What Scott Bessent’s appointment means for the Trump administration

At lastwhite, smoke has emerged from Mar-a-Lago. Two and a half weeks after the election and more than a week since it first seemed as if an announcement about a choice of treasury secretary was coming, has finally made his decision. On November 22nd the campaign said that Scott Bessent, a hedge-fund titan, would command 1500 Pennsylvania Avenue. Both the appointment of Mr Bessent, and the manner in which he was picked, offer clues about economic policy during a second Trump term.The president-elect has made a sensible choice. Mr Bessent is a sharp observer of markets and has a deep grasp of macroeconomics, which has earned him respect on Wall Street. In 1992, as a young portfolio manager at Soros Fund Management, he tipped off Stanley Druckenmiller, a partner at the firm, that the Bank of England would probably be unwilling to defend the pound, as the British economy was struggling. Mr Druckenmiller and George Soros went on to make one of the most famous and successful hedge-fund trades of all time: they bet against sterling and “broke the Bank of England”, making $1bn in the process. When Mr Bessent set out to run his own fund in 2015, he did so with a $2bn investment from Mr Soros.Mr Bessent has been loyal to Mr Trump, donating lavishly to his cause and willing to drop everything to appear on Fox News as an “economic adviser” to the campaign. When he did so he would talk up his support for Trumponomics—wanting to renew the tax cuts put in place during Mr Trump’s first term, outlining an aggressive deregulation agenda and praising the president-elect as a skilled negotiator when it came to waging trade wars.Still, his understanding of economics is likely to lead him to have other priorities, too. In particular, Mr Bessent appears to care deeply about containing government debt: he characterised the big deficits and state subsidies of the Biden era as a “return to central planning” in a speech in June. Any plan to bring down the deficit would almost certainly include gutting the green subsidies in the Inflation Reduction Act, a law enacted in 2022 that he has described as a budgetary “doomsday machine”. He has also, at times, seemed lukewarm on the maximalist tariffs Mr Trump promised on the campaign trail, describing them as more of a negotiating position than a real policy (he laid out some of his ideas in a in October). And he seems less inclined to mess with the dollar than Mr Trump, who has often bemoaned the currency’s strength. That he believes in market exchange rates is hardly a surprise, given his career.Though he was a sensible choice, the path to Mr Bessent’s appointment was anything but—an absurd pageant, involving half a dozen candidates and a “knife fight” between Mr Bessent and Howard Lutnick, the brash boss of Cantor Fitzgerald, an investment firm, and co-chair of Mr Trump’s transition team. Mr Lutnick ultimately had to make do with being nominated as commerce secretary.The process showed that—despite indulging his wildest instincts when it came to almost every other department—Mr Trump wanted to stick to the straight and narrow when it came to the Treasury, preferring a serious Wall Street pedigree. He long coveted Jamie Dimon, boss of JPMorgan Chase, a bank, for the role. A similar impulse led him to consider John Paulson, another hedge-fund titan, and Marc Rowan, boss of Apollo, a successful private-markets firm, as well as Kevin Warsh, a former Federal Reserve Board member. He also wanted someone who was all-in on Trumponomics—from the tax cuts to the deregulation to the tariffs. And he was desperate not to pick someone who might bring about a halt to the post-election stockmarket rally.Nobody fulfilled all these criteria. Robert Lighthizer, a trade hardliner, probably never stood a chance, because the market would have slid in protest. Meanwhile, any of the serious Wall Street types Mr Trump favoured were unlikely to be convinced by his trade plans. Any of them would have ended up playing the kind of role that Gary Cohn, a former Goldman Sachs executive and economic adviser to Mr Trump, or Steven Mnuchin, the president-elect’s last Treasury secretary, did in his first administration. They were keen on tax cuts and deregulation but sceptical of trade wars, a mix that led to explosive Oval Office disputes.By eventually picking Mr Bessent, Mr Trump has sided with his instinct to keep the markets happy. His selection suggests that he really could be constrained by their reaction, at least when it comes to economic policy. That is good news for anyone anxious about how radical he may be in office.But the process also showed that Mr Trump is as arbitrary and capricious as ever. A little over a week ago, Mr Bessent appeared about to be imminently appointed—until Mr Lutnick started whispering in Mr Trump’s ear. As Mr Lutnick’s campaign intensified, and he won over the “first buddy”, Elon Musk, advisers rushed to push Mr Bessent’s case, which may have drawn out the process even further. There is little that Mr Trump hates more than being told what to do.This situation is hardly a peaceful one. It implies that Mr Trump’s desire to appease the markets will be at war with his tendency to do something irrational simply because he is frustrated. Best of luck, then, to Mr Bessent.