Wanted: Fed Chair. Must Run World’s Largest Economy, Manage Up

0:00Hello, I'm Stephen Carroll. I'm in Brussels where many of Europe's biggest decisions get made. And I'm Caroline Hepker in London with the hosts of the Bloomberg Daybreak Europe podcast. We're up early every weekday keeping an eye on what's happening across Europe and around the world. We do it early so the news is fresh, not recycled and so you know what actually matters as the day gets going. From Brussels, I'm following the politics, policy and the people shaping the European Union right now. And from London, I'm looking at what all that means for markets, money and the wider economy. We've got reporters across Europe and around the globe feeding in as stories break So whether it's geopolitics, energy, tech or markets you're hearing it while it happens It's smart, calm and to the point And it fits into your morning You can find new episodes of the Bloomberg Daybreak Europe podcast by 7am in Dublin or 8am in Brussels, Berlin and Paris On Apple, Spotify, YouTube or wherever you get your podcasts

1:02Bloomberg Audio Studios. Podcasts. Radio. News. President Trump is hiring and a month's long search is nearing an end. The job is chair of the Federal Reserve and the job requirements. Number one, you need to inspire confidence, confidence from markets and investors that you bring authority and cachet to the role. Bloomberg's end of current covers the Fed. Then, of course, you need to be well able to navigate the political wins between the White House, Congress and the Fed. Make sure that you're protecting the Fed from ongoing political criticism. So winning over investor confidence, winning over business confidence, winning over household confidence and steering through the political wins of today.

1:47That last qualification wasn't top of mind when previous presidents set out to fill this important position. But President Trump's perspective on the role is different. The number one thing that he's looking for is someone who will be in favor of lower rates. That's Amira Omokwe, who also covers the Fed for Bloomberg. And she says that during President Trump's first term, when he nominated Jerome Powell to be the 16th chair of the Federal Reserve, Trump deferred to his first Treasury secretary. Steven Mnuchin suggested Trump pick Powell. I think he feels that he made a mistake with Jerome Powell, and he does not want to repeat that mistake this time.

2:26A second round of interviews wrapped up on Tuesday of this week. And according to Bloomberg's reporting, the frontrunner is Kevin Hassett, President Trump's chief economic advisor. But Trump's White House press secretary, Caroline Levitt, cautioned that nobody actually knows what President Trump will do until he does it. That's the layer of political complexity awaiting the next Fed chief on top of the responsibilities of navigating complex economic times. Right now, the economic outlook is very complicated for the Fed. We see that there is a faction that is in favor of continuing rate cuts because they are concerned about the labor market.

3:02And there's another faction that is very concerned about inflation because inflation has been above the Fed's 2 percent target for several years and because there is still the threat of tariffs out there. And then the political backdrop is really, really a challenge, right? The next year, we'll have to navigate the reality that no matter what the economy brings, it seems, this president is going to want to lower rates.

3:28I'm David Gurra, and this is The Big Take from Bloomberg News. Today on the show, who's who on the Trump administration's short list for Federal Reserve chair? We tick through what the frontrunners have going for them, what they don't, and we dig into how a new chair could change the way the Fed is run.

3:50For years, President Trump has criticized Federal Reserve Chair Jerome Powell. He's threatened to fire Powell and replace him. Now, there's less than a year left in Powell's tenure as chair, and Trump's search for his successor is almost over. I sat down with Bloomberg's Enda Curran and Emera Omokwe, who have been reporting extensively on the options President Trump is considering, and ask them about the list. And there's this list of potential Fed chairs. Five names are on it. Treasury Secretary Scott Bessett announced it publicly back in October. And I should say he's overseeing this search for the president for the next Fed chair.

4:25And he's someone the president has said a few times now was his pick for the job. Well, I like him, but he's not going to take the job here if he is. You like Treasury better, right? Much better, sir. He's not on the list so far as we know. This is not a job that Scott Bessett wants. Well, publicly, the Treasury Secretary has said he's got the best job in the world already, running the Treasury. He doesn't want to take over the Fed, despite the fact that the President would clearly like him to think about it. But you're right, David, he's not on the list right now. We've had kind of a very public beauty parade for this Fed interview process with Scott Besson interviewing, I think it was around 11 people originally on the list, and now it's down to five.

5:02Those fives are a mixture of existing Fed officials and some on the outside of that sphere, so to speak. So we're expected to have a shortening of that list in the weeks ahead, down to around three, maybe. That's what Secretary Besson has said publicly. And then a decision, perhaps by Christmas, that's what he's also said publicly. So we have this group of five finalists, one woman, four men. Two of them are named Kevin. All of them have said they're in favor of rate cuts right now, which is what President Trump wants. Ahead of this interview, I looked at Polymarket, where you can bet on probabilities of all sorts of things.

5:33And the long-shot candidates, according to betters, seem to be Michelle Bowman, the current vice chair of the Fed, and Rick Reader, who oversees fixed income at BlackRock. So let's start with those apparently longer-shot candidates. And let me ask you first about Rick Reader, who I think is a familiar name to people who watch a lot of Bloomberg television, who listen to Bloomberg Radio. He's somebody at BlackRock who often comes on our air to talk about what's happening in the market and the economy. What are the pros and cons of his potential candidacy? So Rick Reader is certainly well known in financial markets world, a longtime Wall Street veteran.

6:05As you mentioned, David, senior executive at BlackRock. And his views on the economy and financial markets are well known over the years. What he isn't, though, is he's most certainly not a Washington, D.C. insider. But neither has he necessarily been in the public policy world per se. Now, you can argue that stacks up in his advantage, in his favor. Perhaps that's what President Trump wants. or you could argue that might count against him just because he hasn't actually been in the policy world and it will be quite an adjustment. But nonetheless, he hasn't been explicit in terms of how he would change up the Fed.

6:37He has spoken about and he believes interest rates should be lower. So I think it's quite consistent to bring the interest rate down, even though the economy is operating at a pretty good level. Where we're going is to a lower level of inflation and I think we could bring it down. He has spoken about the need to think about new alternative sets of research, for example. He's given some hints around that, giving respect for the institution and, you know, the independence of the institution. So he might be able to straddle all sides of this world here, both the macro policy world and the Wall Street world, and also navigate the political side.

7:08What we do know, though, is he's considered something of an outsider in this race, but our colleagues here have reported that Reeder impressed during his interview with Treasury Secretary Besant. Amira, how about Michelle Bowman, Mickey Bowman, who was a Fed governor, was elevated to vice chair by President Trump, has a supervisory role now at the Fed. What do we know about the way in which the president is looking at her and her potential candidacy? I think Mickey Bowman is viewed as someone who is in many ways aligned with the administration's goals on the regulatory front. So she is the Fed's top bank official.

7:41So she's overseeing supervision and regulation. And I think she has, in her few months in the job, done things that are seen as aligned with what the administration wants on regulation. Some of our regulations have unduly restrained the activities that banks can engage in, incentivizing them to limit those activities and pushing those functions outside of the banking system. She's doing staff cuts of supervision and regulation. And so if you're thinking about a person who might be willing to shake the Fed up in ways that the administration might be looking for, Mickey Bowman is seen as someone who would potentially be open to that.

8:20She also doesn't have a traditional sort of monetary policy background. She came from the banking world. Her family has been in banking over many generations. And so she's kind of seen, kind of like Reeder, as a Washington outsider. And so in that way, she could be an appealing option for the administration. And then there's the frontrunner and two other favorites. We know that the president has talked about the two Kevins in the past and talked about how he likes both of them. I say Kevin and Kevin. Both Kevins are very good. And then there's also Chris Waller. What can you tell us about him?

8:53You've profiled him recently, kind of looked at his career trajectory. What would he bring to the table? So I think he would bring two main things, a deep understanding of the Fed as an institution. Before he was a Fed governor, he was the research director at the St. Louis Fed for many years. So he is someone who understands both the Fed's board of governors here in Washington and the regional Fed banks throughout the country. And in his job now on the Fed's board, one of the things he oversees are the operations of the regional Fed banks. He's kind of the liaison between the regional Fed banks and the board.

9:28And so I think he has a deep understanding of the institution. I think he would also bring a little bit of comfort to investors and the markets because Chris Waller, when he makes calls for policy and the economy, he's viewed as someone who bases those calls in credible analysis. Right. So even back over the summer when he was the first Fed official to say we should be cutting rates again. The headline numbers for the labor market, what we're seeing, are OK. But it's like when you get underneath and start looking at the data, the private sector is not doing as well as everybody thinks it is. There were a lot of economists who didn't agree with his analysis of the labor market at the time.

10:10But nobody really went out there and said, oh, he's only doing this because he wants to be Fed chair, right? People were like, OK, like, I don't agree with him, but I can see how he's looking at the numbers and coming to this conclusion. And so I think he would bring that presumption of credibility and a deep knowledge of the institution to the job. And to rounding out this list are the two Kevins. Let's start with Kevin Warsh, who has been in this position before. He was somebody who we know the president was considering for the top job at the Fed back during his first term. He came very close to getting the Fed chair back in 2017, actually.

10:44He has previously served on the Fed board. He was the youngest ever governor when he was appointed back in 2006. He served in 2006 to 2011. He was on the board during the financial crisis. And at that time, he was seen as playing a pivotal role in linking Wall Street and the policy world because he had worked on Wall Street. Now, more recently, he has become very vocal in his criticism of the Fed. He has a term that he uses, which is regime change. He wants change of personality, change of thinking, change of how to do their business. He has been critical of how they've been managing their balance sheet, which is basically how they buy and sell securities and how that impacts the economy.

11:24And, of course, he's certainly saying there's scope, obviously, for much lower interest rates and cheaper borrowing costs as a result. He's pushing hard for the role this time around, and he's seen as, you know, one of the top contenders when it comes down to it. And let's talk about the person the president's allies and advisors see as the frontrunner, according to Bloomberg's latest reporting. That's Kevin Hassett. But tell me about him and how we should be thinking about his candidacy. Well, Kevin Hassett is central casting public policy wonk here in Washington, D.C., at least on paper. He's previously worked at the Federal Reserve, has got a Ph.D.

11:57in economics. He also was director of research at American Enterprise Institute. So he's a well-established economist around town. The issue around Kevin Hassett is that he's also viewed as being very politically aligned with President Trump, not just on the economics front, but politically aligned with him. And the thinking is, is that if he went from the White House to the Fed, well, then he probably would be not just implicitly, but explicitly reinforcing the message that President Trump wants there. And again, like some of the other candidates, Kevin Hassett has called for lower interest rates.

12:31He has been critical of Chair Powell as well. And he wants to see the Fed change how they do business. So an established economist, no question, but seen as very politically aligned with President Trump. So that's the slate of candidates, the five frontrunners. But what could the winning pick mean for the future of the Fed and for the U.S. economy more broadly? That's after the break.

13:00With the independence of the Federal Reserve under threat, a key factor shaping the central bank's future is who leads it. I've been speaking with Bloomberg's Amara Amokwe and Enda Curran about how its next leader will guide the organization and therefore the economy. Enda, how much power and influence does the Fed chair have? Yes, he is the most public face of the Fed, but he's someone who chairs a committee of 12 voting members who set interest rates. I mean, it's a critical role. The Fed chair is the number one spokesperson for the institution. By extension, is a very important spokesperson on the economy.

13:36and remember is meant to be an impartial spokesperson on the economy. So the White House can say one thing, that's fine, but the average voter would like to hear a referee's point of view as well and that's where the Fed is meant to play its role in all of this. The Fed chair, of course, also sets a critical role in terms of setting the tone for policy. Does the economy need higher borrowing costs? Does the economy need lower borrowing costs? The Fed is meant to help steer that narrative and bring along the whole Fed committee with the chair in terms of what they want to do, either cutting interest rates or raising interest rates.

14:08It doesn't have to be all consensus. And it's not meant to be an authoritarian regime where all of these Fed presidents and governors have their say and have their voice. But neither should it be fragmented and split in the way we're sort of getting closer to right here, right now. So the Fed chair, very important for steering it, very important for influence, and for being a figure of authority and respect when it comes to commenting on the economy. Amira, let's talk about Federal Reserve independence. which is the ability for the Fed to make decisions without political interference. And we've been through this period over these last many months when the president has called for the Fed to lower interest rates.

14:43The president has threatened to fire the current Fed chair, Jerome Powell, over decisions the Fed has made. When you look at this list, when you look at these five names, what does it tell you about the future of Fed independence? I think talking to Fed watchers and people who care about the Fed, I think it's fair to say that there is a fair degree of concern about what some of these candidates could mean for Fed independents. For instance, Kevin Hassett, he works in the White House right now. And on most Fed issues this year, he has been completely aligned with the president. And so that then raises questions about the degree to which he potentially will be independent.

15:24There are similar concerns about some of these other candidates. And even Waller, who is looked at as a credible voice on the economy, I think would be open to some of the types of changes that the Trump administration has made clear that it would want. Like we know in his current role as the governor, kind of responsible for the reserve banks, that he has pushed to a degree for cost cuts and staff cuts. And so it's not like it would necessarily the case that Chris Waller would be, you know, totally against shaking things up and doing things differently. Amara, where are we in this vetting process and what do we know of what comes next?

16:06The thinking is that we could get a pick by the end of this year or early next. Chair Jerome Powell's term is up in May. And so, yeah, we're just waiting to see who the final names that go to the president are and then waiting for the pick. But as we know with President Trump, you know, things are things can be very unpredictable. And approval is ultimately up to the Senate. And I'm curious, as you think about these five individuals, would any of these candidates be an easier or tougher sell to the Senate? How do you see that nomination process playing out on Capitol Hill? Whoever it is will certainly come under scrutiny from the Democratic side.

16:39No question about it, because they will be perceived as being sympathetic to President Trump's worldview on the economy. They'll want to ask questions around what are you going to do in terms of protecting the Fed's independence? What will your links be with the White House, et cetera? But also on the Republican side, we'll have to see. Will there be any voices of concern there? Will they, too, be worried about Fed independence? Or will they be just willing to green light through a candidate that President Trump picks? And I started out by asking both of you about sort of what the qualities are that make a good Fed chair.

17:08And I think something we've seen come out in Jay Powell in recent months is the ability to not answer some specific questions. and one has to do with what happens next for him. You know, I would just say I'll certainly serve to the end of my chair term. And that's really all I've decided and all I'm thinking about. Any insight we have into sort of how he's thinking about his future at the Fed, if he's open to or would be willing to consider serving as a Fed governor after his tenure as Fed chair ends? Yeah, it's probably a detail that maybe the broader public wouldn't pick up on, but his term as chair will end in May.

17:45But Mr. Powell will remain on the board as a governor for, I think it's another two years or so after that. That's important because if Chair Powell said, I'm going to retire altogether and leave the Fed, well, it would open up a vacancy on the board that will allow President Trump to appoint someone to fill that seat. And obviously, in the current political environment, the expectation would be somebody who, again, would be willing to listen to the White House view and the economy and probably lower interest rates and then be seen as a threat to the Fed's independence. Of course, Chair Powell might choose to carry on and serve out his full term and continue to engage in Fed debate on the economy, in which case he's blocking that seat and acting as a pressure point against what President Trump is trying to do in terms of change up the Fed board overall.

18:30You know, the economy is in a strange place. The Trump administration has implemented a lot of different economic policy changes from immigration to tariffs to regulation. There are all these things happening. And the next Fed chair is going to have to navigate all of that and lead the institution through all these changes and how they're impacting the economy. And as we're seeing right now, Powell is having a more difficult time getting consensus. And the committee as a whole is having a difficult time figuring out what to do. And so this next person is going to have to lead the Fed through this very uncertain time.

19:09And you just hope that they have the right temperament and the right wisdom to do that, because they are trying to answer very difficult questions.

19:33If you like this episode, make sure to follow and review The Big Take wherever you listen to podcasts. It helps people find the show. Tomorrow is Thanksgiving in the U.S. Our team is off for the holiday. We'll be back on Friday.