Finance

Congrats, You Vultures, Trump Might Select A Wall Street Lawyer To Run The Fed

You'd love seeing Jerome Powell deciding monetary policy, wouldn't you? WOULDN'T YOU?!

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The real safe bet for Trump Fed’s nominee.

As is his wont, Donald Trump has turned his selection of a nominee to chair the Federal Reserve into a low-budget carnival sideshow heavy on characters yet low on seriousness…or quality.

By throwing out various names who represent an array of conservative economic dogmas, Trump and his team have fostered uncertainty and gossipy intrigue in the selection of a key government figure whose job should be utterly free of uncertainty and gossipy intrigue. There should be nothing sexy about the Federal Reserve chair selection, or arguably the Federal Reserve chair [former chair Paul Volcker knows what we’re talking about], but this administration loves “Ratings” so we are now in the final episodes of what we at Dealbreaker have titled “The Apprentice: Federal Reserve.”

And while we hate the concept, we have to admit that the storylines are so spasmodically batshit that we cannot stop watching.

(It also helps that the ending will be a massively important indicator of American monetary policy and our shared macroeconomic health in the future…so in that sense, it “grabs” you)

So let’s take a look back at the season so far:

Right off the bat, we’ve got the overarching plot of current Fed Chair, Janet Yellen. A respected academic who has been a steward of rather sterling market growth despite being perceived as “Anti-Wall Street.” Despite being not the most popular person to ever have the gig, Yellen has attained a level of respect from a majority of people who care about the Fed. And what with this administration staffing and culling itself like a poorly-adjudicated sorority, even many of Yellen’s critics would be content with the relative safety of her renomination. But on the other hand, she’s not “Trump’s” (and she’s also a woman) so there’s a snowball’s chance in hell that she’ll be coming back for another term.

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Another plot had Trump luring Gary Cohn from the number two seat at Goldman Sachs and into this melodrama with a vague promise of replacing Yellen, only to unofficially rescind that offer after Cohn dared to criticize the president for not adequately criticizing Neo-Nazis. Yesterday we learned that Cohn – who has no real economics background and would have been a terrible choice anyway – is definitely not going to get the gig.

We’ve also seen the full narrative arch of Kevin Warsh begin and end. Warsh, a former Morgan Stanley banker, was an economic policy advisor to George W. Bush and the youngest-ever Fed Governor at age 35 when he was appointed in 2006. He’s also a Harvard Law grad with no advanced degree in business or economics who was widely seen as a slave to Wall Street before, during and after the crisis. The most positive thing that is said about Warsh from his Fed tenure is that he was able to get combative Wall Street CEOs on the phone with Ben Bernanke in the throes of the crisis. What Donald Trump might like most about Warsh however is that his father-in-law is Ronald Lauder, a cosmetic billionaire and childhood friend of The Donald. Word on The Street is that Warsh will not be picked due to a conflict of thinking within the West Wing. And that might be a good thing since Warsh has a real habit of being wrong about shit.

This terrible sideshow has also reintroduced many finance folks to John Taylor; Stanford academic, leonine critic of low interest rates, political operator, and all-around conservative dreamboat. Taylor is also the creator of the Taylor Rule, which pegs rates hikes directly to inflation. But what makes Taylor so appealing to old guard Republicans (ie academic bona fides, deep high-level policy experience) makes him toxic to the fringe far-right members of Congress (ie academia, policy experience). While Trump loves that Taylor is as close to a household name as he’s going to find, he’s also more than likely being told that Taylor will be hard to get out of The Senate. And also that his eponymous rule might be in fact very dumb.

And then there’s a character that makes everyone say “Meh”: Jerome Powell. A current Fed Governor, Powell is most distinguished by the fact that he has no economic training whatsoever. In fact, Powell is a Georgetown law grad who rose up via an investment banking career to take a Treasury Department gig under George H.W. Bush before going to work as a partner at a large hedge fund. After becoming wealthy and dizzy from the revolving door, he’s been on the Fed Board since 2012 where he is pretty much a classic center-right voice. Powell is a painfully safe pick. In fact, the only thing that really separates him from Yellen in the grand scheme is that he takes a much dimmer view of regulating the financial sector.

So, yeah, it looks like it’s gonna be Powell.

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But then again, what with Trump doing straw polls during luinch with GOP senators and having no real grasp of what The Fed even does, we should all be prepared to watch Ivanka Trump’s confirmation hearings for Federal Reserve Chair live on CSPAN this holiday season.

And in that case, we will be saying “Merry Christmas” again.

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