02/01/2026
Introduction: A Warsh Fed, a Big Deficit, and the Myth of “One Person Sets Rates”
In the Ivy Family Office Network, most of us have seen enough cycles to recognize a pattern: markets get a new character, the story turns into personality-driven forecasts, and people start talking as if the next move in mortgage rates, credit spreads, and the 10-year can be pinned to a single appointment. The headlines are already moving in that direction with Kevin Warsh as the announced pick to replace Jerome Powell at the Federal Reserve.
That narrative is convenient, but it is incomplete. The environment a new Chair steps into is the real story: persistent budget deficits, a large and rate-sensitive federal debt stock, and a market that increasingly prices “policy” as a joint outcome of central bank decisions and fiscal math. The uncomfortable possibility that investors keep circling, sometimes explicitly, is a form of fiscal dominance: not a formal surrender of monetary policy, but a steady gravitational pull toward policy choices that keep the government’s funding costs manageable. The Financial Times has framed Warsh’s nomination as signaling a push to rethink the Fed’s post-crisis footprint, including balance-sheet policy and even the relationship between the Fed and the Treasury.
This matters for a simple reason that every allocator understands: the Fed directly controls the front end, but most borrower-facing rates are set off the long end plus spreads, and the long end is a market price. Mortgage rates, investor DSCR loans, CRE coupons, and mixed-use financing are all, in practice, combinations of (a) the market’s expected path of short rates and (b) the term premium investors demand for holding duration and risk through uncertainty. A Chair nominee can influence those expectations and that premium, but they do not “set” the 10-year by decree.
What makes the current moment more interesting, and more relevant to real-world borrowing costs, is the apparent tension inside the policy mix. Reporting around the late-January FOMC decision describes a hold at 3.50%–3.75%, with dissents from governors favoring a cut. At the same time, the Fed has described technical Treasury-bill purchases tied to reserve management after ending quantitative tightening. If you are a borrower, lender, or investor in housing credit, that combination should immediately raise a different question than “hawk or dove”: how do you cut or signal easing on the short rate while also shrinking the balance sheet, and how do you do that in a world where the Treasury’s financing strategy and deficit trajectory are not side notes, they are the backdrop?
Warsh’s public posture, as described in recent coverage, adds another layer: support for rate cuts while also wanting a more aggressive reduction in the Fed’s balance sheet, plus an openness to revisiting coordination norms that trace back to the 1951 Treasury-Fed Accord. Even if you bracket the politics, the market implication is not automatically “lower rates.” It is more nuanced: lower front-end rates can coexist with higher long-end yields if deficits and issuance keep pressure on term premia, and if investors demand additional compensation for inflation uncertainty, volatility, or perceived erosion of institutional independence.
Then there’s housing specifically, where the plumbing matters. Policy focus on reducing mortgage-backed securities exposure, whether via runoff or sales, can widen MBS spreads even if Treasury yields are stable, which flows through to primary mortgage rates. Recent Reuters reporting points to active debate and action around MBS holdings and housing affordability, including discussion of measures meant to offset the mortgage-rate impact of Fed runoff. If you work backward from what the household borrower actually pays, the Fed funds rate is only one piece of the stack. The spread between MBS and Treasuries, the hedging and convexity regime, and the marginal buyer of duration often matter just as much, sometimes more, in the short run.
So the introduction to my thesis is this: the conversation is not “Will a new Chair lower mortgage rates?” The real question is whether the next regime looks like a cleaner separation between monetary policy and fiscal necessity, or a more explicit coordination that the market interprets as accommodation, with all the consequences that implies for term premium, volatility, and long-end pricing. The 10-year does not belong to the Fed, but the market’s confidence in the rules of the game, and in the credibility of institutions, absolutely feeds into the price of duration.
That brings me to the question I want to leave this group with, because smart people can disagree here, and the disagreement is investable: When a new Fed Chair is nominated, are we really debating their “rate policy,” or are we debating whether the market will demand a higher term premium to finance persistent deficits, and if that’s the real driver, what would it take, in practice, for mortgage and commercial borrowing costs to fall meaningfully without the market immediately pricing the long end back up?
About the author: Anthony Tricarico brings over 40 years of capital markets and lending experience, shaped by multiple full-rate and credit cycles and proven under real stress tests: including protecting client portfolios through the 1987 crash, the dot-com bubble, and the 2008 financial crisis, while navigating decades of changing interest-rate regimes. He held senior roles at Lehman Brothers, Oscar Gruss & Son, and Robb Peck McCooey, with work spanning wealth management, asset allocation, and transaction ex*****on. Today, he is CEO of Hamilton Sterling Capital and a licensed Mortgage Loan Originator (NMLS: 2705480). Earlier in his career, he founded and served as President of Moore Financial Group LLC, a licensed New Jersey mortgage banker that scaled through direct relationships with many of the largest direct lenders of the 1990s. Across borrower and investor engagements, he is known for practical underwriting judgment, clear communication, and structuring financing around what will actually close, not what looks good on paper.
