Former Fed Reserve Board Member Calls for Regime Change at Central Bank

Kevin Warsh, a former member of the Federal Reserve board of governors, on Thursday called for a regime change at the central bank.

"We need regime change in the conduct of policy," Warsh, considered one of three or four finalists to take over at the Fed, told CNBC's "Squawk Box." "The credibility deficit lies with the incumbents that are at the Fed, in my view."

Warsh also called for sweeping changes on how the central bank conducts business.

"Their hesitancy to cut rates, I think, is actually … quite a mark against them," Warsh said. "The specter of the miss they made on inflation, it has stuck with them. So one of the reasons why [President Donald Trump], I think, is right to be pushing the Fed publicly is we need regime change in the conduct of policy."

Asked whether Trump should try to fire Fed Chairman Jerome Powell, Warsh said, "I think regime change at the Fed will happen in due course."

He suggested, too, a coordination between the Fed and Treasury Department in the way the U.S. manages debt issuance.

"We need a new Treasury-Fed accord, like we did in 1951 after another period where we built up our nation's debt and we were stuck with a central bank that was working at cross purposes with the Treasury. That's the state of things now," he said. "So if we have a new accord, then the … Fed chair and the Treasury secretary can describe to markets plainly and with deliberation, 'This is our objective for the size of the Fed's balance sheet.'"

Trump on Wednesday said he would love for Powell to resign but acknowledged that many have said it would disrupt the markets if the president were to remove him.

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