The race to succeed Jerome Powell at the Fed just got weirder

Federal Reserve Chair Jerome Powell’s wild ride with President Trump took a few turns down Crazy Street a while ago, of course – but that doesn’t mean the stomach-churning trip is over.

While Wall Street grapples with the president’s threats to fire the central bank’s boss, the rumor mill surrounding his possible successor has yielded a dizzying surprise of its own, On The Money has learned.

Bill Pulte, the current head of the Federal Housing Finance Authority that runs mortgage giants Fannie Mae and Freddie Mac, has lately surfaced as a possible pick alongside the “two Kevins” – Kevin Hassett, director of the National Economic Council; and Kevin Warsh, a Stanford professor and fellow at the right-leaning Hoover Institute.

Let’s be clear – this Pulte rumor is not getting a lot of credence. Pulte is not an economist. He has a degree in broadcast journalism. He is 37 years old. Yet his name oddly began bouncing around the outer edge of the rumor mill after he posted on social media last week that the current Fed chair might step down.

Yes, Pulte runs an agency that oversees some $7 trillion in loans. He’s also the scion of the Pulte family that runs the big residential construction company now known as the Pulte Group. He worked in private equity.

But his social media feed shows he also tapped into the meme stock craze, even if he was careful not to give specific buy recs.

While I kind of like the idea of a meme-stock guy running the Fed just for comedic value, the markets would probably puke with interest rates on the 10 and 30-year bond exploding.

On the other hand, we all know Trump loves easy money (he hates Powell for not being easier with it) and has made some unconventional choices for his cabinet in the past (cf. Matt Gaetz, Pete Hegseth, RFK Jr., etc., etc.).

It’s probably nothing, of course. Has to be, right? Just one more thing to make the suits on Wall Street sweat a little harder this summer.

Back to reality (we hope?). Kevin Hassett  is a smart economist. He co-authored the 1999 book “Dow 36,0000” predicting a massive bull market in stocks. The markets subsequently fell with the dot-com bust, but the prediction was highly prescient, with the down closing Wednesday over 44,000.

Hassett is also good on TV — a plus in Trump world, but again, the question becomes whether he will be seen as a rubber-stamp on interest rate policy given his loyalty to the president and whether that will lead to bond market turmoil.

That brings us to the best choice for the job, Kevin Warsh, who  seems to have it all. He’s camera ready, and he has both the professional chops to do the job having been on the Fed’s board of governors during the 2008 financial crisis.

He’s said to be close with Trump who has leaned on him over the years on monetary policy issues. Another plus: Warsh has been a critic of Jerome Powell’s handling of interest rate policy.

Seems like a shoe-in for Trump right? Well maybe not. Warsh’s Powell critique is mainly over the Fed chair missing the boat on inflation back in 2021 and not raising interest rates fast enough. He would run a less interventionist Fed if he had his druthers, which might not be to The Donald’s liking given the president’s obsession with lower short term rates.

All that said, Warsh would make a really good Fed chair and he and Trump have a bond, I am told. Trump does pick people for top jobs he likes.

As reported, Treasury Secretary Scott Bessent is leading the search, and could pick himself, which would be interesting to watch as that controversy unfolds. Bessent is highly qualified, though. He made his mark on Wall Street as a savvy hedge fund trader, worked for George Soros, the 94-year-old left-wing financier, who made his own fortune back in the day for shorting (betting against) the pound sterling and “breaking” the Bank of England during the UK currency crisis.

In other words Bessent understands monetary policy as well as anyone and Trump obviously trusts his economic knowledge since he’s heading his trade negotiations. His baggage will be making money – maybe too much of it as a speculator.

Can’t wait for those confirmation hearings.