Kevin Hassett’s candidacy for chairman of the Federal Reserve System, once considered a near certainty in the market, has faced some pushback from government officials with the ear of President Donald Trump, according to people familiar with the matter.
The person said there were concerns that the National Economic Council chief was too close to the president, which ironically made him a top candidate to replace current chairman Jerome Powell in the first place. The backlash may help explain why interviews with candidates were canceled in early December and then, at least for Warsh, rescheduled to last week.
After telling reporters he knew who he would choose to chair the Fed, President Trump surprised investors by saying in an interview with the Wall Street Journal on Friday that former Fed director Kevin Warsh had emerged alongside Hassett at the top of the list of Fed candidates. The comment sent Hassett’s odds plummeting to Calci’s prediction market.
President Trump said, “I think both Kevins are wonderful.”
Hassett remains the favorite with a 51% chance in Monday’s Karshi, but that’s down from a high of more than 80% earlier this month. Warsh’s odds are now 44%, up from about 11% at the start of December.
The backlash has taken the form of promoting Warsh rather than criticizing Hassett. At a JPMorgan event on Thursday, CEO Jamie Dimon spoke favorably of both Hassett and Warsh, but also made several comments that led the audience to believe that Dimon was endorsing the former Fed chief.
Bloomberg News reported in late November that Hassett had emerged as the frontrunner to replace Powell, whose term ends in May.
But as December progressed, Mr. Hassett’s candidacy met with some resistance, according to people familiar with the matter, raising concerns that the bond market could revolt over time if it deemed him too much in President Trump’s pocket. This view could have the opposite effect that President Trump hopes for, and end up pushing long-term yields higher on fears that Mr. Hassett won’t do enough to contain inflation should it pick up in the future.
Perhaps in response to some of that criticism, Mr. Hassett took a firmer stance on the issue of Fed independence in an interview with CBS News over the weekend.
Trump “has very strong, well-founded views about what we should do,” Hassett said on “Face the Nation,” according to the transcript. “But ultimately, the Fed’s job is to work independently and with the members of the FOMC board to build a group consensus on where interest rates should go.”
Asked if the president’s views carry the same weight as voting members of the central bank, Hassett said: “No, no, he doesn’t have any weight. The only thing that matters is the president’s opinion, whether it’s good or not and whether it’s based on data or not.”
