UBS Chairman Axel Weber is on first name basis with the world's most influential monetary policy setters. He reveals whom he would prefer as next head of the Federal Reserve.
The chairman of Switzerland's largest lender is often asked to armchair quarterback monetary policy in the U.S. and Europe, though he left the European Central Bank's top council six years ago.
Axel Weber has been critical of ultra-loose policy, including negative interest rates in Switzerland and elsewhere which cost Swiss banks including UBS a whopping 1.5 billion Swiss francs in fees last year.
No surprise then that Weber on Thursday echoed his Deutsche Bank colleague John Cryan, who had openly called for tighter policy by giving «the market a little bit, then a little bit more» at a conference in Frankfurt held by German publisher «Handelsblatt».
«Government Sachs»
That «little bit» is expected by some market watchers ahead of Thursday's rate-setting session by the ECB. Meanwhile in the U.S., President Donald Trump may replace the head of the Federal Reserve, Janet Yellen, when her term expires in February.
Trump is accused of stocking his administration with «Government Sachs» bankers – which refers to the revolving door between influential U.S. investment banks and public service – such as Steve Mnuchin, who runs the Treasury, and Gary Cohn, an economic adviser.
In his inimitable reality star-style, Trump launched Cohn as a candidate in an interview with «The Wall Street Journal» six weeks ago. Ironically, Cohn's main job currently besides advising the president is to run the search process for the next Fed head.
«Cohn in Pole Position»
What's Weber got to do with the mix? The chairman of the world's largest private bank prefers Cohn to replace Yellen, he told the «Handelsblatt» conference on Thursday.
«In a phase where the Fed is reducing its balance sheet, where we're talking a lot about the effect that such a policy will have on markets and on the real economy, it's very sensible to have someone like Cohn play a role,» Weber said. «If that will be at the Fed, we'll see, but I think he has what it takes for the job,» and is in «pole position».
Market-Savvy Fed
«He (Cohn) was the number-two man at Goldman Sachs, and the one who knew the trading floor and the markets extremely well.» Unfortunately for the former Goldman Sachs banker, his candidacy looks to be foundering. Sources close to Trump told the «WSJ» overnight that the president doesn't plan to nominate Cohn for the Fed job after all.
Cohn, who is Jewish, had been openly critical of his boss' response to violence, racism, and anti-semitism in Charlottesville, VA last month.
Cohn Dropped?
The banker's chances of snagging the top Fed job for himself have dropped dramatically because he blindsided Trump with the criticism.
On Wednesday, Yellen's deputy, Stanley Fischer said he will resign next month for unexplained personal reasons. Market watchers speculated that this could pave the way for Cohn to have a high-level Fed role after all – but under Yellen.
Weber and Cohn, who know each other from the Institute of International Finance, a banking lobby group, might run into each other on Capital Hill yet.
