Goldman Veteran Will Be Next Cleveland Fed President

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by Tyler Durden
Wednesday, May 29, 2024 - 02:51 PM

Once upon a time, we joked that Goldman had become a veritable incubator for future central bank heads: from NY Fed's Bill Dudley, to BOC's Mark Carney, to ECB's Mario Draghi, to disgraced Dallas Fed daytrader Robert Kaplan, and Minneapolis Fed "chump" Neel Kashkari, it seemed that anywhere one looked one would find a money printing tentacle of the vampire squid.

Then things went silent around the time Goldman decided to lose its trading luster and focus on issuing credit cards to subprime consumers, a venture which as we warned at the time, ended up in absolute disaster. And just as the bank's income statement was in shambles for the period from 2018 to 2023, so was its central bank incubator reputation.

But things are starting to change: having ditched its catastrophic effort to cater to consumers, and refocusing on its prop trading  principal investing roots, the bank managed to send its stock to all time highs as it managed to restore much of its lost reputation. And the confirmation came moments ago when after a several years hiatus, the Celeveland Fed announced that former Goldman executive and member of the notorious Treasury Borrowing Advisory Committe, Beth Hammack, will become the next president of the regional Fed.

Hammack, 52, spent three decades at Goldman, where she served as global treasurer during the Covid-19 pandemic. Most recently, she was co-head of the bank’s global financing group.

Just as importantly, she served as the chair of the Treasury Borrowing Advisory Committee, or TBAC, a group of Wall Street executives who advise the U.S. Treasury on debt issuance, from 2018 to 2023.

The Cleveland Fed president has a turn voting on the Fed’s rate-setting committee this year. Hammack will start on Aug. 21, meaning she will participate in monetary policy meetings beginning in September.

According to the WSJ, Hammack’s appointment could beef up the committee’s expertise on financial markets, where it has been light in recent years.

As noted above, other current Goldman alums at the Fed include Minneapolis Fed President Neel Kashkari. Robert Kaplan, who announced his resignation as Dallas Fed president in September 2021, was hired as vice chairman at Goldman Sachs earlier this month. He previously spent two decades at Goldman.

The Cleveland bank’s current leader, Loretta Mester, assumed her role in 2014 and will leave at the end of June, when she reaches a mandatory retirement age. She is set to participate at the Fed’s next meeting, June 11-12. During her tenure, Mester was regarded as a vocal hawk and Fed watchers will be keen to learn which way her replacement leans.

The presidents of the Fed's 12 quasi-private reserve banks are chosen by the individual banks' boards of directors, whose members are typically business or nonprofit executives. The selections are subject to approval by the Fed's board of governors in Washington. The Cleveland Fed district includes Ohio and parts of Pennsylvania, West Virginia and Kentucky.

Goldman's return to the regional Fed scene comes at a time when speculation is rife that when Trump becomes president he may appoint a dovish lackey to head the central bank, effectively stripping the Fed of what little fake independence it has left in a move that could have dire consequences for the dollar's "reserve" status.