• President Trump confirms Fed Chair Jerome Powell will leave "very soon," signaling a major leadership shift.
  • Sweeping structural changes at the Fed include 10% staff cuts and regulatory rollbacks favoring banks.
  • Kevin Warsh emerges as top contender to replace Powell, promising closer Treasury coordination.

Powell's Exit and the Fed's Radical Transformation

President Donald Trump has indicated Federal Reserve Chair Jerome Powell is departing imminently, telling reporters Thursday: "He's leaving very soon. I'll miss him." The offhand remark confirms what sources close to the administration have described as an aggressive restructuring of the central bank that goes far beyond personnel changes.

Efforts to reshape the Fed now include slashing 10% of its 24,000-strong workforce, scrutinizing capital project spending, and advancing regulatory reforms spearheaded by newly elevated Vice Chair Michelle Bowman. These moves align with conservative policy proposals in "Project 2025," which seeks to narrow the Fed's mandate to price stability alone. While Trump has distanced himself from some aspects of the plan, the administration's actions reflect its core philosophy.

The Warsh Factor and Market Implications

Former Fed governor Kevin Warsh has emerged as the leading candidate to replace Powell, according to three people familiar with the matter. Warsh, who met with Trump last month, advocates for more transparent Fed communication and closer policy coordination with the Treasury—a shift that could blur traditional independence lines. Markets reacted cautiously to the news, with the 10-year Treasury yield rising 4 basis points in afternoon trading.

Bank stocks rallied on expectations of Bowman's regulatory overhaul, which would ease capital requirements. "This is exactly what the sector needs," said a senior executive at a top-five US bank who requested anonymity. Critics warn the changes could increase systemic risk, pointing to the Fed's $220 billion in losses since mid-2022 as evidence of existing vulnerabilities.

Uncharted Territory

The scale of proposed reforms marks one of the most ambitious reorganizations in the Fed's 110-year history. Unlike past presidential clashes with Fed chairs, this effort combines leadership change with structural transformation. While the exact timing of Powell's departure remains unclear, administration officials suggest an announcement could come within weeks. Attempts to reach Powell for comment were unsuccessful.

Correction: An earlier version misstated the projected staff reduction percentage. The correct figure is 10%, not 15%.