The Fed chair candidate made his name as a conservative economist. Now some fear he is a politician first. By Matt Peterson
President Donald Trump has said he has narrowed down his choice for the next chair of the Federal Reserve to one person, and hinted that it will be Kevin Hassett, now director of the White House's National Economic Council.
Under any other Republican president, Hassett's nomination might not be controversial. Hassett has strong academic credentials and has had a long career in public policy, including an early stint at the Fed. He was confirmed by an overwhelming majority of 81 votes in the Senate to be chair of the Council of Economic Advisers during Trump's first term. Hassett can take at least partial credit for the 2017 tax cuts that lowered corporate rates -- a feat that one of his friends says must have been a dream come true, given his supply-side economic inclinations.
But Trump, and Hassett's loyalty to him, complicates the picture and may put limits on how far down he could force interest rates as Fed chair. A Fed chair can't change the world on his own; cajoling other Fed officials to back his views requires credibility, among other factors.
Trump's attacks on current Fed Chair Jerome Powell, whom Trump nominated to the job in 2017, have raised fears among economists that any replacement won't be truly independent of White House influence. Trump has done little to dispel such worries, telling Politico in an interview published on Tuesday that he would make lowering interest rates a litmus test for the next chair.
On Wednesday, after the Fed cut its federal-funds rate target range by a quarter of a percentage point, to 3.50% to 3.75%, the president called Powell a "stiff" and groused that the rate cut "could have been doubled." Trump has called for the Fed to lower its benchmark interest rate to 1% or less, to help finance the national debt, among other aims. While Fed officials have lowered rates this year to bolster a weakening labor market, they have been reluctant to enact dramatic cuts in the face of persistently elevated inflation.
Barron's recently spoke with people who have worked with Hassett throughout his career to try to get a sense of how he might act as Fed chair. Some support him wholeheartedly. But several who knew him well, including some who wouldn't speak on the record, said that his loyalty to Trump in the second term has changed their perceptions of him. Their worry wasn't that Hassett would propose problematic economic policies, but that his allegiance to a president who seeks to influence a Fed so directly could compromise his independence as chair.
Whatever Hassett thinks, as Fed chair he may find it hard to shake off the perception that he is doing the president's bidding, no matter the economic consequences. That is likely to be true even though Hassett can make a reasonable case for cutting rates, given the long-term inflation outlook. In other words, he doesn't need to take orders from Trump to conclude that interest rates should be lower.
Investors have little concern for now about the possibility of Hassett's leadership. Equity markets are trading at record levels, and bond investors appear to be suspending judgment, much as they would for any new chair.
Hassett declined requests for an interview sent through the White House and in a brief interaction on Tuesday.
"President Trump has assembled the best, most experienced economic team in modern history to help end Joe Biden's inflation crisis and restore the prosperity Americans enjoyed during the first Trump term. Until an announcement is made by President Trump, however, any discussion about Federal Reserve nominations is pointless speculation," said White House spokesman Kush Desai in an email.
Hassett's nomination may not be a done deal, but much is known about the selection process. Treasury Secretary Scott Bessent has narrowed down the search to five candidates, including Hassett, and has said he expects to finish the vetting by late December. Lately, Trump has also mused about picking someone not on that list: Bessent. Trump has repeatedly raised the prospect of Bessent taking the Fed job, only to say that Bessent doesn't want it. Confusingly, Trump has also said he has narrowed the choice down to one person, although he won't confirm who that is.
Hassett acknowledged on Tuesday the odd position in which he has been placed. Trump "makes his choice, and then he changes his mind," Hassett said at a Wall Street Journal event.
Bessent, he said, would be at the top of his own list of Fed chair recommendations, but, he added, "Scott's going to stay at Treasury."
Regardless, Hassett has made his case, and shared his views, including in an interview at the New York Economic Club in November. He worked at the Fed from 1992 to 1997 under former Chair Alan Greenspan. "I worked closely with Alan Greenspan at times and have seen what's good and bad about the way the Fed people think. And there's a lot of bad," Hassett said.
Hassett wants to address what he sees as outdated thinking among Fed staff members, saying they rely too much on old models that produce inaccurate economic forecasts. He has endorsed calls for downsizing, reforming, and auditing the Fed. He has said he agrees with a policy essay by Bessent that calls for giving control of the Fed's balance sheet to the Treasury while trimming it further.
Hassett didn't express reservations about the Fed during his time there, according to some of his former Fed colleagues, who said he seemed to fit in well at the institution. Hassett worked in the research division studying business fixed investment. He had completed a doctorate in economics at the University of Pennsylvania and started a promising academic career at Columbia University, but left to follow his wife, who took a job in Washington.
People who worked alongside Hassett at the Fed remember him as a clever, evidence-driven economist. He was a "Chicago School, efficient-markets guy," as one put it. The Chicago School is a prominent branch of free-market economics associated with Milton Friedman. The efficient-markets hypothesis holds that asset prices reflect all available information. Hassett's beliefs about the stock market would later produce a book that many now see as an error, but his academic research on how lowering taxes can spur business and economic growth was -- and still is -- widely respected among economists.
Hassett describes himself as a supply-side economist, a philosophy associated with Republicans since the presidency of Ronald Reagan. Supply siders argue for cutting taxes to spur growth that will then offset the lost tax revenue.
Hassett's conservative leanings didn't show up at work at the Fed. "There was no talk about the political side; there was almost no politics in terms of what we did," says Gregory Brown, a professor of finance at the UNC Kenan-Flagler School of Business.
Brown worked under Hassett at the Fed and says he would make a good chair.
"I don't have any sense that he has any animus or grudges or lack of respect for the Fed as an institution," says Christopher Carroll, an economics professor at Johns Hopkins University who also worked with Hassett at the Fed in the 1990s. Hassett attended Carroll's wedding.
Hassett began to indulge his more political bent after leaving the Fed for the American Enterprise Institute, a conservative think tank. He wrote widely there, and advised the presidential campaigns of John McCain, George W. Bush, and Mitt Romney. All three ran on the free-market, low-tax economic philosophies long associated with the Republican Party.
It was during his think-tank stint that Hassett wrote the work that probably gained him the most renown before his current job in the White House. In 1999, Hassett published Dow 36,000, a book he co-authored with James Glassman, a former journalist who would go on to work for the George W. Bush administration. The idea, as the title suggests, was that the Dow Jones Industrial Average would quadruple within three to five years to reach 36,000. Investors were only just coming to appreciate that the risk premium for stocks wasn't nearly as high as it seemed and would proceed to bid up shares quickly, they wrote.
Instead, the stock market tanked in 2000 as the dot-com bubble burst. The Dow didn't hit 36,000 until 2021.
Glassman says it's obvious in hindsight that they were overconfident about the risks, although Hassett has seemed more willing to defend their position.
"I really myself realized that I should have had more faith in the market itself, rather than saying, 'I think the market should be this or that.' From what I've read and talked to Kevin about, he's not willing to give up on that," Glassman says.
The two are friends, but they no longer see eye-to-eye on policy, Glassman says. "I don't always agree with Kevin, certainly on economic issues. Let's put it this way. I used to."
Glassman says he objects to what he sees as the second-term Trump administration's "extreme interventions" in the market, including through tariffs and government intrusions into individual companies such as Intel and U.S. Steel. Hassett has defended both policies publicly. If he is giving different counsel to Trump behind closed doors, neither is saying.
Glassman isn't sure whether Hassett has changed his mind in favor of a less free-market ideology or is just doing his best to support the man half of the country picked for president, twice. "You give up a lot of your autonomy when you go to work for a presidential administration. It just becomes a question of degree, like, how far do you want to go?" Glassman says.
Glassman believes that the old Hassett will resurface, should he become Fed chair. "I just don't think he would give up his principles as Fed chairman, as opposed to the position he's in today," he says.
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December 12, 2025 21:31 ET (02:31 GMT)
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