{"id":11890,"date":"2025-07-14T19:45:00","date_gmt":"2025-07-14T11:45:00","guid":{"rendered":"https:\/\/tingchao.xyz\/?p=11890"},"modified":"2025-07-14T19:45:05","modified_gmt":"2025-07-14T11:45:05","slug":"will-bessent-serve-as-fed-chair-treasury-secretary-at-the-same-time","status":"publish","type":"post","link":"https:\/\/tingchao.xyz\/?p=11890","title":{"rendered":"Will Bessent serve as Fed chair, Treasury secretary at the same time?"},"content":{"rendered":"\n<figure class=\"wp-block-image alignwide size-full\"><img loading=\"lazy\" decoding=\"async\" width=\"756\" height=\"468\" src=\"https:\/\/tingchao.xyz\/wp-content\/uploads\/2025\/07\/2-3.jpg\" alt=\"\" class=\"wp-image-11891\" srcset=\"https:\/\/tingchao.xyz\/wp-content\/uploads\/2025\/07\/2-3.jpg 756w, https:\/\/tingchao.xyz\/wp-content\/uploads\/2025\/07\/2-3-300x186.jpg 300w\" sizes=\"auto, (max-width: 756px) 100vw, 756px\" \/><\/figure>\n\n\n\n<p class=\"wp-block-paragraph\">The possibility that President Trump could replace Federal Reserve Chair Jerome Powell with Treasury Secretary Scott Bessent is spinning heads from Washington to Wall Street and beyond.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">Senators on both sides of the aisle have thrown cold water on the idea despite rising tension between Trump and Powell over interest rates, and the precedent-breaking move could also rock markets and face legal challenges.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">Here\u2019s a look at the political and financial feasibility of Bessent doubling down with two of the most important government roles in finance.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">First of all, is it legally possible?<br>Legal experts say there\u2019s no law preventing the Treasury secretary from also serving as the chair of the Federal Reserve.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">\u201cThere\u2019s no prohibition in the Federal Reserve Act that says a member of the board of governors, or the chair, can\u2019t also be the Secretary of the Treasury,\u201d Sarah Binder, a senior fellow at the Brookings Institution, told The Hill.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">WCIA: K9 bill<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">Treasury secretaries used to sit on the board of the Fed prior to 1935.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">However, having a dual Fed-Treasury chief would fly in the face of the doctrine of central bank independence that has gotten stronger over the years.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">Specifically, it would undermine a semi-formal 1951 agreement between the two entities that separated the duties of public debt issuance from interest-rate setting.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">The nearly 75-year accord made it so that the Treasury Department would manage bonds and the debt, and the Fed would handle interest rates and the money supply. This was to protect against the temptation of printing money to pay for the debt.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">\u201cThe announcement [of the agreement referred] to a \u2018full accord with respect to debt-management and monetary policies,\u2019\u201d Columbia Law professor Lev Menand and New York Fed policy adviser Joshua Younger wrote in the Columbia Law Review in 2023.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">The separation of these duties is still passionately supported by many.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">\u201cYou don\u2019t want the fiscal authority making decisions about interest rates,\u201d Binder told The Hill.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">Would markets tolerate it?<br>Bond markets got woozy in response to Trump\u2019s trade policies earlier this year and the administration course corrected as a result.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">National Economic Council chief Kevin Hassett said the White House moved up its pause of wide-ranging \u201creciprocal\u201d tariffs after the bond market cratered.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">\u201cThere\u2019s no doubt that the Treasury market yesterday made it so that the decision \u2013 it was about time to move \u2013 was made with perhaps a little more urgency,\u201d he said after the pause.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">Stock markets also buckled and bounced this week following a new extension of the \u201creciprocal\u201d import tax deadline to Aug. 1.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">Some policy analysts don\u2019t believe the markets would tolerate a dual Fed-Treasury head because it would subvert the central bank\u2019s independence.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">\u201cI don\u2019t think the market would react [well] to that. Even if it was someone they respected, it just too overtly undermines the independence of the Fed,\u201d Stephen Myrow, a managing partner at Beacon Policy Advisers, told The Hill. \u201cI don\u2019t think they would do that.\u201d<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">The real worry is inflation<br>Fed independence encapsulates the idea that part of the central bank\u2019s job is to crush inflation even though actions to do so can increase unemployment, start recessions and sometimes be politically unpopular.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">Inflation is often seen as a greater evil than unemployment because it can be politically and socially destabilizing.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">By undermining Fed independence with a dual Fed-Treasury chair, the worry is that Bessent will bend to Trump\u2019s calls to cut interest rates and that the Fed will be more tolerant of inflation, similar to the dynamic between former president Richard Nixon and his Fed chair, Arthur Burns.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">Inflation tolerance is of particular concern following the post-pandemic inflation, which factored as the top issue in the 2024 election and continues to play a role in U.S. elections.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">\u201cThe public is much more price sensitive now,\u201d David Beckworth, a fellow at the Mercatus Institute, told The Hill. \u201cPeople were really upset about that [inflation]. To my mind, Trump is really playing with fire here.\u201d<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">Other challenges to Fed independence<br>The possibility of Bessent holding both roles is one of a few signs that public debts are rising over inflation as a policy priority, especially after the estimated $3.3 trillion debt bomb coming from Republicans\u2019 tax-and-spending cut bill, which the president signed into law July 4.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">Trump has recently been encouraging the Fed to lower interest rates not simply because they would make lending cheaper and juice the markets but because they would make public debt payments cheaper.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">\u201cHundreds of billions of dollars being lost!\u201d Trump wrote late last month on Truth Social in reference to debt service payments, again encouraging Powell to lower rates.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">Sen. Ted Cruz (R-Texas) also suggested getting rid of interest payments on the $3.2 trillion in reserves that commercial banks hold now with the Fed. That could encourage them to buy bonds to get a comparable return, or the Fed could force banks to hold onto their reserves.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">\u201cThat\u2019s a form of financial repression,\u201d Beckworth said, referring to when debts get inflated away as the rate of inflation surpasses the rate of interest.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">\u201cIt\u2019s a tax on the banks. It sounds crazy, but it\u2019s been used in other countries,\u201d he added.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">The Fed also recently advanced a plan to change big banks\u2019 leverage ratios. This could also encourage bond buying, which would lower long-term interest rates, just like quantitative easing.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">\u201cWe want to ensure that the leverage ratio does not become regularly binding and discourage banks from participating in low-risk activities, such as Treasury market intermediation,\u201d Powell said last month.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">Warnings about \u2018fiscal dominance\u2019<br>The various ad hoc changes to monetary policy stemming from the debt and Trump\u2019s attacks on the Fed \u2014 including the potential second role for Bessent \u2014 are being labeled by economists on both the right and the left as \u201cfiscal dominance.\u201d<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">In a recent op-ed published by the Washington Post, Biden administration economist Lael Brainard called the president\u2019s debt-invoking missives to the Fed \u201ca remarkably clear statement of what economists call fiscal dominance.\u201d<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">Others don\u2019t give that concept much credence but see the proposals as simply another attack on agency independence similar to the ones the Trump administration has carried out on other agencies like the Environmental Protection Agency, U.S. Agency for International Development (USAID), the Consumer Financial Protection Bureau and others.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">\u201cFiscal dominance and monetary dominance are incoherent concepts,\u201d financial researcher Nathan Tankus told The Hill. \u201cWe have one entity that has wide discretion over economic policy, and that\u2019s the Federal Reserve.\u201d<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">\u201cIt makes decisions in response to the macroeconomic environment, and that\u2019s really the long and the short of it,\u201d Tankus added.<\/p>\n","protected":false},"excerpt":{"rendered":"<p>The possibility that President Trump could replace Federal Reserve Chair Jerome Powell with Treasury Secretary Scott Bessent is spinning heads from Washington to Wall Street and beyond. Senators on both sides of the aisle have thrown cold water on the idea despite rising tension between Trump and Powell over interest rates, and the precedent-breaking move [&hellip;]<\/p>\n","protected":false},"author":6,"featured_media":11891,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_monsterinsights_skip_tracking":false,"_monsterinsights_sitenote_active":false,"_monsterinsights_sitenote_note":"","_monsterinsights_sitenote_category":0,"footnotes":""},"categories":[5],"tags":[2073,1794,2002],"class_list":["post-11890","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-international","tag-fed","tag-treasury","tag-would"],"yoast_head":"<!-- This site is optimized with the Yoast SEO plugin v19.0 - https:\/\/yoast.com\/wordpress\/plugins\/seo\/ -->\n<title>Will Bessent serve as Fed chair, Treasury secretary at the same time? - LISTEN WORLD<\/title>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/tingchao.xyz\/?p=11890\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"Will Bessent serve as Fed chair, Treasury secretary at the same time? - LISTEN WORLD\" \/>\n<meta property=\"og:description\" content=\"The possibility that President Trump could replace Federal Reserve Chair Jerome Powell with Treasury Secretary Scott Bessent is spinning heads from Washington to Wall Street and beyond. 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