Cohn Tops Yellen as Fed Chair Guessing-Game Heats Up

By Rich MillerRich Miller, Catarina SaraivaCatarina Saraiva, Chloe WhiteakerChloe Whiteaker and Jeremy Scott DiamondJeremy Scott Diamond
|

White House senior economic adviser Gary Cohn has emerged as the leading candidate to succeed Janet Yellen as Federal Reserve chair when her term expires in February, according to a July 27–28 survey of economists. The former Goldman Sachs executive took over the top spot from Yellen, who was seen as the slight favorite in a similar poll seven weeks ago.

Cohn’s accession in the latest survey comes after President Donald Trump told the Wall Street Journal on July 25 that the director of the National Economic Council was a top candidate for the Fed post. His nomination is by no means assured, however, with the president saying that Yellen and two or three others were also in the running, according to the newspaper. Ultimately, Trump’s pick will need Senate approval.

Trump's Most-Likely Nominee for Fed Chair

Ranking based on a Bloomberg survey of economists (survey methodology below)
The Top Contenders
Gary Cohn: The Insider
As a Trump senior economic adviser, Cohn is expected to have a big say in deciding who will head up the Fed starting next year. So if he gets the job, Cohn is sure to be accused of pulling a Dick Cheney. (Cheney ended up as President George W. Bush's running mate in 2000 after being asked to identify candidates for the post). For what it’s worth, Cohn, 56, has responded to a question about his interest in Yellen’s job by saying he’s happy in his current role. He’s generally viewed as one of the most influential voices in the administration arguing against economic isolationism.

Before joining Team Trump, Cohn worked at Goldman Sachs for more than 25 years, including a decade as president. While there, he criticized the Fed for pumping liquidity into the financial system to stimulate the economy while simultaneously telling banks they needed to build up capital and be careful lending it out. He also complained that Fed policy makers talked too much and just ended up confusing markets.
Janet Yellen: The Veteran
Yellen looked like a goner as Fed chair after Trump’s surprise election victory last November. The billionaire bashed the central bank during the campaign, and there were even rumors he might try to force her out before her term expires in February 2018. But as president, Trump has taken a different tack, saying he respects Yellen—and what's more—likes low interest rates. She has declined to say whether she wants another term.

A Democrat—the Brooklyn native served as chief economist to President Bill Clinton from 1997 to 1999—Yellen has spent much of her professional career working at the central bank, including a six-year stint as head of the San Francisco Fed. The 70-year-old former academic is married to George Akerlof, who won the 2001 Nobel Prize in economics for his work on market imperfections.
Kevin Warsh: The Reformer
As a Fed governor from 2006 to 2011, Warsh drew on his Wall Street experience at Morgan Stanley to play a key behind-the-scenes role in efforts to quell the financial crisis. He’s been a vocal critic of the central bank since then, advocating widespread changes in how it carries out monetary policy and communicates with the public.

A close associate of hedge-fund billionaire Stanley Druckenmiller, he argues that Fed policy makers are too complacent about mounting risks in financial markets. The 47-year-old Hoover Institution fellow was a member of the business-advisory council that met with Trump in February. He is married to Jane Lauder, daughter of Trump friend Ronald Lauder and a global brand president at the cosmetic company her grandmother, Estee Lauder, founded. His candidacy is being taken seriously enough that he’s also attracted opposition from left-leaning activists, particularly for his cheerleading prior to the financial crisis of Wall Street innovations.
Glenn Hubbard: The Tax Man
As President George W. Bush’s chief economist from 2001 to 2003, Hubbard played a key role in fashioning tax-cut packages that reduced rates on wages, dividends and capital gains. A fiscal-policy expert, he also served as economic adviser to Mitt Romney in his failed 2012 presidential campaign.

This isn’t the first time Hubbard, 58, has been touted as a potential Fed chair, losing out in 2006 to Ben Bernanke in the race to succeed Alan Greenspan. He favors a rule-based monetary policy and is uncomfortable with the Fed’s big balance sheet. The dean of Columbia University’s business school has recently raised his public profile, appearing on a number of cable television shows to discuss the economy. Along with Warsh and John Taylor, another potential Fed candidate, he co-wrote a July 18 article arguing that the U.S. could achieve Trump’s goal of 3 percent annual growth with the proper economic policies.
John Taylor: The Rule Maker
Stanford University professor John Taylor is best known for the monetary policy rule he developed in 1993 that links changes in interest rates by the Fed to the state of the economy and inflation. A former Treasury undersecretary during the President George W. Bush administration, Taylor faults the Fed for straying from that guideline in the early 2000s, helping fuel the housing bubble that led to the worst financial crisis since the Great Depression.

The 70-year-old economist has also been critical of the central bank’s more recent stance, arguing that it’s been too lax and too subject to the discretion of policy makers. He’s got supporters in the House of Representatives, where Republican lawmakers have pushed legislation that would require the Fed to follow a Taylor rule or something like it.