Next Fed chair in 'no-win scenario' as selection nears

Trump, who elevated Powell to chair in 2017, appears haunted by that decision. He has made it clear that this time he wants someone more malleable

- Colby Smith

The exterior of the Marriner S. Eccles Federal Reserve Board Building is seen in Washington, DC. Trump's actions have cast serious doubts about the independence of the US central bank under a new leader.

(REUTERS FILE)

It was always going to be one of the Kevins. At least that was the impression among many across Wall Street and Washington when it came to President Donald Trump's selection for the next chair of the Federal Reserve

Trump had hinted for months that he wanted his Treasury secretary, Scott Bessent, for the job. But Bessent kept declining the offer.

That placed Kevin Hassett, a longtime loyalist and economic adviser to Trump, and Kevin Warsh, a former Fed governor who had been in spitting distance of becoming chair during the president's first term, in leading positions to take over for Jerome Powell in May.

The decision comes down to who Trump believes will be more successful in delivering the substantially lower borrowing costs that he has long struggled to get from the Fed under Powell. Trump, who elevated Powell to chair in 2017, appears haunted by that decision. He has made it clear that this time he wants someone more malleable who will take his advice.

That prerequisite creates a credibility problem for whoever is selected, one that will be difficult to escape. A chair who is seen as beholden to the president risks eroding the public's confidence that the Fed is making decisions in the best interest of the economy, not the White House. If that crumbles, borrowing costs could move higher, not lower as the president wants.

"Anyone who gets the job is damaged goods," said Andy Laperriere, head of US policy research for Piper Sandler.