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Thursday, December 28, 2017

Trump Has His Eye On Two Top Pimco Vets

News summary by MFWire's editors

A dark horse Pimco [profile] alumnus did not land the President's nomination to take over the Fed next year, but the Pimco-Fed speculation won't stop there with two other Pimco-connected execs now rumored to be in the running for the Fed's number two spot.

U.S. President Donald Trump's administration has interviewed Richard Clarida, managing director and global strategic advisor at Pimco and professor of economics and international affairs at Columbia University, as a candidate for vice chairman of the Federal Reserve Board, unnamed sources tell the Wall Street Journal. And last month the WSJ reported that Mohamed El-Erian, chief economic advisor to Pimco parent Allianz and former CEO of Pimco, is being considered for that same vice chairman spot.

The WSJ reports that Lawrence Lindsey, CEO of the Lindsey Group, has also been interviewed for the vice chairman job at the Fed. The paper notes that the Trump administration wants "an economist with a strong grounding in monetary policy" to serve as Fed vice chairman, and both Clarida and Lindsey worked in U.S. President George W. Bush's administration (Clarida as Assistant Secretary of the Treasury for economic policy and Lindsey as an economic adviser). Lindsey also previously spent six years on the Fed's board back in the 1990s.

Clarida joined Pimco in 2006 after working at the U.S. Treasury, Credit Suisse, and Grossman Asset Management. He is an alumnus both Harvard University and the University of Illinois.

El-Erian first joined Pimco in 1999, left and took over Harvard's endowment in 2006, then returned to Pimco as co-CEO and co-CIO at the end of 2007 and rose to CEO a year later. He left in 2014, six months before Pimco co-founder Bill Gross infamously jumped ship. An alumnus of both Oxford and Cambridge, El-Erian previously worked at Salomon Smith Barney, previously chaired U.S. President Barack Obama's Global Development Council, and has served as chief economic advisor to Allianz's management board since 2014.

No matter who Trump picks for Fed vice chair, the top spot is already spoken for. There was speculation back in October that Trump might pick a different Pimco alumnus, current Federal Reserve Bank of Minnesota president Neel Kashkari, as Janet Yellen's successor as chair of the Fed — DoubleLine chief Jeffrey Gundlach described Kashkari as Trump's best pick for the job in terms of policy alignment. Yet last month Trump picked current Fed governor Jerome Powell to succeed Yellen when her term ends in February.

Trump is not the first president to be rumored to be interested in picking Clarida for a spot at the Fed. Back in 2011, Obama reportedly wanted to nominate Clarida for an empty Fed governor position, though Clarida then insisted that he was "not a candidate to be a Federal Reserve Governor" at the time and that he would stick with Columbia and Pimco "for the foreseeable future."

Meanwhile, the Pimco-Fed connection does work the other way, too. Since 2015 former Fed chairman Ben Bernanke has served as a senior advisor to Pimco. And Bernanke's Fed chairman predecessor, Alan Greenspan, advised Pimco from 2007 to 2011. 

Edited by: Neil Anderson, Managing Editor

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