Donald Trump, who is about to take over the White House, will nominate Scott Bessent of the hedge fund Key Square Group as the next U.S. Treasury Secretary, and said he will help the United States usher in a new golden age and consolidate the United States' position as the world's leading economy.
Table of Contents
ToggleThe Head of the Hedge Fund Will Lead the U.S. Treasury
According to Bloomberg, the 62-year-old Bessent stood out among many candidates, and if approved by the U.S. Senate, Bessent will become the first openly gay Treasury Secretary. Bessent said he has always wanted to serve the country, but in the 1980s, his sexual orientation prevented him from entering the U.S. Naval Academy and joining the State Department after graduating from Yale University.
Part of Bessent's career was spent managing funds for billionaire George Soros. He was a member of the team led by Stan Druckenmiller, which made a billion-dollar bet against the British pound in 1992 - a wager that forced the pound out of the European Exchange Rate Mechanism and made Soros famous as the "Quantum Fund King". Under Bessent's leadership as chief investment officer, the Soros family office's profits were around $10 billion, with an annualized return of about 13%. In 2015, he founded Key Square, focusing on macro investments that capitalize on geopolitical and economic trends.
According to a person familiar with the matter, Bessent will return the funds to his hedge fund clients as soon as possible after December 1. Federal rules require cabinet members to develop plans to eliminate potential conflicts of interest and implement those plans, typically within just 90 days.
Bessent Will Lead the Financial Stability Council That Regulates Tax Collection and Stablecoins
Bessent is expected to play a key role in pushing Congress to extend Trump's 2017 tax cut plan, many of which are set to expire at the end of 2025.
The Treasury Secretary is also responsible for managing the Financial Stability Oversight Council, a group formed after the financial crisis. Under the outgoing Treasury Secretary Janet Yellen, the FSOC has begun to focus on climate change issues, which has drawn criticism from Republicans who are cautious about banks incorporating climate into lending or capital decisions.
The Financial Stability Council under Yellen's leadership has also recommended strengthening regulation of stablecoins, with the Federal Reserve likening stablecoins to bank deposits and money market funds, and subject to more regulation. Trump's initiatives in the cryptocurrency field during the campaign may make the new Treasury Secretary's stance a focus of attention.
The "Fiscal Hawk" Will Face the Soaring Federal Budget Deficit
Bessent, who is responsible for the nation's finances, will also have to face the high and ever-expanding debt burden. In fiscal year 2024, the federal budget deficit as a percentage of GDP reached a historic high of 6.4% during an economic expansion and full employment. A key driver is the surge in interest costs after the Federal Reserve's series of rate hikes in 2022.
Glen Capelo, managing director of Mischler Financial Group, who has worked on Wall Street bond trading for over 30 years, calls Bessent a "fiscal hawk" who
will certainly have a positive impact on the economy and the market. He wants to control spending. Bessent hopes to realign the Treasury with the market, because he really believes Yellen has done some distortions in issuance.
