President Donald Trump and Treasury Secretary Steven Mnuchin met Thursday with former Federal Reserve governor Kevin Warsh as a potential nominee to be next Fed chairman, an administration official said, as the process of reviewing candidates to lead the U.S. central bank picked up pace.
As part of the search Trump has already met with other contenders, said another administration official, who declined to name the candidates who have sat down with the president. Financial stocks rose and and bonds fell on the report of Warsh's meeting.
Warsh currently is a fellow at the Hoover Institution. Others Trump is said to be considering for Fed chair include the current chairwoman, Janet Yellen, Stanford economist John Taylor, former BB&T Corp. CEO John Allison and Columbia University economist Glenn Hubbard. Trump has said he's also considering White House National Economic Council Director Gary Cohn.
The contest for the position remains an open race as the president isn't close to a decision, one of the administration officials said. Cohn and Yellen, whose term as chair ends in February, remain potential candidates and the president's advisers are trying to assure that he has a range of options, the official said. The selection is one of the most important before Trump, with the central bank responsible for safeguarding the U.S. economy and looked for as a source of global financial stability.
Bond yields and the dollar rose on the news of the meeting with Warsh as investors reacted to a potential Fed pick who they'd view as more hawkish than the current chair. Bank stocks led equities to all-time highs.
"In terms of policy, I think it is fair to say that Warsh is less dovish than Yellen," said Stephen Stanley, chief economist at Amherst Pierpont Securities in New York. "He would be less in favor of fine tuning and more sympathetic to the Fed's role simply being to operate quietly in the background and let the private sector drive things forward."
Two other people familiar with the matter, also speaking on condition of anonymity, confirmed the meeting took place but would not describe the topic. The Wall Street Journal reported on the meeting earlier.
As a Fed governor from 2006 to 2011, Warsh drew on Wall Street experience at Morgan Stanley to play a key behind-the-scenes role in efforts to quell the financial crisis. He's been a vocal critic of the Fed's monetary stimulus policies since the crisis, arguing the approach hasn't been effective and may have dangerous side effects.
"I'm confused frankly about Fed's normalization strategy," he told Bloomberg Television's Vonnie Quinn and Mike McKee in May. "My judgment is, ultimately the Fed's biggest job is to mitigate the risks of an exponential shock. I see way too much complacency."
His candidacy is being taken seriously enough that he's also attracted opposition from left-leaning activists, particularly for his cheerleading prior to the financial crisis of Wall Street innovations.
A close associate of the hedge-fund billionaire Stanley Druckenmiller, Warsh argues that Fed policy makers are too complacent about mounting risks in financial markets. Warsh, 47, was a member of a business advisory council established by Trump and led by Blackstone Group LP CEO Stephen Schwarzman. He is married to Jane Lauder, daughter of Trump friend Ronald Lauder and a global brand president at the cosmetics company founded by her grandmother, Estee Lauder.
