Treasury Secretary Pushes Federal Reserve Reform Amid Chairperson Search

The search for the next chairperson of the Federal Reserve is ongoing, with the U.S. Treasury Secretary leading the effort to interview multiple candidates. The Treasury Secretary has recently met with former Federal Reserve officials, including Lawrence Lindsey, Kevin Warsh, and James Bullard. Lindsey and Warsh have both served as Federal Reserve governors, while Bullard was the of the Federal Reserve Bank of St. Louis. The goal is to add one or two more candidates to the list that President Trump has already mentioned, which includes Warsh, the current chair of the National Economic Council, Kevin Hassett, and the current Federal Reserve governor, Christopher Waller. The Treasury Secretary is also considering a broader range of 11 economists, including former and current Federal Reserve officials and some market strategists.

In addition to interviewing candidates, the Treasury Secretary is pushing for his own agenda of Federal Reserve reform. Sources indicate that he hopes the Federal Reserve can naturally reduce its massive bond portfolio, including 600 billion dollars in U.S. Treasuries and mortgage-backed securities (MBS), without disrupting the market or the economy. Furthermore, the Treasury Secretary aims to minimize the Federal Reserve's footprint in the economy.

This news comes as the Federal Reserve is under close scrutiny from the White House. President Trump and other government officials have repeatedly called for the Federal Reserve to lower interest rates, but no rate cuts have been made since December 2024. Market expectations are that the Federal Reserve will cut rates by 25 basis points at its upcoming meeting next week.

The Treasury Secretary recently wrote an opinion piece in a prominent publication, outlining his views on the Federal Reserve. He criticized the Federal Reserve for what he termed "mission creep," where it repeatedly exceeds its narrow mandate of maintaining low unemployment and low inflation. "The Federal Reserve must change course. Its toolkit has become too complex, and its theoretical foundations are not robust enough," he wrote.

Industry experts predict that the Federal Reserve's landscape could undergo significant changes in the coming year. The current chair, Jerome Powell, whose term expires in May 2026, will likely be replaced as chair, although he could continue to serve as a governor for two more years. Additionally, the U.S. Senate is expected to vote next Monday on the nomination of Stephen Miran to fill a vacant seat on the Federal Reserve Board of Governors. President Trump has also pushed to remove Federal Reserve governor Lisa Cook, citing allegations of mortgage fraud, but a court has currently blocked this action.

The Treasury Secretary's efforts to reform the Federal Reserve and the ongoing search for a new chairperson highlight the administration's focus on reshaping the central bank's role and policies. As the Federal Reserve continues to navigate economic challenges and political pressures, the selection of a new chairperson will be a critical decision that could shape the future of monetary policy in the United States.