US Treasury Secretary Scott Bessent has stated that a primary focus in the search for the next chairman of the Federal Reserve is simplifying the US central bank’s approach to managing money markets. Bessent suggested that the Fed’s current operations have become excessively complex. Speaking on CNBC, Bessent highlighted the importance of understanding the interplay of the Fed’s various financial instruments as a key criterion for candidates.
Bessent mentioned that the final round of interviews with the five candidates to replace Jerome Powell is scheduled for today. He reaffirmed that President Donald Trump intends to announce his nomination before December 25. The candidates under consideration include current Fed governors Christopher Waller and Michelle Bowman, former governor Kevin Warsh, National Economic Council director Kevin Hassett, and BlackRock executive Rick Rieder. BlackRock is an investment management company that provides a range of financial services, including asset and risk management.
The Federal Reserve currently employs an ample reserves approach to manage its policy interest rate, which involves holding a significant amount of Treasury securities on its balance sheet. As part of this system, the Fed pays interest on reserves held by banks and on cash temporarily deposited by money market funds.
Bessent expressed concerns about the sustainability of the current system, stating that “The Fed has taken us into a new regime – what is called ample reserves regime – and it looks like that might be fraying a bit here in terms of whether the reserves are actually ample in the system.”
