Kevin Warsh’s possible appointment could pivot the Fed’s $6.7tn balance‑sheet strategy. Minutes from March hint at a two‑pronged plan: deregulate bank reserve demand and tighten liquidity tools. Warsh has pushed to trim the Fed’s market footprint, a move that would reshape how banks tap into central‑bank liquidity.

Governors Stephen Miran and Lorie Logan outline concrete tweaks. Miran proposes adding discount‑window borrowing to the liquidity‑coverage ratio, potentially cutting reserve demand by $50‑$450bn. Logan favors replacing excess buffers with the Fed’s Standing Repo Program, aiming to reduce reserve demand by up to $2tn.

Implementing these changes would shift the Fed from a fixed‑reserve model to a liquidity‑on‑demand framework, restoring interbank markets and tightening the Fed’s balance sheet. Investors should watch for a formal policy shift that could lower the Fed’s influence in markets and alter the cost of borrowing for banks.