Bernanke Advisor Who Questioned QE2 Quits

Bloomberg
Feb. 10, 2011

Federal Reserve Governor Kevin Warsh, who was one of Chairman Ben S. Bernanke’s closest financial-crisis advisers before becoming the only governor to question the expansion of record monetary stimulus in November, resigned after five years at the central bank.

Warsh, 40, a former investment banker who was the youngest- ever Fed governor when then-President George W. Bush appointed him in 2006, will leave “on or around March 31,” he said in a letter today to President Barack Obama that was released by the Fed in Washington.

His departure may give Bernanke a stronger hand to complete or potentially expand $600 billion in Treasury purchases through June. At the same time, Bernanke loses a link to Wall Street executives and Republican politicians as he carries out Congress’s overhaul of financial regulation and faces criticism from a political party that in the midterm election gained control of the U.S. House.

“You lose a forceful internal advocate for ending QE and trying to renormalize policy quicker,” said Vincent Reinhart, the Fed’s director of monetary affairs from 2001 to 2007, referring to the stimulus program known as quantitative easing.