The Journal. - Inside Trump's Pick for Treasury Secretary

Episode Date: November 26, 2024

After two weeks of uncertainty, Donald Trump nominated Scott Bessent, a longtime Wall Street investor, as his next Treasury secretary. The pick capped a behind-the-scenes battle one advisor called a ���knife fight.” WSJ’s Andrew Restuccia takes us inside the decision, explores why Bessent triumphed and unpacks what his tenure could mean for the U.S. economy. Further Reading: -How Scott Bessent Won the ‘Knife Fight’ to Be Trump’s Treasury Secretary  -Scott Bessent Sees a Coming ‘Global Economic Reordering.’ He Wants to Be Part of It.  Further Listening: -Gaetz, Bondi and Trump's Department of Justice  -The Scramble Is on to Fill Trump's Cabinet  Learn more about your ad choices. Visit megaphone.fm/adchoices

During his campaign, one of President-elect Donald Trump's top issues was the economy. Kamala Harris and Crooked Joe have driven our economy off a cliff. The Harris price hikes have cost the typical household $28,000. Congratulations. Hope everyone's happy. I'm going to make America affordable again. In addition to making it great again, we're going to make it affordable again.

Trump promised big changes by levying tariffs, cutting taxes, and deregulating parts of the economy, which is why, as Trump has named his cabinet picks over the past few weeks, our colleague Andrew Rastusia has been watching for one role in particular. Yeah we've been sort of chasing our tails over the last few weeks trying to figure out what the president is gonna do before he does it. But this is a big one for us. On Friday the president-elect announced that he was going to pick Scott Bessent to run

the Treasury Department. Scott Bessent. He's a 62-year-old hedge fund manager from South Carolina. And unlike some of Trump's other cabinet nominations, this one took some time. There were plenty of other decisions that happened quickly. The defense secretary, the attorney general. Big positions that happened in just a matter of days.

The fact that this took more than two weeks says a lot about the political importance of the economy for Trump. He knows that this is one of the issues that sunk Biden and then later Harris. And he knows his political fortunes are really tied up in it. Right. And the treasury secretary is key to making his economic promises happen. The treasury secretary, if Besson is confirmed, will be at the center of the entire economic agenda

for the president-elect. He has made the economy kind of the centerpiece of his political campaign. And the Treasury Secretary will be at the center of all that. And whether he succeeds or fails will, of course, be at the feet of the president, but will also really be at the feet of Scott Besson. Welcome to The Journal, our show about money, business, and power.

I'm Jessica Mendoza. It's Tuesday, November 26th. Coming up on the show, what Trump's pick for Treasury Secretary might signal for the U.S. economy. How do airplanes fly? What's in this box? What does this thing do? Kids are curious about everything, including guns. Learn how to store your guns securely and make your home safer at nfamilyfire.org.

Brought to you by N Family Fire, Brady and the Ad Council. What does the Treasury Secretary do? Good question. So the Treasury Secretary does a lot of things. So they are essentially the core economic policymaking engine of the federal government. They are in charge of lots of wonky things. They implement tax policy. They manage the nation's debt. They lead financial regulations.

They oversee sanctions. And they conduct economic diplomacy abroad. So it's a huge mandate, it's a massive department, and it's a really crucial job. Like Trump's last Treasury Secretary, Steven Mnuchin, Scott Bessent is a long-time Wall Street investor. He started his career at Soros Fund Management, the investment firm founded by the billionaire George Soros Fund Management, the investment firm founded by the billionaire George Soros.

Soros, by the way, has been a big supporter of liberal causes and a big target of the right wing. Back in the 90s, Besant worked with Soros's team to short the British pound, a move that led to a billion dollar windfall. Later, Besant co-founded his own investment company called Key Square Capital Management. He sort of spent his entire career in this sort of investing world. And for someone like Donald Trump, a businessman who thinks in terms of dollars and cents, that's really important. He really likes people who have experience on Wall Street and people who have, in his view, been successful on Wall Street. He sees that as a really important asset, particularly at the Treasury Secretary role. Remember, in his first term, Stephen Mnuchin, who was a Wall Street guy, was his first term Treasury Secretary and maintained a relatively

good relationship with Trump throughout his term. Which is remarkable. It's unusual. It is. Yeah. I mean, you saw a lot of people come and go during the first term. Some lasted, you know, only weeks or months. And for someone to stick around for years is really notable. So what's Besant's relationship like with Trump? Do they know each other well? They know each other well now, but it's a relatively recent relationship. Besant has known the Trump family in a sort of acquaintance type way for decades, but

he really started getting to know Trump about a year ago. Trump was impressed with Besson's unequivocal support at a time when a lot of people on Wall Street were backing people like Nikki Haley or just staying out of it altogether. So he really caught Trump's eye when he was on TV, you know, praising him up and down. I think what's very interesting about President Trump, he's been in the financial markets, through his real estate holdings. He has a deep understanding of financial markets as opposed to most politicians.

And then they met at Mar-a-Lago and he traveled with him to some campaign events. He at one point was brought up on stage by Trump where he praised him and called him one of the smartest people on Wall Street. Just come up here, please. Just come up here for a moment. He is considered one of the most brilliant men on Wall Street. So Besant is a Wall Street guy. That's a check for Trump. He is somebody who has defended Trump, also a check for Trump. Is there anything else about Besant that sort of speaks to why Trump is picking him? So two things we were told after he made the decision. One and the most important thing

is they had a personal rapport and Trump came to trust him. And he trusted that he would be the best positioned people of all these other candidates to actually implement his agenda. And then secondarily, and this is quite secondary, Trump has also told people that he likes the way he looks. Like his physical appearance. His physical appearance. Trump talks about, one of the highest forms of praise from Trump is when he describes someone as straight from central casting.

It means that they look the part. And Scott Bessent does look the part. He has sort of gray hair and it's swept back, and he wears glasses, and he looks sort of almost professorial, and he looks like the kind of guy that you sort of want to be the face for the treasurer secretary, at least in Trump's opinion. — Bessent seemed like a natural fit. But he wasn't the only name in the mix. There was also Howard Lutnick,

the CEO of a financial services company called Cantor Fitzgerald. Lutnick is a close Trump ally and a strong supporter of Trump's economic plans. What did Howard Lutnick bring to the table? So he actually has known Trump for quite a while. They have a relationship that dates back decades from just being in New York circles in the 80s and 90s. He was also a fierce defender of Trump on television. And that's how he ended up, in part, getting this job as co-chair of the transition team.

And he developed a really close relationship with Trump over these last few weeks in particular, as he was sort of going over the ins and outs of what the administration should look like. Lutnick had won the backing of some high-profile people in Trump's inner circle. — Over the last week and a half, Trump allies come out in favor of Lutnick for Treasury, and that is Elon Musk, the businessman, and Robert Kennedy Jr., who's now the nominee for to lead the Health and Human Services Department. And they both came out on social media and said, you know, he's our guy, essentially. And not only that, Musk sort of directly criticized Besen arguing

that he was a more business as usual approach and that he wouldn't sort of shake up the Treasury Department in the way that they wanted him to. So, what's wrong with the business as usual approach, according to Besen's critics? And like, what was it that Lutnick was bringing that they felt was more desirable? So one of the biggest things is their approach to trade. Besant up until recently has taken a more traditional Wall Street view of trade, and he's described Trump's sweeping plans for aggressive tariffs on basically all US imports as a negotiating tactic, as something that when you sit down

with other countries, this threat is enough to reach an agreement that is beneficial to both sides. And then ultimately some of these big campaign promises might not come to fruition because of that. Lutnick has been a little bit more of a just straight up cheerleader for Trump's trade agenda with fewer caveats. And so there was a sense that like he was a more true believer, MAGA type guy.

Lutnick's last minute play for the treasury job almost derailed Vesin's nomination. And Andrew says the infighting got pretty fierce. One Trump advisor called it a knife fight. It was pretty intense. So these are some veteran people that lived through a lot of fighting in the first term. And they even were surprised by the degree to which not only were they sort of bad mouthing each other behind the scenes,

but also how aggressively and public the campaign became. You had multiple candidates, you know, sort of publicly making the case on Twitter and elsewhere, and interviews for the job. And it irritated Trump, according to people that we talked to, to the point where he actually broadened the search at the last minute beyond Lutnick and Besant to include other people like Kevin Warsh, who's the former Fed governor, and Apollo global management CEO Mark Rowan.

But ultimately Trump went with Besant. What made him come to pick him over Lutnick or any of these other folks? So one thing happened in the interim, which is come to pick him over Lutnick or any of these other folks? So one thing happened in the interim, which is what he decided to give Lutnick the Commerce Secretary job. So that ended up taking him out of the running. Notably, he also was giving Lutnick a pretty broad portfolio, including oversight of trade itself. And I just think he wasn't happy with the other candidates. And so I think he decided that his first initial gut instinct was the best one.

How Besant might implement Trump's big economic ideas? That's next. Okay, so Trump has nominated Scott Besant for Treasury Secretary. What do we know about Besant's plans if the Senate confirms him for the job? So Besant did his first interview with the journal just the other day, and he laid out a few things that he's, at least in his initial thinking. So the sort of first and biggest thing is making the 2017 tax cuts that Trump oversaw permanent. That's going to be a massive undertaking that's going to unfold in 2025.

That's going to involve lots of negotiations with lawmakers. He also wants to follow through on the campaign promises that Trump made, so that's including eliminated taxes on tips, social security benefits, and overtime pay. And he wants to focus on rolling back regulations, which is at the core of Trump's campaign pledge. Besant also pitched Trump on a plan

to stimulate economic growth. And he gave the idea a catchy name, 333. It is based on Shinzo Abe, the former Prime Minister of Japan's approach to sort of turning around the economy in the 2000s. And there are sort of three planks to that approach. So they include cutting the budget deficit to 3% of gross domestic product by 2028, spurring GDP growth of 3% through deregulation, and also producing an additional 3 million barrels of oil per day. So that's the 333. Yeah, I mean, he was smart to kind of create a name for it because I think Trump thinks that way.

He sort of thinks in slogans and it's unclear if Trump will explicitly adopt this 333 approach, but it was certainly a powerful selling point for him behind the scenes. But the big thing that many people are watching for is what Besant does about tariffs. During his campaign, Trump talked a lot about tariffs. But to me, the most beautiful word in the dictionary is tariff, and it's my favorite word.

It needs a public relations firm. Trump has even said he wants to put a tariff on every import into the US. In a post last night on Truth Social, he said that one of his first executive orders will be to impose a 25% tariff on all products coming from Mexico and Canada, and an additional 10% tariff on products from China. But remember, Besant had in the past taken a less aggressive position on tariffs.

And that was a sticking point for some inside Trump's transition team. — During the campaign, one of the things that he said was that he saw tariffs as a negotiating tool. In a letter to investors, he said, the tariff gun will always be loaded and on the table, but rarely discharged. Which is an indication that he believes that these are a useful negotiating tool and a threat, but that you should really only use them when you have to. That really differs from the way that the President-elect thinks about tariffs. He got up on the campaign stage time after time and said,

I'm going to slap 60% tariffs on China. I'm going to do up to 20% across the board tariff on all US imports. He's talked about 200% or higher tariff on vehicles from Mexico. These were not framed as simply negotiating tactics during the campaign. Now, I should note, Besant has sort of tried to tweak that position, especially because

it was one of the reasons why people were trying to take him down in the final days. And he published an op-ed on Fox News' website just days before the announcement where he basically said that, you know, I'm a true believer on tariffs. And he criticized people who criticized tariffs. So he said in the op-ed, the reflexive opposition to tariffs represents political ideology and advocacy not considered economic thought. So he's trying to make this sort of economic academic case for why tariffs are important. So it sounds like he could go either way on tariffs.

It remains to be seen how he'll actually approach it if he's confirmed and becomes Treasury Secretary. And my guess is at the end of the day, there's going to be a lot of very spirited fights about this behind the scenes. What does it say to you that Trump went with him as his Treasury Secretary? I think it says that for all the bluster and for all of the campaign rhetoric, Trump wanted a relatively steadying force at the Treasury. And then he was worried that if he picked someone that was a little bit more unknown or didn't have

a whole lot of bona fides on Wall Street, that the market would be spooked. He just really didn't want to see the market's downturn as a result of whoever he chose. And in the days leading up to his decision, he called people on Wall Street and asked for their advice. And the advice that they gave was that Besesson would be seen as a sort of steady leader, and that they would reassure the markets. And it did. — Besson still needs to be confirmed by the Senate early next year. How is that process likely to go for him? Is there anything from his past, maybe, that might come up during confirmation hearings?

— Yeah, so, this is just starting now. He does not have a lot of strong relationships on Capitol Hill, so he's going to have to go to the Senate and meet and introduce himself to senators. As of now, we see no indication that he's not going to get confirmed. Remember, the Republicans now control the Senate. But they will certainly ask about his investment history. Republicans, I'm sure, will be curious about his long-time affiliation with George Soros. But as of now, we're not seeing any red flags that should slow down the confirmation battle,

but it's something we're going to be watching closely. And so nominations for cabinet posts are continuing to roll in. What do these picks tell us about Trump's second term? One of the things that Trump talks a lot about and his close allies talk a lot about is they want to do things slightly differently than they did the first time. In the first term, they felt that they had too many people that were rowing in the different direction than them and that opposed fundamentally some of the things they were trying to do. This time, though the thing that they've really stressed is that, yes, there will be disagreement

on the specifics, but you have to be in line with Trump ideologically in order to serve in this administration. And we'll see if that is actually the case, if there are people who harbor some concerns about some of his policies behind the scenes, but they really want people all on the same page. That's all for today, Tuesday, November 26th. The Journal is a co-production of Spotify and The Wall Street Journal. Additional reporting in this episode from Ben Schwartz, Nick Timouros, Alex Leary, Peter Routagier, and Gregory Zuckerman.

Thanks for listening. See you tomorrow.