Wells Fargo CEO Charlie Scharf on Monday backed the independence of the Federal Reserve but also President Donald Trump’s right to espouse his central bank views.
“The financial services industry is pretty consistent” that “the independence of the Fed is critically important,” the chief executive told David Rubenstein during a Monday event at The Economic Club in Washington, D.C.
However – “just to get a little controversial” – Scharf said there’s no reason why the president shouldn’t have a point of view when it comes to the central bank.
“This always comes down to, well, what should the president be able to say and what should the president be able to do?” Scharf said. “All presidents have for a long period of time. They've done it in different ways. This president does it very vocally in terms of what his points of view are.”
President Donald Trump has nominated former Fed Gov. Kevin Warsh to succeed Fed Chair Jerome Powell, whose term is set to end May 15. The Senate Banking Committee has set a hearing Tuesday on Warsh’s nomination.
Trump hasn’t held back his criticism of Powell, who was confirmed as chair during Trump’s first term. The president has relentlessly pressured the Fed chair to lower interest rates. More recently, Trump has resumed his push to fire Powell, who’s also the subject of a Justice Department probe related to the central bank’s renovation projects.
Scharf noted the contrast between the viewpoints-heavy political infrastructure, which turns over frequently, and the long-term structure at the Fed. Striking the right balance to achieve the best outcome, “given the political environment we have, is extremely important,” he said.
Warsh, Scharf said, has his own views “on what's going on in the world, AI, what it's going to mean for jobs, what it's going to mean for productivity, and that's his point of view, and it's got to be approved by Congress.”
“This idea that there's total separation is just not true. But it is true when it gets to the actual decision making, and that's really important,” Scharf said told Rubenstein, the Economic Club’s chairman who’s also co-founder and co-chair of the Carlyle Group.
When it comes to the decision to lower interest rates – something Trump has incessantly pushed for – it seems difficult to imagine Warsh pushing ahead with that given the current state of the economy, Scharf acknowledged.
“Right now, there’s pretty clear consensus that it would be the wrong thing to do,” Scharf said, in light of the risk posed by the Iran war.
“As you hear voting committee members talk about it, there's a high degree of consistency – including, I think, from the Treasury secretary – in terms of waiting to see how this all plays out,” Scharf said. “That seems like the prudent thing to do.”
As for the economic impact of the war, the CEO indicated he’s watching to see how long oil and gas prices remain high amid the conflict.
“If this goes on for a longer period of time, it can be more damaging,” said Scharf.
The banking industry broadly saw Trump’s reelection ushering in a more favorable climate for business. Trump-era regulators have sought to roll back regulations, emphasizing a focus on material financial risk and approving larger bank deals more quickly. But lenders have also faced scrutiny around debanking activities, for example.
The Trump administration is highly accessible, which Scharf added is “totally different than the last administration.” The Biden White House had “no interest in engaging, other than one or two people in that administration,” he said.
“We don't agree with everything the administration is doing,” Scharf said of Trump’s White House. “They don't like everything about us, but it's a very, very open conversation about policies, about regulation, about things that we see, and I think there's always this open door to conversation.”
