New York Fed President William Dudley recently weighed in on who the next head of the Federal Reserve should be, surprising analysts by vouching for Gary Cohn, a former Goldman Sachs executive now serving as President Donald Trump’s economic adviser.
In an interview with the Associated Press, Dudley called Cohn “a reasonable candidate” for the Fed’s top job.
Trump has helped contribute to growing speculation that Cohn is a leading candidate for the position when he said last month that he was looking at Cohn and two or three others, including current Chairwoman Janet Yellen, for the job, during an interview with The Wall Street Journal. Cohn accompanied Trump during that WSJ interview.
“I’ve known Gary for a long time, but I’ve gained great respect for Gary working with him, so Gary certainly would be in the mix,” Trump said at the time.
A recent survey suggests Fed watchers have interpreted Trump’s remarks as a hint that Cohn is the top contender to take the reins of the U.S. central bank.
Read: All of a sudden, Gary Cohn is seen as shoo-in to be next Fed chairman
Ian Katz, Fed watcher, said it was a bit surprising that Dudley would want to inject himself in what has become a popular parlor game inside and outside of Washington. Fed officials, however, typically try to remain mum on such personnel matters.
“It moves close to the issue of mixing politics and the Fed, which the Fed discourages,” he said in an email. Katz said what Dudley said seems obvious, that Cohn would be a reasonable candidate.
Diane Swonk, CEO of DS Economics, said she was concerned with the timing of Dudley’s remarks, particularly given that Yellen hasn’t expressed a desire to vacate the role, nor has the president said that he wouldn’t renominate the economist who just celebrated her 71st birthday on Sunday. Her term ends in 2018.
“It is unusual for anyone at the Fed, at this point in time, to comment on a new Fed chair or not,” Swonk said in an interview.
“We haven’t heard if Fed Chairwoman Janet Yellen is leaving. She’s only said that she would cross that bridge when she gets to it,” Swonk said.
“My guess is Dudley is trying to be neutral but its unusual. Saying anything about it makes people talk, perhaps more than you want them to,” she said.
A spokeswoman for the New York Fed said the bank would have no further comment on Dudley’s interview.
A changing of the guard at the Fed could set policy on a new path, adding a level of uncharacteristic drama and market speculation to the institution established 104 years ago.
Mark Gertler, a professor of economics at New York University, said there has been a tradition since the 1970s that Fed chairman have been reappointed, if they have shown a good record, even by presidents of opposite political parties.
“It is not obvious why Yellen is not reappointed given her performance,” said Gertler, who often collaborated with former Fed Chairman Ben Bernanke. He said the Fed community, writ large, is hoping that Yellen gets a second four-year term.
In contrast, Cohn is “a blank slate when it comes to monetary policy,” Gertler said.
Although the Wall Street executive comes with a Goldman Sachs pedigree, which has been a pseudo-calling card for financial officials in Washington over the past several decades, Cohn isn’t a card-carrying, Ivory tower economist.
Specifically, he doesn’t boast a Ph.D. in economics, in contrast to the past three Fed chairman.
In the interview, Dudley played down an academic background as a requirement to being the top Fed boss.
“He [Cohn] knows a lot about financial markets. He knows a lot about the financial system. I don’t think you have to have a Ph.D. in Economics, which I have, to be Chair of the Fed or governor or a president of one of the Federal Reserve Banks,” Dudley said.
It is worth noting, however, that outside of the realm of academia, Dudley and Cohn do have one alma mater in common: Goldman Sachs. Dudley was the chief economist at the world’s most prominent investment bank from 1986 to 2007.
Julia Coronado, founder and president of economic research firm MacroPolicy Perspectives, said it is a reasonable thing to have people other than economists for the Fed but that the Goldman
connection might make Cohn an unpopular choice.
“To have the head of the New York Fed and the Fed Chair both be Goldman alumni probably won’t be reassuring to a lot of Americans,” she said.