Kevin Walsh's balance sheet reduction plan faces resistance and will only be rolled out slowly.

Kevin Warsh's plan to shrink the Federal Reserve's balance sheet will proceed slowly. As Trump's nominee for Fed chair, Warsh is facing resistance in his efforts to reduce one of the Fed's most influential tools. Warsh has repeatedly stated that the Fed's nearly $7 trillion balance sheet reflects its overreach into congressional authority, and has pointed to the distortions in financial markets caused by massive bond purchases during previous quantitative easing programs. However, sources familiar with the matter revealed that Warsh will only begin adjusting the Fed's balance sheet after extensive consultations with banks and the wider public regarding the potential impact. These sources also stated that he is unlikely to push the balance sheet back to pre-2008 financial crisis levels and will call for internal research and academic conferences to discuss the issue before taking action. Warsh also believes that the 2008 crisis showed that over-reliance on the interbank market poses a risk to financial stability and has publicly advocated for a "third model" of balance sheet management. Some regional Fed presidents are willing to consider a gradual shift to the new balance sheet management model. (Financial Times)