How Kevin Warsh could put the toothpaste back into the tube at the US Fed | 20 Feb 2026 | ING

This report from ING, dated February 20, 2026, analyzes Federal Reserve Chair-elect Kevin Warsh's ambition to significantly shrink the Fed's balance sheet. The author, Padhraic Garvey, explores the historical context of the Fed's "bloated" balance sheet and the technical challenges of returning to a "scarce reserves" environment.

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The Core Objective: "Putting Toothpaste Back in the Tube"

Chair-elect Kevin Warsh intends to reverse years of aggressive bond-buying (Quantitative Easing) to return the Fed to a pre-2008 operational style. This is described as a "damage limitation exercise" because the current "excess reserves" system acts as a comfort blanket for the financial system.

Key Figures & Scale of the Task

• Current Fed Bond Holdings: Approximately US$6 trillion, or 20% of GDP.