00:00You've been talking about the prospect of this happening for a while.
00:02Your feelings this morning?
00:05I think you know my feelings, John.
00:08I think the president had a range of better choices and he picked the worst one in front of him.
00:14What gives you confidence, Neil, that that's actually going to bear out during his purported tenure,
00:19should he get confirmed, given the fact that he has had a different rhetoric over the past couple of months
00:24and frankly convinced President Trump?
00:26Well, I mean, it's one thing to convince President Trump.
00:30I think it's going to be quite another to convince the members around the FOMC table.
00:37You know, Mike McKee was talking about his record during the financial crisis,
00:43which, just to remind everyone, is horrific because, you know,
00:49I think anyone would know at the time what to have done and yet he was worried about inflation,
00:53even as unemployment was rising.
00:56Not exactly what you'd expect to see from the greatest jobs president that God ever invented.
01:04That being said, it's not so much that he's hawkish.
01:06It's that he's always hawkish and always, typically when he's wrong, he's wrong in the same direction.
01:11I mean, what you want in these positions is someone that has an open mind, that's a flexible thinker.
01:15So I think his newfound dovishness looks very suspicious and, you know, maybe that's one reason why Powell sticks around past May.
01:26If he does, he'll be a weak Fed chair.
01:29And even if he doesn't, he'll probably be a weak Fed chair because, you know, look, the FOMC, it's bigger than one person.
01:36You can't just get in there and exert your will.
01:39There are things that he can do with respect to reforming the institution.
01:43But, you know, again, I have my I mean, has he run a large thing before?
01:49I mean, you know, I have my suspicions about whether he's actually able to affect that outcome also.
01:54So, you know, we'll see.
01:58You know, again, as I said before, he's also he's an avowed free trader.
02:02You know, he used to criticize politicians for not pursuing free trade deals.
02:05And one of his other criticisms, of course, is that, you know, the Fed tends to encourage fiscal irresponsibility through their interest rate policy.
02:16But, of course, the federal government's been fiscally irresponsible despite high interest rates.
02:22So I think he has the causality backwards, really.
02:25It wasn't so much that, you know, interest rates were low, not because the Fed was trying to bail the federal government out, but interest rates were low because the economy was weak.
02:38Neil, you said something there that I want to follow up on.
02:40You think that the nomination of Kevin Warsh makes it more likely that Jerome Powell stays on as a governor after his Fed term is up.
02:49Is that correct?
02:52Yeah, I don't see why that wouldn't be the case.
02:54I mean, nothing about this process has been normal.
02:57And, you know, as I say, I mean, you can talk about the sort of golden age and like maybe Kevin Warsh believes in the golden age.
03:04But, you know, look, I mean, he's again, he's been hawkish his entire public career.
03:11OK.
03:11And he's known for making good economic calls.
03:16He is not.
03:17So, again, like this is all you can't just go in there and say, I think we're in a golden age.
03:21The proof of the pudding is in the eating.
03:23And the people around that table are going to want evidence before they sign up for something like that, which is why I think it's unlikely that you can just expect them to go in there and deliver a series of interest rates.
03:33So, Neil, that's the analysis.
03:34When you're thinking about markets and what you tell clients this morning on how to work accordingly off the back of that, what would you suggest?
03:41I mean, I think it's I mean, you you can't expect.
03:47OK, so this is, I think, of the four candidates that were out there, I would say that Warsh was probably the worst.
03:53But that doesn't mean that you just dump all your stocks and punt the long long end of the, you know, the treasury market right away.
04:01I mean, it takes time for these things to show up.
04:03I think the primary risk is that the president risks getting duped.
04:08And that's because if you are able to engineer a series of rate cuts up front, the risk with Warsh is that you may have to take them back aggressively later.
04:18You know, when have you ever seen Kevin Warsh make the dovish case for monetary policy and convince someone of that outcome?
04:28Well, it sounds like, Neil, he was able to do that with the president actually in the Oval Office.
04:33What do you make of the process now?
04:34We're going to have to wait and see play out in Congress.
04:37Do you think he actually sticks based on what we're hearing from members of Congress, like Senator Tom Tillis, if this takes a very long time and the market continues to push back?
04:48I mean, that's one potential.
04:50I mean, you know, Tillis has said that he's going to slow down the nomination process because there's an open investigation.
04:55So we see we need to see what happens with that with that investigation.
04:59But I would just say that perhaps I mean, I'm not a political analyst, Anne-Marie, as you know, you are.
05:06But I would say that there's probably time for pushback from the president's base.
05:10You know, a member of the MAGA movement, Kevin Warsh is not.
05:14I mean, let's be clear.
05:14He works at a traditional GOP Republican establishment think tank named for a president that presided over the Great Depression.
05:23Right. So you think that there's you know, I suspect there's time for the president's base to do to Kevin Warsh what they did to Harriet Myers back in the day.
05:36Right. And she never made it to the Supreme Court because of that pushback that Congress saw on President Bush.
05:42Do you actually think, given how you had interpreted Kevin Warsh and his body of work over the course of the years, that actually for what Trump wants, he better off just be sticking with Jay Powell type?
05:55Well, I think, you know, look, it's hard to I mean, I think from the beginning of this process,
06:00the Treasury secretary has been very wise to kind of avoid putting his thumb on the scale.
06:05That's what Mnuchin did. And it cost him dearly.
06:09But if the goal is to put your prints on the Fed, the way to have done that would have been to elevate Christopher Waller,
06:17someone who has a track record of convincing his colleagues to the dovish position while simultaneously showing a penchant for reforming the institution.
06:26I mean, it's not like Christopher Waller is someone that was unable to kind of kind of, you know, knock heads a little bit within the Fed, is my understanding.
06:38But that would also have freed up two seats. Right.
06:42Because the likely outcome at that point would have been would have been that Powell would have gone.
06:47And so then you have another seat you could fill in addition to the seat that that is going away this week, which is the Myron seat.
06:53So the way to you know, you have to think about it like the Supreme Court in a way.
06:58The way to get the policy and, you know, remake the institution in your image is to get your people on there.
07:03That seems at the margin, I think, a little bit harder to do with Warsh.
07:09Neil, just finally, if this doesn't go well, and let's see how it plays out.
07:13But if it doesn't go well, who does the president get to blame this time?
07:18Well, I mean, it's himself.
07:20I mean, you know, the Fed job under Trump is a thankless job, admittedly.
07:24I mean, because you're going to sort of get his ire very quickly.
07:27So I understand why there's a reluctance among some to want to do it.
07:32But as I said, I mean, there's a there were a lot of good candidates out there.
07:37You know, some of them I didn't like, some of them I did.
07:40But, you know, I think of the lot, I would say, you know, for most of the people I talked to,
07:45but even just more importantly for myself, I think that Warsh was the least favorite of the of the candidates being thrown out there.
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