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Trump ditches swamp-draining playbook for do-no-harm fed picks

Christopher Condon, Bloomberg News on

Published in Political News

WASHINGTON -- President Donald Trump's claim he's "always been great with jobs" faces a real test as he continues to overhaul the leadership of the Federal Reserve.

But if Jerome Powell, his choice announced Nov. 2 to chair the central bank, is any indication of how he plans to fill other vacancies, the president is likely to play it safe in an attempt to preserve a booming stock market and the third-longest economic expansion in U.S. history.

For Trump, there's too much at stake economically and politically to include the Fed in his "drain the swamp" approach.

"My concern about change at the Federal Reserve has diminished importantly in the last week," said Carl Tannenbaum, chief economist at Northern Trust Corp., who spent four years at the Chicago Fed. "Powell has certainly not been a bomb thrower."

There is, however, plenty more to come. Trump is seeking three new Fed governors, one of whom will also serve as vice chair. The search may swell to four if, as expected, Janet Yellen leaves the Board of Governors when her term as chair expires in February.

Adding to the churn, William Dudley on Monday said he would step down in mid-2018 as president of the New York Fed. That position is the key liaison to Wall Street and typically is the most powerful of the 12 regional Fed chiefs.

The slew of personnel changes poses a set of risks for Trump if things go south on his nominees' watch. Yellen's Fed has arguably laid the groundwork for a quickening economy and stock market rally for which Trump likes to take credit.

The economy grew at an annual pace of 3.1 percent in the second quarter and 3 percent in the third, making for the best six-month performance since 2014. Almost 1.7 million new jobs have been created so far this year, driving unemployment down to 4.1 percent, the lowest level since 2000. On top of that, U.S. stocks have surged to record highs.

"With everything going reasonably well, you may want to make a change, but you don't want to make a significant change," said Drew Matus, chief market strategist at MetLife Investment Management. "If the economy is going fine and you make a change and something goes wrong, then you own it."

Perhaps no surprise, then, that Trump went with Powell, described by many Fed watchers as the best continuity option short of reappointing Yellen, a Democrat. In five-plus years as a Fed governor, the Republican Powell has never dissented from a policy decision taken by the Federal Open Market Committee under Yellen or former Chairman Ben Bernanke.

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