9-29-17 5:35 PM EDT | Email Article
By Michael C. Bender 

WASHINGTON -- President Donald Trump's search for the next Federal Reserve chair ramped up this week when he interviewed a current and a former central bank governor for the job, and he said Friday he would make a decision within three weeks.

Mr. Trump and Treasury Secretary Steven Mnuchin met with Fed governor Jerome Powell on Wednesday and with former Fed governor Kevin Warsh on Thursday to discuss their possible nomination to run the world's most powerful central bank, according to administration officials.

Other names said to be in contention include current Fed Chairwoman Janet Yellen, whose term expires in early February, Stanford University economist John Taylor and John Allison, the former BB&T Bank chief executive, according to people familiar with the process. Mr. Allison was offered a position on the central bank's board of governors earlier in Mr. Trump's tenure, but turned it down, said people familiar with the offer.

Mr. Powell joined the Fed's board of governors in 2012. He was a partner at the Carlyle Group, a private-equity firm, from 1997 to 2005 and a lawyer and investment banker in New York. He served as an undersecretary and assistant secretary for domestic finance at the U.S. Treasury from 1990 to 1993.

He has emerged as a reliable ally of Ms. Yellen's on monetary policy, while also calling for easing some of the bank rules put in place following the financial crisis. This puts him largely in sync with Mr. Trump's positions favoring low interest rates and financial deregulation.

Mr. Warsh served as Fed governor from 2006 to 2011, during the financial crisis, and was an economic adviser to President George W. Bush from 2002 to 2006. He was a member of President Trump's Strategic and Policy Forum, a group of business leaders that disbanded in August in protest over what they said was Mr. Trump's failure to sufficiently condemn racism. He was also an economic adviser to 2016 Republican presidential candidate Jeb Bush, who was considered the front-runner for the nomination before Mr. Trump's rise surprised the political establishment.

Mr. Warsh is married to Jane Lauder, granddaughter of cosmetics icon Estée Lauder. His father-in-law, businessman Ronald Lauder, has been pushing the White House to have the president name his son-in-law to the central bank's highest post, said people familiar with those conversations.

The search for a new Fed chairman has been largely informal until now. Several White House officials had described the short-list of candidates as existing only in Mr. Trump's mind. But the president has started to interview candidates in recent days, one White House official said.

Mr. Trump told reporters Friday, "I've had four meetings for Fed chairman," without specifying whether he saw four candidates and without identifying the participants. "I'll be making a decision over the next two or three weeks," he added.

White House spokeswoman Natalie Strom confirmed the Warsh meeting occurred, but declined to make any additional comment. Mr. Warsh didn't immediately return a request for comment.

Mr. Trump told The Wall Street Journal in July he was considering nominating Ms. Yellen to a second term. She met with White House adviser Ivanka Trump, the president's daughter, in July and had a 15-minute meeting with Mr. Trump in February. She said at a news conference last week that she hadn't met with Mr. Trump since then.

Mr. Trump also expressed interest in nominating Gary Cohn, the director of the National Economic Council, during his July interview with the Journal. But Mr. Cohn's public criticism of Mr. Trump's response to the racially charged violence in Charlottesville, Va., made it unlikely the president would nominate him to the position, people familiar with the president's thinking told the Journal this month.

White House officials, however, have cautioned that Mr. Cohn, a former Goldman Sachs executive, may be able to repair his relationship with the president. Mr. Cohn is one of the key administration hands shepherding an overhaul of the federal tax code through Congress. If successful, Mr. Cohn may find himself in better standing.

Every president since Ronald Reagan has asked the incumbent Fed leader to stay in the job at the start of his presidency, which has served to underscore the central bank's relative independence from politics on monetary policy.

If Mr. Trump doesn't follow that pattern, Ms. Yellen would be just the third Fed chief since 1934 to serve only one term.

On monetary policy, Mr. Powell has backed Ms. Yellen's strategy of gradual interest rate increases as the economy improves. In recent public remarks he sounded an optimistic note about the economy and indicated a willingness to continue raising the Fed's benchmark short-term interest rate.

If the economy continues to grow as forecast by the Fed "I would view it as appropriate to continue to gradually raise rates," he said in June.

On regulatory policy, Mr. Powell, the only Republican on the Fed board, has said he would be open to easing some of the rules contained in the 2010 Dodd Frank law. Speaking before lawmakers in June, Mr. Powell said he was looking into softening the Volcker rule preventing banks from making overly risky bets with their own money.

He also said it might be appropriate to ease some of the annual stress tests that big banks must perform.

In July, he called on Congress to overhaul the housing finance system, saying he would like to see the country's two large mortgage-finance firms, Fannie Mae and Freddie Mac, move out from under government conservatorship. More private capital in those firms would reduce the risk of a taxpayer-funded bailout in the event of a downturn, he said in a speech.

The Fed declined to comment on Mr. Powell's interview and whether Ms. Yellen had been interviewed or was scheduled to be interviewed for the job. Mr. Powell, through a spokesman, declined to comment.

Mr. Warsh, in contrast, has been a critic of the Fed's aggressive monetary easing, warning that it increased the risks of a financial bubble. He has called for broad changes in how Fed officials communicate with each other and the public, and has urged policy makers to overcome what he calls groupthink in academic economic circles.

"The conduct of monetary policy in recent years has been deeply flawed," Mr. Warsh wrote in an opinion piece published in The Wall Street Journal in August 2016, citing the weak economic growth of recent years. He called for "a rigorous review of recent policy choices and significant changes in the Fed's tools, strategies, communications and governance."

Mr. Warsh, a former member of Morgan Stanley's mergers-and-acquisitions department, has disagreed with Republicans who have pushed for additional oversight of the Fed's decision-making. But in June, at a public event in Dallas, he suggested the Fed could be at risk of being dismantled if it doesn't make needed changes from within. "The idea that we [the Fed] are a permanent fixture in the economy is mistaken," he said.

After leaving the Fed in 2011, Mr. Warsh became a visiting fellow at the Hoover Institution, a policy think tank affiliated with Stanford University.

The search comes as the Fed is in the process of reversing the extraordinary economic stimulus measures it put in place during and after the financial crisis. Ms. Yellen reaffirmed last week the central bank is on track to raise short-term interest rates again before year's end if the economy stays on course, and the Fed has started to slowly shrink the large portfolio of bonds it purchased to drive down long-term rates.

Mr. Trump has three vacancies on the seven-member Fed board now and another to come open this month when Vice Chairman Stanley Fischer steps down, giving the president the opportunity to remake the central bank's leadership.

--

David Harrison

contributed to this article.

Write to Michael C. Bender at Mike.Bender@wsj.com

 

(END) Dow Jones Newswires

September 29, 2017 17:35 ET (21:35 GMT)

Copyright (c) 2017 Dow Jones & Company, Inc.
Add a Comment

Try Premium Membership today. Your first 14 days are free of charge. Start my Premium Membership Trial.
Sponsored Links
Buy a Link Now
Sponsor Center
Content Partners