Wednesday, July 26, 2017

Cohn And Yellen Are Among Trump’s Contenders To Lead Fed

The president says ‘two or three’ other candidates also are under consideration.


By Kate Davidson
The Wall Street Journal
July 26, 2017

President Donald Trump is considering renominating Janet Yellen as Federal Reserve chairwoman but also views his economic adviser Gary Cohn as a top candidate, he told The Wall Street Journal in an interview Tuesday.

Mr. Trump reiterated that he thinks Ms. Yellen is doing a good job and he has “a lot of respect for her,” and said she is still in the running to serve a second four-year term as leader of the central bank. But he said he also is considering replacing Ms. Yellen with Mr. Cohn, who became Mr. Trump’s National Economic Council director after a 26-year career at Goldman Sachs Group Inc.

“He doesn’t know this, but yes he is,” he said, when asked if Mr. Cohn, who was present during the interview, was a candidate for the job. “I actually think he likes what he’s doing right now.”

Mr. Cohn has been managing the search for the next Fed chief and has emerged as a key intermediary in the administration’s relationship with the central bank.

“I’ve known Gary for a long time, but I’ve gained great respect for Gary working with him, so Gary certainly would be in the mix,” Mr. Trump said.

Mr. Cohn and other White House officials have said he is focused on his current job. But former colleagues have said he has developed an appreciation for the power of the Fed during his long career on Wall Street, and for the central bank’s relative independence during his current stint in Washington.

As for Ms. Yellen, Mr. Trump said, “She is in the running, absolutely.”

“I like her; I like her demeanor. I think she’s done a good job,” he said. “I’d like to see rates stay low. She’s historically been a low-interest-rate person.”

Mr. Trump said there are “two or three” other contenders in the mix, but declined to name any other potential candidates and said he probably wouldn’t announce a nominee until the end of the year. “It’s early to make the decision,” he said, noting Ms. Yellen’s term doesn’t expire until February. He said he expected the confirmation process for the Fed job would move quickly.

Mr. Trump’s fierce criticism of the Fed and Ms. Yellen in the final weeks of his campaign led many to conclude he was unlikely to reappoint her. But the two have forged an amicable relationship since he took office, reflected in part by his willingness to consider her for the job.

Mr. Trump has offered contrasting views of Ms. Yellen during the campaign and his first months in office.

In May 2016 Mr. Trump said Ms. Yellen was doing a good job, but he likely would replace her when her term expires. Four months later, he accused the Fed chairwoman of being “highly political” and keeping interest rates low to help President Barack Obama.

In an April interview with the Journal, he left open the possibility of nominating Ms. Yellen for another four-year term as chairwoman. “I like her; I respect her,” he said at the time.

Since taking office, the president and his advisers haven’t publicly questioned the Fed’s actions—including its decision to raise short-term interest rates in March and June, and pencil in another rate increase this year.

The Fed is expected to leave rates unchanged at its two-day meeting that ends Wednesday.

Ms. Yellen hasn’t said whether she would like to serve another term as chairwoman, or whether she intends to step down from the Fed board of governors when her term as chairwoman expires.

“I absolutely intend to serve out my term,” she told lawmakers on Capitol Hill earlier this month. “I’m very focused on trying to achieve our congressionally mandated objectives, and I really haven’t had to give further thought at this point to this question.”

Later, when asked what she would say if Mr. Trump asked her to serve another term, she said, “It is certainly something that I would discuss with the president, obviously.”

If Mr. Trump doesn’t renominate Ms. Yellen, it would be highly unusual. The tenure of Fed chairmen is staggered, by design, to end the year following a new president’s inauguration. But most presidents have chosen to keep the central bank chief on for another term.

The last time a Fed chairman wasn’t renominated by a new president was in 1978, when President Jimmy Carter replaced Arthur Burns with William Miller. Mr. Miller lasted for 17 months at the central bank before Mr. Carter nominated him to be Treasury secretary, and replaced him with Paul Volcker.

Mr. Trump entered office with two vacancies on the Fed board, and a third slot opened up in April when Fed governor Daniel Tarullo, the Fed’s point man on Wall Street regulation, stepped down.

Mr. Trump nominated Randal Quarles, an investment-fund manager who served in the Treasury Department in both Bush administrations, to be Fed vice chairman for supervision earlier this month. The Senate Banking Committee has scheduled a hearing on his confirmation Thursday, and he is expected to receive broad Republican support.

The White House also has been considering economist Marvin Goodfriend to fill a second vacancy on the Fed board, according to people familiar with the matter. It isn’t clear when his nomination might be announced and submitted to the Senate.

The White House also has been searching for a community banker to fill the third vacancy, the result of a new requirement that someone on the Fed board have experience dealing with small banks. But officials have had trouble finding a nominee willing to comply with strict federal ethics rules, which require Fed governors to divest of their interest in financial firms.


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