It’s been all about Warsh for Fed chair since the Journal reported on Friday that Trump and Mnuchin had met with ol’ Kev about possibly taking over for Janet Yellen.
As we and plenty of others have noted, Warsh would most likely attempt to take the Fed in a more hawkish direction if his bombastic rhetoric about the dangers of central banks being enthralled with markets is any indication. I wrote at length about this over at DealBreaker on Monday. Here are a couple of excerpts:
It’s still not entirely clear whether Trump understands the irony inherent in lambasting Yellen for “doing political things” that she “ought to be ashamed of” (which he did in September, 2016) and then live-tweeting S&P records just 12 months later. Even less clear is whether he actually “gets it” when it comes to the mechanics behind what then-candidate Trump called an “artificial stock market.” But one person who does “get it” when it comes to how Fed policy has driven equities to record highs is Kevin Warsh.
And if you’re interested to know just how much he “gets it,” you can read a speech he gave last year at the 15th BIS Annual Conference in Lucerne, Switzerland here.
Well, the White House has been keen to make it clear that no decision has in fact been made and on Tuesday evening, Bloomberg reports that Trump’s advisers “have given him a final list of people they’re recommending as candidates to lead the Federal Reserve and have ended the search.” BBG is citing no fewer than seven people familiar with the matter.
The short list is: Yellen, Cohn, Warsh and Powell. No surprises there, although Powell seems to be hitting the dollar. “The sudden wave of USD bearishness running through Asia markets on Wednesday appears to be investors in the region reacting to the Fed short list,” Bloomberg notes, adding that “betting markets show a surge in interest for Jerome Powell, who would be expected to take a dovish tack.”
But perhaps more notable outside of the knee-jerk was this:
Two of the people say Fed Chair Janet Yellen remains under consideration — even though few, if any, of Trump’s inner circle are advocating for her re-appointment.
Of course it’s never been clear whether she would accept if asked, but whatever the case, it looks like we might be witnessing the final days of Janet’s tenure.
Draw your own conclusions, but if you’re long risk assets and Yellen leaves, we imagine this might play out like the monologue from “Gotti”:
Now what do you got? Anarchy. You got anarchy.
Five, ten years from now, they’re gonna wish there was quantitative easing.
Five or ten years from now they’re gonna miss Janet Yellen.
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