Besant's Interview with Bloomberg TV
Nomination Process for Next Fed Chair Begins
"Powell Should Resign as Governor After Chair Term Ends"
"Emperor of Wall Street" Dimon: "Fed Independence Is Critical"
U.S. Treasury Secretary Scott Besant announced on July 15 (local time) that the official process to nominate the next Federal Reserve (Fed) Chair has begun. He pressured current Fed Chair Jerome Powell, who has refused President Donald Trump's calls for an interest rate cut, to step down not only from the chairmanship when his term ends in May next year but also from his remaining position as a Fed governor. This stance appears to be based on concerns that if Powell retains his seat as a governor, he could remain as a 'shadow Fed Chair' and continue to exert influence over monetary policy.
In an interview with Bloomberg TV that day, Secretary Besant said regarding the nomination of the next Fed Chair, "The official process has already started. There are many excellent candidates both inside and outside the Fed."
When asked whether President Trump had requested that he take on the role of Fed Chair, Besant replied, "I am involved in part of the decision-making process," adding, "The decision is up to President Trump and will proceed at his pace."
During the interview, Secretary Besant emphasized that Powell should also step down as a governor after his term as chair ends next year. He stated, "Traditionally, the Fed Chair resigns from the governorship as well," and added, "There has been much discussion that pre-designating a shadow Fed Chair would cause confusion. It would also be extremely confusing if a former Fed Chair remained (as a governor)."
Powell's term as Chair runs until May 2026, while his term as a Fed governor lasts until January 2028. This means that even after stepping down as Chair, he could remain as a governor. The Federal Open Market Committee (FOMC) consists of 19 members in total, with voting rights on interest rate decisions held by the seven governors (including the Chair), the President of the Federal Reserve Bank of New York (an ex officio member), and 12 regional Fed bank presidents. If Powell retains his governorship, he would not only keep his voting rights but could also continue to wield influence within the FOMC as a former Chair. Given that all of the leading candidates for the next Fed Chair?former Fed Governor Kevin Warsh, current Fed Governor Christopher Waller, and White House National Economic Council (NEC) Director Kevin Hassett?support interest rate cuts, there is speculation that Powell may be motivated to remain as a governor to counter this trend.
In particular, President Trump and Secretary Besant had previously considered nominating the next Fed Chair early in an attempt to induce a lame-duck period for Powell, a plan referred to as the 'shadow Fed Chair' concept, but ultimately abandoned it. Now, however, the situation has changed, and there is speculation that Powell could remain at the Fed as a governor after his term as Chair ends, effectively becoming a shadow Fed Chair. Secretary Besant's recent remarks are seen as an attempt to preemptively block this possibility. While Powell has repeatedly stated that removing a Fed Chair is illegal and has expressed his intention to serve out his full term, he has not commented on whether he would resign his governorship after his chairmanship ends.
Bloomberg News noted, "A new shadow Fed Chair scenario is now emerging," and pointed out, "Perhaps most paradoxical is that it is by no means impossible to imagine Powell becoming a shadow Chair in May next year."
President Trump has continued to publicly criticize Powell for refusing to lower interest rates. On this day, after the June core Consumer Price Index (CPI) came in lower than expected, Trump stated, "Consumer prices are low," and insisted, "The Fed must cut rates immediately. It should be a 3-point (3 percentage point) cut." This came just one day after he had sharply criticized Powell, saying, "I wish he would just lower rates," and, "I tried to be nice to him, but it was useless. He's an idiot and a fool."
The White House recently sent an open letter to Powell demanding an explanation for what it claims are excessive remodeling costs for the Fed's headquarters building. Director Hassett stated that, depending on the outcome of the investigation, President Trump could remove Powell from office.
Meanwhile, Jamie Dimon, Chairman and CEO of JPMorgan Chase, known as the 'Emperor of Wall Street,' publicly warned against efforts to undermine Powell. After the bank's second-quarter earnings announcement, Dimon stated, "The independence of the Fed is absolutely critical," and warned, "Playing games with the Fed could result in negative consequences that are the exact opposite of what is expected." He further emphasized that the Fed's independence is "absolutely critical not only for the current Fed Chair, Jerome Powell, whom I respect, but also for the next Fed Chair." Among private sector financial CEOs, Dimon is the first to publicly criticize President Trump's attacks on Powell.
© The Asia Business Daily(www.asiae.co.kr). All rights reserved.
