Wall Street moves to stop Trump from picking Kevin Hassett as next Fed chief — here’s why

Wall Street leaders and corporate chiefs have tried a final push to convince President Trump to scrap his intention of naming Kevin Hassett as the next Federal Reserve chair, but their chances of success remain uncertain, according to On The Money.

As with most of Trump’s decisions, external influence rarely sways him; he tends to follow a gut instinct. That instinct, it appears, is firmly in favor of Hassett, the current head of the National Economic Council, as a successor to Jerome Powell.

Market betting indicates an about 80 % probability that Hassett will be able to win over Powell, whom President Trump has privately and publicly expressed disdain for. At the same time, Trump is clearly a fan of Hassett, who has long been a loyalist and served as the chief of the Council of Economic Advisers during his first term.

For the purposes of a figure of speech: Hassett is television‑savvy, has a robust academic résumé, earned a PhD in economics from the University of Pennsylvania, and has worked in think‑tanks as well as the Federal Reserve as an economist.

Nonetheless, the ultimate test for any Fed chair is not the president who nominated them but the bond markets. In recent days, CEOs, portfolio managers, and Wall Street executives have cautioned the White House that Hassett may not meet the investment community’s expectations for the required independence. More From Charles Gasparino

They argue that Hassett is too political, eager to appease the president by pushing for lower interest rates that could spur growth, but ignoring the Fed’s inflation mandate, which is arguably even more critical. Critics point to recent occasions where Hassett seemed to downplay a sharp rise in inflation, possibly to avoid conflict with his current boss, and other instances where the policy seemed to be shaped to fit Trump’s agenda.

Those critics have also suggested that because Hassett appears to be a puppet of the White House, he lacks credibility with Fed staff and will be pressed to make rate cuts that align with Trump’s demands, even though the Fed board remains divided by lingering inflation concerns.

Under Trump’s preference for cutting short‑term rates well below the market norm, bond traders would see that as trigger inflation and push long‑term rates up. Consumer‐facing rates—mortgages, for instance—are heavily influenced by the 10‑year and 30‑year Treasury bonds, rather than the Fed Funds rate that the Fed directly controls. Hence, a rapid rise in rates could mirror the infamous “Liz Truss moment,” when the British prime minister fell from office as the pound and government debt plummeted.

Higher borrowing costs would make mortgages and other loans less affordable and could cause the stock market to collapse, similar to the downturn that followed President Trump’s “Liberation Day” tariff announcement, which subsequently retracted the steep duties as rates and stocks slumped.

One economist who was directly involved in the selection process told us that Hassett “has a real lack of credibility inside the Fed and outside.”

Court‑reporter of the White House, Kush Desi, responded, “President Trump has assembled the best and most experienced economic team in modern history, a team that has already cooled Joe Biden’s inflation crisis, secured historic trade deals, and delivered working‑class tax cuts.”

“The President will continue to nominate the most qualified individuals to the federal government, and until an announcement is made by him, any discussion about potential nominations is pointless speculation,” Desi added.

It is worth noting that no Federal Reserve chairman is ever completely politically independent. Janet Yellen, for instance, worked on Bill Clinton’s economic team before becoming Fed chair under Barack Obama, and later served as Joe Biden’s Treasury Secretary, where—according to critics—she helped justify some of the most expensive spending by the already over‑extended welfare state.

Powell, who is scheduled to finish his term next year, helped the Biden administration expand the size of government through an aggressive open‑market purchase program long after the COVID lockdowns ended—an approach that, combined with Yellen’s spending, helped fuel soaring inflation.

At least according to critics, Hassett would appear especially vulnerable to politics and Trump’s influence, and bond investors are wary of both. If Trump does listen to that warning, other candidates on the shortlist could include former Fed governor and academic Kevin Warner and current governor Christopher Waller.