated her job was likely safe. She was appointed by then-President Joe Biden to a 14-year Fed term that expires in 2038. 

The 47th president also targeted Powell as part of a U.S. Justice Department subpoena in early January tied to costly renovations at the Fed’s Washington, D.C., offices. North Carolina Sen. Thom Tillis, a Republican who is the senior member of the Senate Banking Committee, said the day of Trump’s pick of Warsh he will oppose the nomination until the probe into Powell is “fully” resolved.

Warsh is still expected to gain U.S. Senate approval despite Tillis’s objections, according to David McCarthy, managing director, chief lobbyist and head of legislative affairs at the Commercial Real Estate Finance Council (CREFC). McCarthy noted that Tillis’s opposition is “rooted in procedure rather than substance” and that Republicans across Capitol Hill praising Warsh’s nomination bodes well for his getting confirmed.

“I certainly expect his past actions as a Fed governor and prolific commentator to be well reviewed and subject to scrutiny,” McCarthy said. “But, currently, the cloud over Fed independence is the biggest obstacle to his confirmation. If that clears, I would expect him to be confirmed in short order.”

Prior to his five-year run with the Fed, Warsh was an executive secretary of the National Economic Council from 2002 to 2006 under then-President George W. Bush. He more recently has been a fellow at the conservative-leaning Hoover Institution at Stanford University. 

Lisa Pendergast, president and CEO of CREFC, said Warsh was viewed by the organization as “accretive and thoughtful” when addressing the 2008 financial crisis as a central bank governor under Bernanke. She added that his time with the National Economic Council will help position him to respond to today’s economic climate, while his Wall Street experience may generate a “pragmatic view” for the correlation between credit conditions and the CRE market. 

Pendergast stressed that the foundation of the Fed should help maintain its long-standing independence given that FOMC decisions are collectively decided through its seven governors and five regional bank presidents. She said Fed independence will be a main focus of the Senate confirmation process along with Warsh’s views on its balance sheet and bank supervision.

Another key CRE issue Warsh will play a role in if approved as chair will be the Fed’s forthcoming Basel III capital proposal. A previous Basel proposal outlined in July 2023 faced some pushback in the CRE industry since it would have required the biggest banks to increase their capital requirements by around 9 percent on average. 

“This revised proposal will be a key policy for CRE, and we remain optimistic that the revised framework will not constrain the flow of capital and credit to real estate,” Pendergast said. “As we noted in our comment letter on the original proposal, we were concerned with the overall capital charges to banks and specific provisions that could have disfavored securitization and warehouse lending, among others.”

Since the Warsh announcement, long-term interest rates dictated by the 10-Year Treasury yield have risen slightly and were at 4.25 percent at the close of trading Feb. 4. 

The upward movement of 10-Year Treasurys reflects the reality that longer-term borrowing costs are influenced by myriad other factors such as government debt and inflation trends, with bond investors not banking yet on a “massive series of rate drops,” according to RLTYco’s Elwell. Even if the benchmark interest rate is cut later this year by Warsh and the other governors, the 10-Year will likely remain relatively unchanged and bring “stability” for the CRE market, Elwell said, 

Even if long-term rates remain elevated, a reduction in short-term borrowing costs could throw some more life into the construction lending space, according to Patrick Southern, an agent for brokerage firm Serhant, who has helped facilitate deals for a number of new multifamily and condo projects sprouting up in Jersey City, N.J.

“So many of these deals are syndicated deals, which means there’s a lot of fees, with [limited partners] and [general partners] and bank fees, so, when they get underwritten, construction finance is a real line item and affects the viability of a lot of these deals to be able to pencil,” Southern said. “Any little relief helps to try to get some more housing out of the ground because we have an affordability issue in many marketplaces, and a good fix for that is more housing, and it’s just really expensive to build.” 

Lower interest rates under Warsh would also be positive for investment sales and leasing activity, according to Adam Henick, co-founder of Current Real Estate Advisors, but he cautioned that the long end of the curve could hinge on whether Warsh ends up shrinking the Fed’s $6.6 billion balance sheet. 

Henick said Warsh’s evolving positions on interest rates and qualitative easing is a positive sign that he is willing to keep an open mind on monetary policy based on whatever economic conditions arise. 

“If you’re not open-minded to a variety of different policies or solutions, then you run the risk of having bad policies because you only lean hawkish or dovish,” Henick said. “If things actually are data dependent and there is a re-evaluation of the economy on an ongoing regular basis, then that should lead someone like the incoming Fed chairman to reassess his position from time to time based on the merits of the case.” 

Powell’s term as Fed chair is slated to expire on May 15, which leaves him two more  FOMC meetings in mid-March and late April. He is eligible to remain a Fed governor until January 2028, but has not indicated yet whether he will remain with the FOMC. 

A Fed chair has not stayed on as a governor for an extended period after their term ended since Marriner Eccles, who served on the board for three years after he was replaced by President Harry Truman in 1948. While Powell would only have one vote, Trimont’s Bailey said the soon-to-be former chairman staying on with the FOMC a little longer could prove beneficial as the board gets set to transition to new leadership under Warsh. 

“With all of the connections and all of the engagement with both the domestic as well as the foreign finance and economic community, he would be a phenomenal ambassador to assist Chair-designate Warsh in the completion of his duties,” Bailey said.

Andrew Coen can be reached at acoen@commercialobserver.com.