The next direction of US financial policy determined by 11 candidates for Federal Reserve Board Chair

In August 2024, during the important speech at the Jackson Hole Annual Symposium, a quiet race for the next Federal Reserve Chair was already underway. U.S. Treasury Secretary Scott Bessent is currently vetting 11 leading candidates and has entered the stage of seeking President Trump’s final decision through interviews starting on Labor Day.

Amid public dissatisfaction from the President regarding Chair Powell’s policy management, it is highly likely that a new approach will be required for the next Federal Reserve Chair. However, how to balance the nominal independence of the Fed with reform demands will serve as a test for this personnel decision.

Four Strong Candidates Likely to Be Chosen from Within the Fed

Four senior officials within the Federal Reserve Board form the most competitive first candidate group. These individuals have built their track records within the current monetary policy framework, are experienced in policy formulation, and excel at building trust with markets.

Michelle Bowman, Board Member: Known as a Strict Regulator at 54

Board Member Bowman has demonstrated the most hawkish stance on monetary tightening within the Federal Reserve Board. As the only member to oppose the start of the 2024 rate cut cycle, her judgment and independence have attracted attention from the White House.

Her background in financial regulation, from Kansas State Bank Commissioner to Deputy Supervisory Head, aligns with a policy of easing regulations on small and medium-sized banks. However, her hawkish stance could pose a risk of market instability if markets fear excessive tightening.

Christopher Waller, Board Member: 65, Emphasizing Policy Continuity and Academic Rigor

Waller, former Research Director at the St. Louis Fed, is a leading economist who has published numerous important papers on central bank digital currencies and financial stability. He is also highly regarded for his communication skills and market expectation management.

However, his conservative policy approach, often called a “version 2.0” of Powell’s policies, may be somewhat distant from President Trump’s expectation for bold reforms.

Vice Chair Philip Jefferson: 63, Deeply Understanding Fed Operations

Current Vice Chair Jefferson has the potential to become the first African American Chair of the Fed. As an expert in labor economics, he offers unique insights into the employment market, aligning with the President’s focus on this indicator. His academic background at Dartmouth and practical experience are strengths.

However, his cautious decision-making style could be a challenge in situations requiring swift crisis responses.

Lael Brainard, President of the Dallas Fed: 23 Years of Practical Market Experience

Having long overseen open market operations at the New York Fed, Brainard possesses deep expertise in managing trillions of dollars in funds. Her crisis management experience during the 2008 financial crisis and the 2020 pandemic response are key assets for market trust.

On the other hand, her lack of political support in Washington could be a potential obstacle.

Three Experienced Candidates Returning from Academia or Wall Street

A group of three candidates who have left the Fed but continue to deeply understand its mechanisms and the essence of monetary policy. They could bring fresh perspectives outside the existing framework.

Kevin Warsh, Former Fed Governor: “Wall Street Elite” at 54, Became a Governor at 35

Warsh played a key advisory role to Chairman Bernanke during the 2008 crisis and has since promoted important research on Fed reforms at Stanford’s Hoover Institution. His career spans Wall Street experience at Morgan Stanley, policy practice at the central bank, and academic research.

His father-in-law is an heir to Estée Lauder, and he has extensive networks in Washington and Wall Street. Highly regarded as a potential leader for younger generations, he also has a record of losing in the 2017 Chair race.

James Bullard, Former St. Louis Fed President: “The Forecaster” Who Warned of Inflation Risks in 2021

Bullard warned of inflation risks a year ahead of the mainstream Fed consensus, starting in 2021. Known as “Inflation Hawk,” his forecasting ability and market intuition are highly respected.

Currently, as Dean of the Olin Business School at Purdue University, he continues economic research. During his tenure at the St. Louis Fed, he often expressed dissenting opinions at FOMC meetings, reflecting a strong independent streak. Whether this personality will foster diverse decision-making or undermine organizational unity remains to be seen.

Larry Lindsey, Former Economic Advisor: 70, with Experience in Both Republican and Democratic Administrations

Lindsey served as Chief Economic Advisor to President George W. Bush and as a Fed Governor under Clinton, embodying a bipartisan career. He accurately predicted the economic impacts of the dot-com bubble burst in 2001 and the Iraq War.

However, his more than 20-year absence from the Fed and his age are concerns. Questions also remain about his ability to adapt to modern monetary policy tools.

Two Economists Trusted by the President’s Economic Team

If the first two groups symbolize “expertise,” this group represents “loyalty.” Their greatest strength lies not in pure monetary policy knowledge but in their understanding and ability to implement “Trump policies.”

Kevin Hassett, Chair of the Council of Economic Advisers: Known as “The President’s Economics Professor,” 62

As current CEA Chair, Hassett regularly explains economic indicators to the President, being one of the few who the President actually listens to. He was a principal architect of the 2017 tax reform and is known for extracting positive signals from economic data.

His main challenge is the lack of experience in central banking, and his understanding of monetary policy is considered to be at an academic level.

Mark Summerlin, Reform Advocate: “Outsider Within the System” with a Vision for Fed Reform

A former Vice Chair of the CEA under the Bush administration, Summerlin proposes the most radical Fed reform plans, despite being a traditionalist. He advocates for shortening FOMC statements, reducing press conference frequency, and restoring the Fed’s “mystique.”

He has a broad bipartisan network and experience managing a consulting firm serving major Wall Street hedge funds, but his low profile in the general market remains a challenge.

Two New Generation Candidates Emerging from Market Practice

Candidates with practical experience in financial institutions, active at the forefront of markets. They embody an approach based on real-world market experience rather than academic theory.

David Zellvos, Chief Market Strategist at Jeffries: 56, Sharp Voice of the Market

A savvy Wall Street economist who warned of the 2008 subprime crisis and maintained a bullish stance during the March 2020 market panic. His experience at the New York Fed in the 1990s provides him with a solid understanding of central banking.

However, his frank speaking style, which includes blunt assessments like “economic suicide,” could pose risks as a Fed Chair where diplomatic communication is crucial.

Rick Leader, Investment Head at BlackRock: 62, Perspective from Managing Over $4 Trillion in Assets

As Head of Global Fixed Income at BlackRock, he manages over $4 trillion and has navigated multiple economic cycles and crises. His track record includes limiting losses during the 2022 bond market crisis, outperforming the market average.

However, his high-income background in the private sector could provoke populist backlash, and potential conflicts of interest from transitioning into policy-making are concerns.

The Fed Chair Election as a Turning Point in U.S. Monetary Policy

Historically, the Fed has selected leaders based on academic credentials, believing they could maintain independence and make long-term judgments. However, the current 11 candidates reflect a split between those emphasizing market experience and those prioritizing academic expertise.

Chair Greenspan faced the dot-com bubble, Chair Bernanke responded to the financial crisis, Chair Yellen managed post-pandemic economic adjustments, and Chair Powell has fought inflation resurgence. The next Fed Chair may oversee the full deployment of digital currencies or face unforeseen “Black Swan” events—what lies ahead remains unknown.

This is not merely a personnel choice but a decision that will influence U.S. monetary policy and the global economy for years to come. Eleven candidates, one chair, and infinite possibilities. The game has just begun.