The economic analysis and commentary in this post is based on original content by Joe Brown of Heresy Financial. All credit for the underlying research, data interpretation, and financial analysis belongs to him. This post represents my perspective as a Southwest Florida real estate professional on what Joe’s insights mean for our local market and my clients. If you’d like to go deeper on the economic analysis, I highly recommend subscribing to Joe’s YouTube channel — search Heresy Financial on YouTube.
If you own a home, are thinking about buying one, or simply want to understand what is happening with interest rates and the economy, this is worth your full attention. On May 15th, 2026, Jerome Powell’s tenure as Federal Reserve chairman came to an end — and a new era of monetary policy has begun with Kevin Warsh stepping in as the new Fed chair. This is one of the most significant shifts in economic leadership in recent memory, and it has real implications for mortgage rates, borrowing costs, and the housing market here in Southwest Florida.
Let me break it all down in plain language.
The Powell Era — What He Left Behind
Jerome Powell served as Federal Reserve chairman since 2018, and before that as a governor on the Fed’s board since 2012. By any market measure, his tenure produced remarkable results — the stock market rose approximately 177% during his time as chairman, and no major recessions occurred, even if some were arguably papered over.
But the legacy he leaves behind is complicated, and it centers on one word: inflation.
The 2020 Money Printing Experiment
When COVID hit in 2020, the Federal Reserve launched the most aggressive quantitative easing program in its history. The money supply — which had been sitting around $15 trillion — spiked to over $22 trillion in just a couple of years. That is a 25% increase in the entire money supply in a single year. The consequences were predictable: inflation ripped to the highest levels in modern American history.
To his credit, Powell then spent years trying to rein it back in — raising interest rates aggressively and shrinking the Fed’s balance sheet. But here is the problem: inflation never got back down to the Fed’s 2% target. It came down from its peak, but it has remained stubbornly elevated above pre-2020 norms — and in recent months, it has actually been reaccelerating.
The Excuse That Never Changed
If you followed the Fed’s press conferences over the years, you may have noticed a pattern. Every time inflation came in higher than expected, it was always someone else’s fault — geopolitical conflicts, supply chain issues, one transitory shock after another. The Fed’s own monetary policy — the actual cause of the inflation — was rarely acknowledged as the culprit. The history books are likely to record Powell’s legacy as a failure to adequately use monetary policy to rein in the inflation the Federal Reserve itself created.
The One Thing Powell Got Right
To be fair, Powell accomplished something that his predecessor Janet Yellen never could — he actually shrank the Fed’s balance sheet meaningfully. Between April 2022 and December 2025, he drained the excess liquidity from the system that had built up during the 2020 printing spree. That was genuinely difficult and genuinely important. It just wasn’t enough to finish the job on inflation.
Enter Kevin Warsh — What Changes Now
Kevin Warsh comes into the chairmanship with a very different philosophy than Powell — and the markets have already responded positively to his appointment. Here is what we can expect.
1. Lower Interest Rates — But With a Catch
The primary reason President Trump nominated Warsh is his willingness to bring down the federal funds rate — something Powell resisted for much of his final years. Lower short-term rates are coming.
However — and this is critically important for anyone watching mortgage rates — the federal funds rate does not directly control mortgage rates. Mortgages are tied to longer-term rates like the 10-year and 30-year Treasury. And here is the counterintuitive part: if the Fed lowers short-term rates while inflation remains elevated, it could actually push long-term rates higher — which means mortgage rates could go up, not down, even if the Fed cuts.
This is one of the central challenges Warsh faces, and it is exactly why his approach goes beyond simply cutting rates.
2. Shrinking the Balance Sheet — Ending QE
Warsh has signaled his intention to continue shrinking the Fed’s balance sheet and end quantitative easing as a policy tool. This means the Fed would stop using money printing to prop up financial markets — a significant philosophical shift from the Powell era.
3. Bank Deregulation — The Key to the Whole Strategy
This is the most important and least discussed part of the Warsh plan. Here is the challenge he faces: how do you lower short-term rates, shrink the balance sheet, and still keep long-term rates from spiking and crushing the economy?
The answer is bank deregulation.
After the 2008 financial crisis, regulations were piled onto banks to prevent another collapse. One unintended consequence: banks were required to hold a certain number of U.S. Treasuries based on their balance sheet size — but then penalized for holding them, which prevented banks from using their full lending capacity in the real economy. This strangled bank lending into the private sector and contributed to the rise of private credit markets as an alternative.
The Warsh plan — developed in coordination with former Fed governor Steven Moran and Treasury Secretary Scott Bessant — would deregulate banks in a way that allows them to:
• Buy unlimited quantities of U.S. Treasuries — pushing Treasury yields down and reducing the government’s borrowing costs.
• Use their full balance sheet for private lending — mortgages, car loans, small business loans, and more.
• Do all of this with a profit incentive — meaning capital is deployed productively, not just to prop up markets.
If this works, it could be genuinely transformational. Lower borrowing costs for the government, more mortgage lending for homebuyers, and a private economy that grows its way out of the inflation problem rather than being crushed by high rates.
Is It a Gamble?
Yes — honestly, it is. The theory is that if you grow the money supply in a way that simultaneously grows the production of goods and services, the inflationary effect is offset. Think of it this way: if the supply of homes in your market doubled overnight, prices would fall — the same amount of money chasing twice as many homes. The Warsh strategy bets that deregulated bank lending will fuel enough real economic production to absorb the money supply growth without triggering another inflation spiral.
The markets are betting it works, at least for the next few quarters. Borrowing costs are expected to get cheaper. Mortgage lending is expected to expand. A GDP boom is possible.
But as always in economics — what goes up eventually comes down. Keep your eyes open.
The Wild Card — Jerome Powell Isn’t Gone
Here is the twist that almost no one is talking about: Jerome Powell did not resign.
This is the first time in 75 years that a Federal Reserve chairman has not stepped down after his term ended. Powell is staying on as a regular governor — a voting member of the Fed — for the next two years.
Why? There is a criminal investigation into Powell launched by the Trump administration, related to allegations that he misled Congress about the cost of renovations to the Fed’s Washington headquarters. Powell has stated he will not leave the board until the investigation is resolved with full transparency.
The practical implication: Warsh comes in as the new chairman, but his predecessor is sitting right there at the table with a vote — and decades of institutional influence. That creates an unusual and potentially tense dynamic.
Most observers expect the Trump administration to quietly drop the investigation relatively quickly. Why? Because they don’t want Powell’s shadow hanging over the new chairman’s agenda. The sooner Powell’s path to the exit is cleared, the sooner Warsh can fully implement his vision.
What This Means for Southwest Florida Real Estate
Let me bring this home — literally.
For buyers: We are likely entering a period where mortgage lending becomes more accessible. Bank deregulation should expand the pool of available mortgage credit, and if long-term rates cooperate, we could see borrowing costs come down meaningfully over the next one to two years. If you have been waiting for rates to improve before making your move, the policy direction is — for the first time in several years — pointing in your favor.
For sellers: A more accessible lending environment means a larger pool of qualified buyers. That is always good for sellers. Combined with the tightening inventory we are already seeing across Southwest Florida, the fundamentals for sellers remain solid.
For everyone: The inflation story is not over. Even under the best-case scenario for the Warsh plan, elevated prices are not going away overnight. This is precisely why owning real assets — property in particular — remains one of the wisest financial decisions you can make in an inflationary environment. Real estate is one of the very few assets that grows with inflation, generates income that rises with the cost of living, and allows you to pay back fixed debt with cheaper future dollars.
Southwest Florida is not immune to macroeconomic forces. But it is one of the most resilient, desirable, and demand-driven real estate markets in the United States. Whatever happens at the Federal Reserve, people will continue to choose this corner of the world as the place they want to plant their roots.
And I will continue to be here — helping them do it wisely.
Ready to Talk?
If you have questions about what the Federal Reserve transition means for your buying or selling plans in Southwest Florida — or if you simply want an honest conversation about where the market is headed — I would love to connect.
Tim Steeves Broker Associate | Coldwell Banker Realty 📞 (239) 898-5572 ✉️ tim@freestatefloridahomes.com 🌐 FreeStateFloridaHomes.com 📍 550 5th Ave S, Naples, FL 34102
The views expressed in this post are Tim Steeves’s personal interpretation of publicly available economic commentary and are intended for general informational purposes only. They do not constitute financial, investment, or legal advice. Always consult a qualified financial advisor for decisions specific to your situation.
