Federal Reserve

Gary Cohn has one very good reason for not bailing on Trump

Key Points
  • Trump economic advisor Gary Cohn is thought to be the odds-on favorite to be the next Federal Reserve chair.
  • However, sources close to Cohn indicate he's been deeply troubled by the president's behavior in the aftermath of the Charlottesville, Virginia, racial violence.
  • Cohn likely will have to stay in the administration if he wants the job leading the central bank.
Gary Cohn faces worst career investment dilemma

If Gary Cohn ever wants to head the Federal Reserve, then he's likely to stay right where he is in the Trump administration.

As speculation swirls over whether the president's top economic advisor might be the latest White House official to bolt, the Fed factor could prevail over all others. President Donald Trump himself has signaled that Cohn is a top contender for the seat should current Chair Janet Yellen be replaced.

However, Cohn is thought to be deeply disappointed in Trump's behavior since the racial violence in Charlottesville, Virginia, a week a week ago. The question is whether he is upset enough to leave his White House post and, in doing so, squelch virtually any chance he'd have at the Fed position.

"It's a difficult question," said Christopher Whalen, head of Whalen Global Advisors and himself once rumored for a Fed governorship appointment.

As Whalen sees it, the credibility of the Trump administration, particularly at such a tumultuous time, depends on having stable hands around like Cohn, Treasury Secretary Steven Mnuchin and chief of staff John Kelly.

"He and Kelly and Mnuchin are all lending their credibility to this presidency. At a personal level, they're going to have to make a decision," Whalen said. "On the one hand, you want to serve the people of the United States. At the same time, you are basically lending your support to what he does by serving him."

White House chief economic adviser Gary Cohn, right, talks to President Donald Trump, left, prior to a working session at the G-20 summit in Hamburg, Germany, July 8, 2017.
Michael Sohn | AP

For his part, Cohn has been mum on his Fed aspirations. However, multiple accounts both in Washington and on Wall Street indicate that he likely can have the job if he wants it.

Cohn would bring a strong set of qualifications to the chairmanship. While he is not steeped in academia like many of his predecessors, his background as the former chief operating officer at Goldman Sachs give him a different set of qualities that the president finds attractive.

No less an authority than New York Fed President William Dudley earlier this week raised eyebrows when he told The Associated Press that Cohn was a "reasonable candidate" and that it isn't necessary for a Fed chair to have a doctorate in economics to be considered qualified.

"I think he'd be a great Fed chairman," Whalen said. "I hope he takes the job. He'd be a breath of fresh air."

Whether a job setting monetary policy and financial regulation would top helping set the president's fiscal agenda is another matter. As Fed chair, Cohn would wield a big stick when it comes to the financial system, while it's unclear at this point how much Trump is even listening to those around him.

"He doesn't have nearly the influence the market thinks he does," said Stephen Myrow, managing partner at Beacon Policy Advisors and perhaps the first Washington analyst to identify Cohn as a potential Yellen successor. "If he left he'd be less in contention of getting the Fed job."

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