The Fed chair contest is Trump's version of 'The Bachelor'

Key Points
  • President Donald Trump has turned his selection of a Fed chair into a version of 'The Bachelor,' Politico's Ben White says.
  • A consensus among people close to the process has emerged that the race is likely down to either current Fed Governor Jerome "Jay" Powell or Stanford economist John Taylor.
President Donald Trump in the Rose Garden of the White House in Washington, U.S., October 16, 2017.
Yuri Gripas | Reuters

Like pretty much every big personnel call in this White House, President Donald Trump has turned his selection of a Federal Reserve chair into a version of "The Bachelor" with everyone feverishly guessing who will get the role of leading the world's most important central bank.

Trump has gone so far as to solicit advice from Fox Business Network host Lou Dobbs in a televised interview. "Tell me who your preference is," Trump asked Dobbs. "I'd love to hear it. You could even cut it out if you want. You don't have to — I would love to hear you. I only want that from people I respect."

Dobbs went on to suggest keeping Janet Yellen, something that I'm told is at least somewhat attractive to Trump given that markets love the current chair and would likely react favorably to her status quo renomination.

But a source who talks to the president regularly about the Fed and other economic matters tells me that while Trump does like Yellen, he is not going to renominate her because he wants to put his own mark on the central bank — something the president also suggested to Dobbs.

Just after this conversation, another senior source close to the Fed nomination process cautioned me not to rule Yellen or anyone else out. "He changes his mind about it every day," this person said.

But a consensus among people close to the process has emerged that the race is likely down to either current Fed Governor Jerome "Jay" Powell or Stanford economist John Taylor. Former Fed Governor Kevin Warsh sparked increasing speculation after a meeting last week with Vice President Mike Pence. Treasury Secretary Steven Mnuchin is pushing against Warsh and in favor of Powell, whom he got to know in recent months working on financial reform issues.

National Economic Council Director Gary Cohn has been mostly out of the running for weeks now both because of his clash with Trump over the violence in Charlottesville, Virginia, and because the president wants the former Goldman Sachs president to keep working on the high-stakes tax cut push.

An announcement on the Fed chair pick could come any day, but sources close to the matter say it will most likely happen next week before the president departs for a 12-day trip to Asia. Even that is not assured, however. If Trump can't make up his mind, the announcement could wait until he gets back. The Senate needs to have hearings before the Banking Committee and a full vote prior to Yellen's term expiring on Feb. 3. Ideally, the process of sending up the next nominee would start soon.

The Senate can move quickly when it wants to — it's basically up to Majority Leader Mitch McConnell – so next week is really not a hard deadline for the president.

The arguments favoring a Powell chairmanship include that it would allow Trump to install his own pick while also likely continuing the very modest approach to rate normalization and balance sheet drawdown initiated by the Yellen Fed. Taylor, while much more beloved by conservatives on the Hill and places like The Wall Street Journal editorial board, would present at least something more of a hawkish risk that might spark jitters on Wall Street.

Some conservatives on Capitol Hill have led a behind-the-scenes campaign against Powell and in favor of Taylor or Warsh. But it's not clear that those efforts will produce results, especially given that Trump generally does whatever he wants with limited regard for what Republicans in Congress say. And Sen. Pat Toomey, R-Pa., is among the few on record arguing against Powell. Taylor won a straw poll when Trump met with Senate Republicans earlier this week and quizzed them on their Fed preference, but there is very little chance many would vote "no" if Trump actually sends up a Powell nomination.

And Powell is a former banker rather than a wonky economist like Taylor, a style Trump tends to prefer in his nominees. So the betting line remains on Powell for chair and perhaps Taylor for vice chair, if he is willing. Heavy caveats continue to apply. Trump could change his mind at the last minute and turn the process on its head, possibly even electing to simply stick with Yellen, though that remains unlikely.

The rose is still up for grabs.

— Ben White is Politico's chief economic correspondent and a CNBC contributor. He also authors the daily tip sheet Politico Morning Money [politico.com/morningmoney]. Follow him on Twitter @morningmoneyben.