Admin Narrows List of Poss. Fed Chairs 10/28 06:09

   

   WASHINGTON (AP) -- Treasury Secretary Scott Bessent on Monday confirmed the 
names of five candidates to replace Jerome Powell as chair of the powerful 
Federal Reserve next year.

   On an Air Force One flight to Asia with President Donald Trump, Bessent said 
he would engage in a second round of interviews in the coming weeks and present 
a "good slate" of candidates to Trump "right after Thanksgiving." Trump said he 
expected to decide on Powell's replacement by the end of this year.

   The five people under consideration are: Federal Reserve governors 
Christopher Waller and Michelle Bowman; former Fed governor Kevin Warsh; White 
House economic adviser Kevin Hassett; and Rick Rieder, senior managing director 
at asset manager BlackRock.

   The names suggest that no matter who is picked, there will likely be big 
changes coming to the Federal Reserve next year. Bessent, who is leading the 
search for Powell's replacement, last month published extensive criticisms of 
the Fed and some of the policies it has pursued from the Great Financial Crisis 
of 2008-2009 to the pandemic.

   Trump on Monday, meanwhile, repeated his long-standing attacks on Powell, 
charging that he has been too slow to cut interest rates.

   "We have a person that's not at all smart right now," Trump said, referring 
to Powell. "He should have been much lower, much sooner." The Fed is expected 
to lower its key rate Wednesday for the second time this year.

   Trump's goal of selecting a new chair by the end of this year could reflect 
some of the tricky elements surrounding Powell's status. His term as chair ends 
next May, but he could remain on the Fed's board as one of seven governors 
until January 2028, an unusual but not entirely unprecedented step. Such a move 
would deprive Trump of an opportunity to nominate another governor for several 
years.

   Still, current governor Stephen Miran was appointed by Trump Sept. 16 to 
finish an unexpired term that ends next Jan. 31. Trump could nominate his 
candidate to replace Powell for that seat, and then elevate that person to 
chair in May after Powell steps down.

   Hassett is currently the chair of the National Economic Council at the White 
House and was also a top Trump adviser in the president's first term, and a 
frequent defender of the administration's policies on television. His longtime 
loyalty to the president could give him an edge, some Fed watchers say.

   Warsh is a former economic advisor in the George W. Bush administration and 
was appointed to the Fed's governing board in 2006 at age 35, making him the 
youngest Fed governor in history. He left the board in 2011. Warsh is now a 
fellow at the Hoover Institution and a lecturer at the Stanford Graduate School 
of Business.

   Waller was appointed to the Fed by Trump in 2020, and quickly established 
himself as an independent voice. He began pushing for rate cuts in July and 
dissented at that meeting in favor of a quarter-point cut, when the Fed decided 
to leave its key rate unchanged. But he voted to reduce rates just a 
quarter-point in September, along with 10 other Fed officials, while Miran 
dissented in favor of a half-point.

   Michelle Bowman is the Fed's vice chair of supervision, making her the 
nation's top banking regulator. She was appointed by Trump in 2018, and before 
that was Kansas' state bank commissioner. Bowman also dissented in favor a rate 
cut in July, then voted with her colleagues last month for a quarter-point 
reduction.

   Rieder has the most financial markets experience of any of the candidates 
and has worked for Wall Street firms since 1987. Rieder joined BlackRock in 
2009. His focus is in fixed income and he oversees the management of roughly 
$2.4 trillion in assets.

   Bessent has set out a wide-ranging critique of the Fed while interviewing 
for Powell's replacement. In particular, he has criticized the central bank for 
continuing unconventional policies, such as purchasing Treasury bonds in order 
to lower longer-term interest rates, long after after such steps were 
justified, in his view, by emergency conditions.

   "It is essential the Fed commit to scaling back its distortionary impact on 
markets," Bessent wrote. "It also likely requires an honest, independent, and 
nonpartisan review of the entire institution and all of its activities."

   Bessent's criticisms aren't entirely new, but they have gained greater 
traction in the wake of the 2021-22 inflation surge. The Fed is mandated by 
Congress to seek stable prices as well as maximum employment.

   Bessent's critiques have also inevitably been tangled up with Trump's 
insistent calls for lower interest rates, which have threatened the Fed's 
independence from day-to-day politics. Trump has also taken the unprecedented 
step of trying to fire Fed governor Lisa Cook, a Biden appointee, to open 
another seat on the board for him to fill.

   Cook has sued to keep her seat and the Supreme Court has allowed Cook to 
remain on the board while it considers the case.

   Trump's attacks on the central bank have left some longtime Fed critics 
skeptical of the Trump administration's approach.

   Peter Conti-Brown, a Fed historian and professor of financial regulation at 
the University of Pennsylvania's Wharton School, cautioned against placing 
"loyalists" on the Fed "who are there to push the president's narrative."

   "Those are the ones that we want as his advisers and spokespeople and his 
lawyers, not his central bankers," he said."