WASHINGTON – The incoming Federal Reserve chairman believes that recording fewer policy discussions would lead to better monetary decisions, according to comments he made in an upcoming book that highlight his plans to reform the central bank.
Kevin Warsh, who is expected to receive Senate confirmation this month as the next Fed chief, told New York University Professor Simon Bowmaker that the current practice of recording and eventually releasing complete meeting transcripts hampers honest debate among policymakers.
In the interview for Bowmaker’s book “Fed Reckoning: Conversations on America’s Central Bank,” set for publication early next year, Warsh suggested recording only the final decision-making discussions where officials explain their vote rationale.
“Policymakers do not want to appear wrong with the benefit of hindsight, and so they instinctively tend to hedge their bets” when their comments are taped for release, Warsh explained to Bowmaker.
The 56-year-old lawyer and former Fed governor from 2006 to 2011 pointed to his work with the Bank of England, where he recommended changes in 2014. “As a result of the work I did in 2014, the recording device has been turned off” for initial policy discussions there, he said, while transcripts of final decision meetings are still released for transparency.
Warsh emphasized his desire for more vigorous internal debates: “The tape recorder, however, still looms large at the Federal Reserve… If we want that deliberation to be robust, we need a family fight. If people think the decision is 60–40 one way, I would prefer them to argue as if it were 95–5. I want to hear the best arguments.”
Since the early 1990s, the Fed has published complete transcripts of its policy meetings with a five-year delay, a compromise designed to balance public accountability with concerns that immediate release would discourage frank discussion.
While current Fed Chair Jerome Powell conducts extensive private consultations with colleagues before meetings, Warsh believes broader group discussions would improve policy outcomes. “It would be preferable if the fierce deliberation happened among a larger group. So, if you want sound policy decisions, you have to create an environment in which sound policy fights can happen,” he said.
Warsh supports maintaining recordings of final decision sessions, stating the second day of discussions “should be recorded” and “the transcript should be made available because it is a judgment of what each member believes and his rationale. The historical record should ensure accountability for the decisions.”
The potential changes would reverse decades of increasing Fed transparency that began controversially in the 1990s when Congress discovered the central bank had been secretly keeping meeting transcripts since 1976, drawing comparisons to President Nixon’s White House recordings.
Former Fed Vice Chair Donald Kohn, who participated in the original transcript policy discussions, acknowledged Warsh’s concerns while noting benefits of the current system. “Did it impede discussion? Yes, to some extent,” Kohn said, but added that the recording requirement also increased policymakers’ preparation levels.
Warsh may also modify other Fed communication practices, potentially reducing the frequency of press conferences that Powell holds after each policy meeting or eliminating quarterly economic projections that he views as constraining “forward guidance.” During his April 20 confirmation hearing, he didn’t rule out reducing the number of annual meetings from the current eight.
Michael Arone, chief investment strategist at State Street Investment Management, predicted communication changes under Warsh’s leadership. “Fed communications are not a light switch, on and off, it’s a dial. Powell was incredibly transparent… Should Warsh be confirmed, it will be turned down a few notches,” Arone said. “As a consumer of information, more is better than less. It would increase the risk of misinterpretation.”
The Fed’s transparency evolution has included more detailed policy statements, regular press conferences, and frequent public speeches by officials, based on the theory that clearer communication makes monetary policy more effective.
Sarah Binder, a George Washington University political science professor who studies Fed history, warned that reducing transparency could revive old suspicions about the central bank, particularly as President Trump seeks greater influence over Fed operations.
“Changes on disclosure are hard to take back… The big, broad movement at the Fed is from very little transparency to a pretty broadly transparent institution,” Binder said. “The moment it becomes known that they are turning off the tape recorder, suspicions grow. How did they reach that decision? People’s minds can go pretty conspiratorial.”
