In November, President-elect Donald Trump named billionaire hedge fund investor Scott Bessent as his pick for Treasury secretary, a position that will advise the incoming president on key economic policies. Bessant was selected from a field of high-profile Wall Street contenders, including Apollo CEO Mark Rowan, Cantor Fitzgerald CEO Howard Lutnick and JPMorgan Chase’s Jamie Dimon.
Bessant, 62, will succeed Janet Yellen as Treasury secretary pending Senate confirmation. Yellen rose to prominence through prestigious academic halls and public service positions, including as Fed chair from 2014 to 2018, while Bessant made a name for himself in the private sector, most notably from 2011 to 2018. He served as Chief Investment Officer of the George Soros Family Office.
In 1992, while leading the London office of Soros Fund Management, Bessant used the fund’s vast war reserves to make $10 billion in trades against the weakening pound, ultimately forcing the Bank of England to intervene to support the pound. . In another high-profile trade in 2013, he made $1 billion in profits from three months of trading the Japanese yen.
What does the Minister of Finance do?
The Treasury secretary is one of several key economic advisers to the president. Other important advisory roles within the executive branch include the secretaries of commerce, labor, and the chairman of the Federal Reserve Board. Each covers unique and overlapping economic policy responsibilities.
The Secretary of the Treasury has similar functions to the Treasurer and is primarily responsible for collecting and making payments on behalf of the federal government. This includes enforcing tax and customs laws, operating the Internal Revenue Service, managing the finances of government agencies, and repaying the national debt. The Secretary of the Treasury also oversees fiscal operations, including the production of coins and currency, and represents the United States to the International Monetary Fund and World Bank.
In times of financial crisis, investors often look to the Treasury Secretary for guidance. In January 2023, when Congress was deadlocked over its inability to pass legislation to raise the debt ceiling and the United States faced the risk of a debt default for the first time, Yellen took extraordinary measures to calm the market, including halting reinvestment of funds held by federal employee retirement funds. Government securities count toward the debt limit. As then-New School economics professor Steven Pressman described it, “It’s essentially money the government owes itself.” By doing so, Yellen temporarily lowered debt levels, setting the stage for other federal actions Provides funding space.
During the 2008 financial crisis, President George W. Bush’s Treasury Secretary Henry Paulson played a major role in drafting a $700 billion financial rescue package. He has told Senate leaders the government needs the financial equivalent of a bazooka.
“If you have a bazooka and people know you have it, you probably don’t have to take it out,” he said. Essentially, Paulson believes that if the market believes that the Treasury Department has the funds to rescue Fannie Mae and Freddie Mac in case the crisis worsens, investors will have the confidence to keep money in the financial system, thus restoring trust in financial institutions. without actually spending the bailout funds.
What was the script for Bessant?
Bessant has high ambitions for his upcoming role, saying he hopes to learn from former Japanese Prime Minister Shinzo Abe’s “three arrows” strategy to help Japan recover from a decades-long recession. In a 2013 speech, Abe described the “three arrows” as “bold monetary policy, flexible fiscal policy and a growth strategy that encourages private sector investment.”
Bessant’s version would also include a “3-3-3” plan: increase GDP growth to 3%; cut the budget deficit to 3% of GDP; and increase U.S. oil production to 3 million barrels per day. With U.S. economic growth expected to likely slow from 2.8% to 2.2% in 2025, Bessent’s strategy is designed to help the economy reach its maximum potential. While monetary and energy policy are outside his remit, Bessant is also likely to wield significant influence over policymakers to achieve those goals.
