What mes­sage will Trump’s Trea­sury pick send markets?

The Myanmar Times - - International / Business -

A FOR­MER banker, a con­gress­man, a for­mer cap­tain of in­dus­try: which one Pres­i­dent-elect Don­ald Trump chooses as the US Trea­sury sec­re­tary will send a key mes­sage about his ad­min­is­tra­tion’s eco­nomic plans.

His sig­na­ture will be on the back of the US cur­rency, but more im­por­tantly the sec­re­tary is a key player in financial reg­u­la­tion, guar­an­tor of the world’s largest re­serve cur­rency, ar­chi­tect of eco­nomic re­la­tions with China and leader of the fight against the fi­nanc­ing of ter­ror­ism.

Sev­eral names have cir­cu­lated in the race to re­place Jack Lew, Pres­i­dent Barack Obama’s fi­nance min­is­ter since 2013, but two seem to stand out: for­mer Gold­man Sachs in­vest­ment banker Steven Mnuchin, 53, and the con­ser­va­tive Con­gress­man Jeb Hen­sar­ling, 59.

JPMor­gan boss Jamie Di­mon, 60, and Black­stone real es­tate in­vestor Jonathan Gray, 46, re­port­edly re­buffed over­tures by Mr Trump.

In­dus­tri­al­ist Daniel DiMicco, 66, for­mer head of Nu­cor Steel and “Made in Amer­ica” cham­pion, also has been men­tioned but could in­stead lead the for­eign trade port­fo­lio.

The range of ca­pa­bil­i­ties of the can­di­dates un­der con­sid­er­a­tion are “re­flec­tive of the breadth and depth of the agenda to­day”, said Robert Kim­mitt, a deputy Trea­sury sec­re­tary in Ge­orge W Bush’s ad­min­is­tra­tion.

Mr Trump’s plans for the econ­omy are vast. He plans to re­form the Dodd-Frank financial reg­u­la­tion law and cam­paigned for ma­jor cor­po­rate tax cuts, while promis­ing mas­sive in­fra­struc­ture spend­ing and the re­turn of off­shored jobs to the US.

Trea­sury is also at the cen­tre of the fight against the fi­nanc­ing of ter­ror­ism, in­clud­ing im­pos­ing sanc­tions against Iran and North Korea. And the depart­ment over­sees one of two reg­u­lar eco­nomic di­a­logues with China, made more in­ter­est­ing by the fact Mr Trump has vowed to take a firmer stance against the coun­try.

Mr Kim­mitt won­ders if this di­a­logue will be able to con­tinue, since just two months af­ter Mr Trump takes of­fice, Trea­sury will have to sub­mit to Congress its semi-an­nual re­port on for­eign ex­change poli­cies, which in par­tic­u­lar fo­cuses on China.

That is the ve­hi­cle the ad­min­is­tra­tion would use to de­clare China a cur­rency ma­nip­u­la­tor, some­thing it has es­caped in re­cent years, al­though econ­o­mists say the coun­try now is in fact prop­ping up the yuan.

David Wes­sel, eco­nomic an­a­lyst at the Brook­ings In­sti­tu­tion, said that in the wake of the 2008 Great Re­ces­sion, it will be cru­cial that the next Trea­sury sec­re­tary has “the ca­pac­ity to deal with a financial cri­sis, whether it’s caused by a big bank­ing mess, even the financial as­pect of a ter­ror­ist strike – and more”.

But he warned, “One thing we’ve learned is that you don’t want some­body who has to learn on the job.”

Given the un­pre­dictable per­son­al­ity of the new pres­i­dent, the ideal can­di­date will also have to show diplo­macy and au­thor­ity.

“Given the na­ture of Don­ald Trump the Trea­sury sec­re­tary is go­ing to have an im­por­tant role in both re­strain­ing some of Trump’s im­pulses and also in in­ter­pret­ing what Trump re­ally means to the rest of the world,” Mr Wes­sel told AFP.

“We have al­ready seen how con­fus­ing some of his state­ments can be. That can be very dam­ag­ing for the con­fi­dence in the econ­omy, it can cause un­wel­come volatil­ity on financial markets,” he said.

So ideally this key po­si­tion will be filled by some­one “who can both in­flu­ence the pres­i­dent and speak for him with au­thor­ity so that we don’t have un­nec­es­sary mis­un­der­stand­ings or worse”.

Another key role will be man­ag­ing re­la­tions with Congress. This could make Texas Rep­re­sen­ta­tive Hen­sar­ling, chair of the in­flu­en­tial House Financial Ser­vices Com­mit­tee, a fron­trun­ner since the promised tax cuts will widen the deficit and in­flate the debt.

It will be dif­fi­cult for a can­di­date to check all the boxes for the Trea­sury post, to be a Wall Street spe­cial­ist and a ne­go­tia­tor with Congress or es­pe­cially a li­ai­son with the pres­i­dent him­self, Mr Wes­sel cau­tions.

Among the lead­ing names, Mr Mnuchin, the Gold­man Sachs veteran, will cer­tainly draw crit­i­cism if se­lected, he said, since it would be para­dox­i­cal if Mr Trump, who cam­paigned against the es­tab­lish­ment, chooses a Trea­sury sec­re­tary who is a Wall Street in­sider with all the con­nec­tions he claims to ab­hor. –

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