Warsh Leads Yellen, Powell
in Tight Race for Fed Chair

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

Former Federal Reserve Governor Kevin Warsh has emerged as the leading candidate to run the central bank next year, jumping ahead of current Chair Janet Yellen, according to a Bloomberg survey of economists Oct. 6–11. Fed Governor Jerome Powell—until now seen as a long-shot—vaulted into a tie for second with Yellen behind Warsh in the poll.

The three—along with Stanford University professor John Taylor and White House economic adviser Gary Cohn—are on a shortlist that President Donald Trump is considering for the Fed chair job, according to administration officials. Yellen’s current four-year term as the central-bank’s chair expires on Feb. 3. Trump has indicated that he may name a nominee, who would be subject to Senate approval, this month.

Trump's Most-Likely Nominee for Fed Chair

Ranking based on a Bloomberg survey of economists (survey methodology below)

* Added to the September poll after being mentioned as candidates by people familiar with the matter

The Top Contenders
Kevin Warsh: The Reformer
As a Fed governor from 2006 to 2011, Kevin 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 attracted opposition from both the left and right wings of the political spectrum.
Janet Yellen: The Veteran
Janet 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. 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 Brooklyn native who 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 71-year-old former academic is married to George Akerlof, who won the 2001 Nobel Prize in economics for his work on market imperfections. One strike against her: She's been outspoken in support of the tougher rules put in place after the crisis to tame financial markets—a stance that puts her at odds with Trump’s anti-regulatory bent.
Jerome Powell: The All-Rounder
A Fed governor since 2012, Jerome Powell has earned a reputation as a non-ideological and pragmatic policy maker with an ability to get along with his colleagues. He’s made his mark mostly outside the monetary arena, spearheading the Fed’s response to the 2014 flash crash in Treasury debt and the overhaul of the flawed London Interbank Offered Rate benchmark. He’s also dug into many low profile, yet essential, Fed board duties, including oversight of the financial payments system.

A lawyer by training, Powell spent much of his time outside government in the financial industry, first at investment bank Dillon Read & Co. and later at Carlyle Group, where he set up the private-equity firm’s industrial group. The 64-year-old, who goes by Jay, also served in the Treasury Department under Republican President George H.W. Bush, eventually rising to the post of undersecretary for domestic finance. He played a key behind-the-scenes role in helping to avert a debt default by the U.S. government in 2011 while working at the Bipartisan Policy Center think tank in Washington.
Gary Cohn: The Insider
As Director of Trump’s National Economic Council, Gary Cohn is playing a leading role in the president’s push to overhaul the tax code and enhance U.S. competitiveness. He was seen at one point as the leading candidate to take over the Fed until he publicly distanced himself from Trump’s response to a deadly white-supremacist rally in Charlottesville, Virginia, in August.

Before joining team Trump, Cohn worked at Goldman Sachs Group Inc. 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. Cohn, 57, also complained that Fed policy makers talked too much and just ended up confusing markets.
Glenn Hubbard: The Tax Man
As President George W. Bush’s chief economist from 2001 to 2003, Glenn 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, 59, 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
John Taylor, another critic of the Yellen Fed, is also an oft-mentioned candidate to replace her. A professor at Stanford University and a former Treasury undersecretary, he’s 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.

Taylor, 70, has argued that the Fed’s been too loose with monetary policy and too subject to the discretion of policy makers. He has supporters in the U.S. House of Representatives, where Republican lawmakers have pushed legislation requiring the Fed to follow the Taylor rule or something like it. Taylor has, however, a rather hawkish reputation that might scare off a president who has described himself as “a low interest-rate” person.