Having filled up his administration to the brim with former Goldman staffers, to the point where even President Trump realizes there may be too many "Goldman Guys" on his team, Bloomberg reports that in an attempt to branch out, Donald Trump plans to nominate David Malpass, 60, the former Bear Stearns economist, as U.S. Treasury undersecretary for international affairs.
For those trading FX, his role will be critical: "His first job will be to help guide policy as the world wonders whether the new administration will make a habit of talking up or down other countries’ currencies."
Malpass will report to the Treasury secretary on the U.S.’s international economic relationships, most importantly with China. Ties between the world’s two largest economies have become more tenuous since Trump’s election. The Republican and his advisers have not only talked about China and Japan artificially manipulating their currencies -- after walking back a pledge to label the former as a manipulator in the early days of the administration -- but have also moved foreign exchange markets by jawboning the U.S. and Canadian dollars, Mexico peso, and the euro.
In other words, with much confusion within the Trump admin over whether the US Dollar should be stronger or weaker, Malpass will - hopefully - provide some much needed clarity. He will also be the point person, i.e., fall guy, should Trump's dollar policy backfire.
His nomination will likely be heated as most other Trump candidates: Malpass, due to his high profile Bear Stearns roots prior to its collapse in 2008, may face heat from Democrats already bitter over the number of Wall Street alums joining the Trump administration.
Confirmations in the Senate are gummed up, with Democrats debating for 30 hours or boycotting committee votes on some cabinet picks. Treasury Secretary nominee Steven Mnuchin is expected to be confirmed in a vote on Monday.
The good news for Trump is that if confirmed by the Senate, Malpass would bring "extensive government experience to an economic team that has little background in public service. He served as a deputy assistant secretary in the Treasury and State departments during the administrations of Ronald Reagan and George H.W. Bush."
Malpass' ascent will be notable to Fed watchers because he has stated in the past that he views the Federal Reserve’s asset purchases as “very harmful” to the economy by channeling credit to corporations and the government instead of to new, more dynamic small businesses. That said, as Bear Stearns’ chief economist, Malpass in 2007 wrote a Wall Street Journal column advising markets not to panic over a $2 trillion loss in equity markets, calling it a “correction” that may eventually drive economic growth. The following year, that credit crunch turned into a global crisis, taking Bear Stearns down with it.
After Bear Stearns’ demise Malpass founded Encima Global, an economic research company, and has been a frequent commentator in print and on television. He served on the Trump campaign’s economic advisory council.
Bloomberg adds that Malpass would replace Nathan Sheets, who served as undersecretary of international affairs in the final stages of the Obama administration. Lael Brainard, now a Fed governor, also held that role under Obama from 2010 to 2013. As explained yesterday, Brainard is one of the Fed governors closely tied to the Clinton regime, and some see her as the next head to roll at the Fed following Daniel Tarullo's unexpected departure on Friday.