Trump Ally Bessent Says Yellen Using Post to Aid Biden 2024 Bid

(Bloomberg) -- Key Square Group LP founder Scott Bessent, a prominent Donald Trump fundraiser, sharply criticized Treasury Secretary Janet Yellen, accusing her of using the department to bolster President Joe Biden by juicing the economy ahead of the election.

Most Read from Bloomberg

Bessent, who is seen as a potential pick for a top economic position in a second Trump administration, said Yellen had “taken control of monetary policy” through Treasury issuances.

“Yellen in October changed the cadence of the composition of the Treasury issue which eased financial conditions substantially,” Bessent said during a wide-ranging Bloomberg roundtable on Friday. “You had this incredible loosening of financial conditions.”

Asked about Bessent’s criticisms of Yellen, Treasury spokesperson Christopher Hayden said the agency makes debt issuance decisions based on demand and borrowing needs, with the goal to finance budget gaps at the lowest cost to taxpayers. Recent debt issuance decisions have been “well within the range of market expectations,” he said.

Yellen, in congressional testimony earlier this week, denied a claim from US Senator John Kennedy, a Louisiana Republican, that she was trying to induce a “sugar high” in the economy before the election.

Earlier: Ex-Soros Star Bessent Jockeys With Paulson to Run Trump Treasury

Bessent has been a pointed critic of Biden’s management of the economy, a defining issue for voters in November’s election, and accused Federal Reserve Chair Jay Powell of being slow to tackle the high inflation that has been one of the president’s top political liabilities.

Trump, the presumptive Republican nominee, tapped Powell to lead the Fed as president, but said last year he would not reappoint him. Bessent downplayed any suggestion Trump might seek to fire Powell before his term expires in 2026.

“I would be very surprised,” Bessent said, citing deadlines to extend Trump-era tax cuts and other battles that would occupy an incoming president’s attention in what he called a “fraught 2025.”

Tax, Debt Priorities

Bessent on Friday said he was not speaking on behalf of Trump’s campaign, but the global macro investor and self-described “economic historian” has the ear of the former president’s inner circle as one of several informal advisers and Wall Street donors who have been discussing policy and jockeying for influence.

Bessent said a Republican administration would focus on reducing the debt and deficit by ensuring an extension of the 2017 tax cuts signed into law by Trump that are set to expire next year would be offset. While offering a fresh round of tax cuts has endeared Trump to Wall Street, the extensions come with an estimated $4.6 trillion cost.

Earlier: Trump Tax Cut Renewal Revives Fight Over Cost, National Debt

“If the Trump tax cuts get extended or made permanent, I think there have to be pay-fors,” Bessent said, floating “rolling back” the Inflation Reduction Act, Biden’s climate and tax law, and halting the president’s initiative on “forgiving student loans.” He questioned the legality of the IRA and Biden’s effort to relieve student-loan debt.

On tariffs, Bessent told Bloomberg News he would be in favor of a system of tariffs in which Trump’s proposed 10% minimum tariff proposal could be scaled up or down depending on the nature of the US relationship with a specific country. Allies could see tariffs of 5% or lower, as one example.

He added that there was not “much disagreement” among Trump’s informal economic advisers on the idea of a global minimum tariff and that there are ways to add nuance to it.

Ultra-Long Bonds

Bessent offered support for the idea of the US issuing ultra long-term bonds, an idea studied in Trump’s administration by then-Treasury Secretary Steven Mnuchin. The idea failed to gain traction with Treasury’s market advisers saying they did not foresee enough demand for 50- and 100- year bonds.

“It would have been a great idea,” Bessent said, and noted countries such as Mexico and Austria have done so, dismissing the idea that there would be insufficient demand for the bonds.

“When rates are very low, you should extend duration,” he said. “I think it’s very unfortunate what Secretary Yellen’s doing. She’s financing at the front end, and she’s making a bet on the carry trade, which is not good risk management.”

Bessent seemed less concerned with Treasury’s longstanding practices in debt management, which is to be “regular and predictable” in its issuance, saying it would be feasible to issue a first ultra-long bond as a one-off and see how demand developed.

Earlier: White House Mulls New 50-, 25-Year Bonds to Finance Stimulus

On Ukraine, Bessent called sanctions “pretty ineffective,” and said Biden’s efforts to aid Kyiv were hampered by White House worries about raising the price of gas if Ukrainian President Volodymyr Zelenskiy were allowed to strike Russian refineries.

He also suggested that financial regulation under a Republican administration should focus on penalizing regulators instead of banks.

“I think that small and community banks have to be at the center of this, and any regulation that makes it more costly for them or starts putting them out of business is bad for Main Street,” Bessent said.

--With assistance from Joshua Green, Ben Bain, Nancy Cook, Christopher Condon and Katherine Burton.

Most Read from Bloomberg Businessweek

©2024 Bloomberg L.P.