Trump May Pick John Allison For Treasury Secretary

Investors are going along with the same belief system voters had when they chose Trump. Trump has taken multiple positions on issues which caused his supporters to envision their personal opinions on Trump and assume he was fighting for them. Investors are imagining the best possible scenario where he’s pro-business (possible), in favor of free trade (unlikely), and in favor of a less interventionist monetary policy (possible). There’s always optimism after a president is elected, but few have ever had such the uncertainty which surrounds the Trump administration. Trump’s disdain for the media, makes me question if what he’s feeding them is true or being used for his own political gains.

The market is ignoring Trump’s tweeting which has the potential to cause volatility in the next few years. Today he tweeted those who burn the American flag should be jailed for a year or have their citizen revoked. Trump shoots off the cuff responses to whatever is in the news. If the Fed raises rates in December and the market sells off, I could see him claiming the Fed is trying to bring him down. This could cause Yellen to step down which would cause uncertainty over future policy. If the market doesn’t respond to Trump’s tweets, it means it take him seriously. We will see in the next few weeks which statements he’s made in the past we should take seriously and which campaign promises will be revoked.

Recently Trump met with John Allison who is the former CEO of BB&T Bank and the former CEO of the Cato Institute, the libertarian think tank. He’s considered to be a late entrant as a candidate for Treasury Secretary. This would be an amazing pick and would signal Trump is serious about his Federal Reserve criticisms and dedication to free market capitalism. The rules of how Trump operates are different than past transition teams. Therefore, instead of looking at years past to determine who he will pick, I have to look at the past few weeks of his actions.

The two actions I will look at are positive for the chances of Allison. The first is the Secretary of State position. Mitt Romney is considered to be one of the front-runners for this position. Some may wonder if Trump is serious about considering Romney because he has been a harsh critic of Trump on the campaign trail. Trump called Romney a failure for losing to Obama and Romney attacked Trump for not disclosing is tax returns. Recently, Trump’s campaign manager Kellyanne Conway stated Trump’s grassroots supporters don’t like Romney. This statement infuriated Trump which shows he’s seriously considering everyone he meets with and is willing to put the good of the country ahead of his ego. This means Trump seriously listened to Allison in his meeting with him.

Trump has chosen Tom Price as the Health and Human Services Secretary who has beliefs along with Paul Ryan. This shows Trump plans to keep his promise about dismantling Obamacare and it shows he’s willing to make peace with the ideas of his critics (Paul Ryan gave Trump a weak endorsement). Tom Price’s proposals won’t necessarily be enacted into law, but he has great ideas.

One part of his proposal is to allow people to save for health care before taxes in health savings accounts. Even those under Medicare can have savings accounts to pay premiums and copays. This is a great idea because when the consumer shops for healthcare they become price sensitive which causes costs to fall. This is why plastic surgery has seen declining prices.

Another great part of Price’s health care plan is if someone with a preexisting medical condition doesn’t have continuous insurance 18 months prior to getting a new policy, they will be denied coverage. The person can be denied up to 18 months after picking the policy. Those who can’t get insurance would be put in a high risk pool which the federal government would gave states money to pay for. This is a great idea because the ability to deny coverage allows insurance to exist. If everyone can get insurance, they can just wait until they get sick to get coverage. This is why the individual mandate was put in place. Separating those with pre-existing conditions allows the free market to cut costs for most people and has the government deal with the few people who are unhealthy.

The pick of Tom Price shows Trump is sticking to support of the free market. This approach to health care is similar to what Trump’s advisors put in place as his infrastructure plan. This lowers the likelihood Steve Bannon’s trillion dollar stimulus plan will get enacted.

John Allison is a capitalist who has great proposals. If he gets picked by Trump, I question the thesis that Trump will rely on the Fed to do QE in order to pay for massive deficits. Trump may be in favor of lowering the influence the Fed has over markets. John Allison is in favor of ending the Fed, getting rid of the FDIC, repealing Dodd Frank, and repealing the 1968 Truth In Lending Act.

I can only wonder what Trump’s thought on the Fed are. I’m aware Carl Icahn’s criticisms of the Fed are why Trump attacked the central bank as being political and forming asset bubbles. John Allison likely told Trump about his findings which show the Fed creates volatility even though it tries to diminish it. The Fed’s debt monetization is funding Congress’s deficit spending which depreciates the spending power of the American people. There is a real chance Trump sides with Allison which would be the biggest Cabinet decision Trump makes in his presidency.

Repealing Dodd Frank, the FDIC, and the Truth In Lending Act would all be great for the banks as costs would be lowered. Trump has wavered on his criticism of Dodd Frank in the past few weeks, so appointing John Allison would renew his criticism of the law. Eliminating the FDIC would make the banking system safer because if the government doesn’t insure deposits, banks have to take less risk in order to earn depositors’ trust. The FDIC is the impetus for the ‘too big to fail phenomena’ because it essentially guarantees every bank will be bailed out. The banks won’t need to take as high risk in order to make big profits because of the cost savings repealing regulations would bring.


            The past few days have been mixed for Trump. The market is ignoring any possible negative scenario as the NASDAQ reached new all-time highs today. If Trump reigns in the Fed, it will terrible for the stock market, but great for long term growth. The Fed won’t be able to create bubbles in the future, but this current bubble will also pop. I consider Trump to be close to Andrew Jackson. Jackson shut down the second National Bank. Trump would be acting repeating President Jackson’s actions by rolling back Fed policy.

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