NEW: Bessent reveals possible timeline for Trump Fed chair final pick

Key Concepts

• Federal Reserve Chair Selection: The ongoing process to select a new Chair of the Federal Reserve, with Kevin Warsh emerging as a potential frontrunner.
• Federal Reserve Independence & Accountability: Concerns regarding the independence and internal management of the Federal Reserve, including cost overruns and ethical violations.
• Trump Economic Policy: The three-legged stool of trade, tax cuts, and deregulation driving the current economic boom.
• IEEPA (International Emergency Economic Powers Act): The use of emergency powers for trade and foreign policy objectives, currently under Supreme Court review.
• Economic Growth & Inflation: The current strong economic growth, coupled with declining inflation, and the potential for a 1990s-style disinflationary growth environment.
• Deregulation: The impact of deregulation, particularly in lending and energy, on economic growth and investment.

The Federal Reserve Chair Selection & Internal Issues

The discussion centered heavily on the selection of a new Federal Reserve Chair. President Trump has expressed dissatisfaction with current Chair Jay Powell and has been actively considering alternatives. A process involving 11 candidates was narrowed to 4, with Kevin Warsh currently seen as the leading contender. Treasury Secretary Bessent clarified that the decision ultimately rests with the President. He also noted that Vice Chair Mickey Bowman, considered “fantastic” for regulation, will remain in her current role, as agreed upon by President Trump.

Regarding concerns about Powell, Secretary Bessent acknowledged the President’s frequent expression of disappointment. He also addressed the recent subpoena issued to Jay Powell related to Federal Reserve cost overruns, stating he couldn’t comment on the ongoing investigation but emphasized the need for greater transparency and accountability within the Fed. He highlighted a recent resignation over an ethics violation, noting the delayed public disclosure (3-4 months after departure) as deficient. He argued the Fed should proactively investigate inefficiencies, given its significant influence over the American people. He pointed out the unique situation where the Fed can simply “print” extra funds to cover cost overruns without going through the appropriations process, a privilege not afforded to the Treasury.

Secretary Bessent also noted concerns about insider trading scandals at the Fed, stating that four or five instances out of nineteen governors is “a tremendous number” and would be unacceptable in a private firm.

Trump’s Economic Policies & Current Economic Performance

Secretary Bessent outlined the three pillars of President Trump’s economic policy: trade, tax cuts, and deregulation. He stated the tax cuts have been implemented, with full expensing for capital expenditures, and are driving a capital expenditure (CAPEX) boom. Trade deals are bringing in substantial tariff income, contributing to a fiscal contraction in 2025. He emphasized the private sector GDP growth of 4.7% in the third quarter, boosted by the government contraction.

He highlighted the ongoing deregulation efforts, particularly at the OCC, Fed, and FDIC, which have created an estimated $2.5 trillion in additional lending capacity for banks. This increased lending is fueling the AI boom and supporting Main Street businesses. He also pointed to deregulation in the energy sector, potentially leading to lower oil prices. He emphasized the ability to build things in America again, citing examples like factories in Minnesota benefiting from the 100% expensing provision.

The Secretary described the current economy as the “strongest in 40 years,” attributing it to these policies. He noted that economists and government forecasts had been incorrect, and the economy is experiencing a boom driven by a combination of factors, including the tax cuts, deregulation, and increased overseas investment.

IEEPA & Supreme Court Challenge

A significant portion of the discussion focused on the International Emergency Economic Powers Act (IEEPA) and the legal challenge before the Supreme Court. Secretary Bessent expressed confidence that the Court would uphold the President’s use of IEEPA, arguing it’s a crucial tool for both economic and foreign policy. He emphasized that the President has used IEEPA to address the fentanyl crisis by imposing tariffs on countries supplying precursor chemicals, leading to a decrease in fentanyl-related deaths.

He also cited the example of China’s rare earth export controls, which prompted a threat of a 100% tariff and ultimately led to negotiations. Furthermore, he highlighted the President’s intention to impose a 25% tariff on countries buying Iranian goods, citing the brutal regime’s actions against its people. He argued that IEEPA allows the President to conduct both economic and foreign policy effectively, and no one does it better than Donald Trump. He dismissed concerns about overreach, stating the Court is unlikely to overturn a signature economic policy or unleash chaos.

Future Outlook & Potential Interventions

Secretary Bessent anticipates a decision on the Fed Chair nomination within the next few weeks, potentially before or after Davos. He acknowledged the possibility of a “shadow Fed Chair” situation if Powell remains on the Board after his term ends in May, but expressed hope that wouldn’t occur. He believes the President’s nominee will be confirmed quickly.

He also discussed the January 31st deadline for Steve Miran’s leave of absence from the CEA, clarifying that the seat remains open until a replacement is appointed. He suggested the President might intervene to resolve the legal issues surrounding Jay Powell, but indicated a willingness to let the process take its course.

He predicted continued economic growth, potentially exceeding 5-6% in real terms, and a return to the disinflationary growth environment of the 1990s. He also anticipated further declines in oil prices and a continued boom in investment and lending.

Notable Quotes

• Secretary Bessent (regarding Larry Kudlow’s “performance”): “Larry, when I used to be a professor, I was known as a tough grader. That was a solid A. Solid A. No grade inflation.”
• Secretary Bessent (on Fed accountability): “The Fed has to be like Caesar’s wife, beyond reproach.”
• Secretary Bessent (on insider trading at the Fed): “Four or five out of nineteen is a tremendous number. If you or I were the CEO of a Wall Street firm and that happened, we’d be kaput.”
• Secretary Bessent (on Trump’s economic policy): “Trump economic policy is a three-legged stool: trade, tax, and deregulation.”
• Secretary Bessent (on IEEPA): “No one does it better than Donald Trump.”

Logical Connections

The conversation flowed logically from the immediate news of Trump’s comments on the Fed and the subpoena issued to Powell, to a broader discussion of the Fed’s internal issues and the President’s economic policies. The discussion of IEEPA was presented as a defense of the President’s trade strategy and a demonstration of his willingness to use all available tools to protect American interests. The future outlook section tied together the various themes, presenting a positive vision of continued economic growth and prosperity.

Conclusion

The interview painted a picture of a robust economy driven by President Trump’s policies, with a strong emphasis on deregulation and trade. While acknowledging the legal challenges surrounding Jay Powell and the Fed, Secretary Bessent expressed confidence in the President’s ability to navigate these issues and maintain economic momentum. The key takeaway is that the Trump administration is committed to a pro-growth agenda that prioritizes American interests and challenges conventional economic wisdom.