Top Candidates For Federal Reserve Chair Position And Their Views

President Trump is weighing his options for appointing a new Federal Reserve Chairman and this could be one of the most important appointments that he makes in his first year or his first term possibly. The Fed Chair is seen as the main policy maker when it comes to monetary issues.

The way the Fed sways the economic environment is underrated by some and at different times. If we look back at the policies of Fed Chairman Paul Volcker during the Carter Administration, they contributed to the terrible economic environment with high interest rates and high unemployment. In fact, the recessionary period the U.S. experienced in the early ‘80s in referred to as the Volcker Recession in the economic education realm.

The appointment of Fed Chairman Greenspan by Ronald Reagan may have been one of the greatest appointments of his administration. Mr. Greenspan did such a good job that he was reappointed by President George H.W. Bush, President Clinton and President George W. Bush. The only other Fed Chairman that had a tenure as long as Greenspan’s was William Martin. Martin was appointed by President Truman, reappointed by Presidents Eisenhower and Johnson and ended up serving under five different presidents.

We see from the men mentioned above that the Fed Chair position can have a lasting effect on the legacy of a president. When a chairman is appointed or reappointed by a president of the opposing party, it is a pretty good sign that they are doing a good job and are running the Fed with a sense of independence. That being said, let’s take a look at some of the candidates President Trump is considering.

Janet Yellen is the current Fed Chairman and is said to be under consideration for reappointment, but it seems like a long shot since she was appointed by President Obama and we have seen how anything accomplished by the 44th president seems to be at odds with the 45th president. In addition to being appointed by Obama, she is seen as a liberal and one of her initial tasks as Fed chairman was to review and tighten financial regulations. President Trump has made it known that he wants to loosen those very regulations, so it seems highly unlikely that Yellen will be reappointed.

The one person that seems to be the front-runner at this point is Jerome Powell. Powell is a former investment banker and former partner at the hedge fund firm the Carlyle Group. Powell is a current member of the board of governors where he was nominated by President Obama. Powell is viewed as a centrist, but has voiced that he would consider rolling back some of the regulations that were instituted after the financial crisis. He is a Wall Street insider and that has been something that President Trump has seemed to like in some of his other appointments.

Another leading candidate is Kevin Warsh. Warsh is the youngest of the leading candidates and if appointed would be the fourth youngest Fed chairman in history. The only ones younger were the aforementioned Martin, Marriner Eccles and Roy Young. Warsh is a former member of the board of governors and was on the board during the financial crisis. He was considered one of Chairman Bernanke’s closest allies during the crisis, but he was also openly critical of the Fed’s open-market bond buying activity. One of his concerns was he thought the policies would lead to extreme inflation rates and that concern has proven to be wrong. Warsh would likely face a tougher path to confirmation due to his right-leaning views.

One more candidate that is getting a lot of mentions is John Taylor. Taylor would be somewhat of a dark horse pick as he is known as a monetary hawk, meaning he thinks interest rates need to be raised. President Trump has expressed concerns about the current potential hikes, so it is unlikely he would nominate a hawkish economist for the position. He is currently a professor of economics at Stanford, but he is no stranger to public service positions. Taylor served as the Under Secretary of the Treasury for International Affairs during George W. Bush’s first term and he was on the Council of Economic Advisors under George H.W. Bush. He also served as the Senior Economist at the Council of Economic Advisors during Gerald Ford and Jimmy Carter’s administrations.

It is possible that President Trump goes outside of this list for the next Fed Chairman, but it is unlikely. The most likely candidate seems to be Powell and he would likely face an easier confirmation than some of the other right-leaning candidates.

Chairman Yellen’s term ends on February 3, 2018, so President Trump will want to announce his choice soon so that the confirmation hearings can begin. The more controversial or unknown the candidate is, the longer the hearings will take.

About Rick Pendergraft

Rick has been studying, trading, analyzing and writing about the investment markets for over 30 years. He has worked for some of the largest financial publishers in the world and he has been quoted in the Wall Street Journal, USA Today, the New York Times and the Washington Post. In addition, he has been interviewed on Bloomberg, CNBC and Fox Business News. Rick’s analysis process includes fundamental, sentiment and technical analysis. Rick started college as an education major, wanting to teach economics, but eventually changed to majoring in Economics and received a Bachelor of Science in Economics from Wright State University. His desire to inform and educate people is at the heart of his writing.

2 comments

  1. Rick’s rendition of Volcker’s adverse economic impact during Carter’s administration successfully ignores the elephant in the room; runaway inflation which Volcker defeated and replaced with sound economic policies.
    His laudatory comments regarding Greenspan fail to mention the S&L crisis,the Dot Com crisis and the roller coaster credit expansion and contraction which occurred throughout his tenure.
    Otherwise his writing was apolitical….

  2. Great delivery. Sound arguments. Keep up the great work.|

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