The Fed’s balance sheet grew to about $9 trillion after the financial crisis and still remains high at around $6.7 trillion, a primary concern for Fed chair nominee, Kevin Warsh, who proposes faster bond sales to reduce the size of the Fed’s balance sheet.—wsj.com
The Questions
- Who is Kevin Warsh?
- What is the Fed’s balance sheet?
- What is Kevin Warsh’s primary concern?
- How did the Fed grow its balance sheet?
- How can the Fed shrink its balance sheet?
The Answers
- Who is Kevin Warsh?
Kevin Warsh is a former Federal Reserve Governor and, in May 2026 was appointed to the position of Fed Chair.
- What is the Fed’s balance sheet?
The Fed’s balance sheet is a statement of the Fed’ assets and liabilities. The Fed’s assets are U.S. government and private securities and its liabilities are currency and reserves of banks and other depository institutions—the monetary base.
- What is Kevin Warsh’s primary concern?
Kevin Warsh’s primary concern is the very large size of the monetary base.
- How did the Fed grow its balance sheet?
Quantitative easing (QE) carried out in three main rounds starting after the financial crisis (November 2008) and continuing until COVID-19 period, expanded the Fed’s balance sheet and monetary base to about $9 trillion by 2022.
- How can the Fed shrink its balance sheet?
The Fed can shrink its balance sheet with quantitative tightening (QT), which decrease the Fed’s assets and bank reserves by the same amount. The reserves disappear in the same way they were created—back into thin air.
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