Bond fund manager Jeffrey Gundlach thinks Donald Trump will pick Neel Kashkari to be the next chairman of the Federal Reserve.
That might not be as far-fetched as it seems. Although Kashkari is not considered one of the leading candidates for the job, his views may be closer to the president’s than any of those thought to be on the White House’s short-list.
Gundlach, who was one of the few big-time money managers who predicted the election of Trump, made his prediction at a Vanity Fair conference in Los Angeles Tuesday.
“I actually have a very non-consensus point of view. I think it’s going to be Neel Kashkari,” the CEO of Doubline Capital said, according to a CNBC report. “He happens to be the most easy money guy that in the Federal Reserve system today and that’s why he may win.”
Kashkari is not officially under consideration for the post, according to White House sources. The president has met with former Fed governor Kevin Warsh and current Fed governor Jerome Powell to discuss the position. He has also said that he would consider re-appointing current chair Janet Yellen. Gary Cohn, the director of the National Economic Council, was considered to be the front-runner until he fell out of favor with the president because of his comments disparaging the president’s reaction to the violence in Charlottesville.
Gundlach said that he does not think Yellen wants to stay in the position.
“I think there’s no chance that she wants to be chairwoman, nor do I think the president wants her to be,” Gundlach said.
Trump has said that he favors low interest rates and Kashkari is one of the leading interest rate doves at the Fed. Higher rates would make the growth targets of the Trump administration harder to achieve. And to the extent higher rates would cause the dollar to strengthen against foreign currencies, they could cause trade deficits to grow.
Like Cohn, Kashkari is a former Goldman Sachs banker. But he was not a high-ranking executive at the firm and his work did not touch any of the scandals that have loomed over Goldman in recent years. During the financial crisis, he worked closely with then-Treasury Secretary Hank Paulson, running the bank bailout program known as TARP. But he has since become one of the most vocal critics of large banks and has proposed a plan to end the problem of Too Big To Fail with much higher capital requirements. Banks might need to be broken up, Kashkari has said.
“We must begin this work now and give serious consideration to a range of options, including … breaking up large banks into smaller, less connected, less important entities,” he said last year.
That sets him apart from most other Fed officials and puts him in the same camp as Trump, who has said that he would consider breaking up the largest banks.
Indeed, on a number of issues, Kashkari’s views are far closer to Trump’s than those of Cohn, Warsh, or Powell. Warsh, for example, has been a vocal advocate of the type of free trade deals that Trump has criticized. Kashkari describes himself as favoring free-trade but always with the caveat that it serve to boost U.S. exports by opening markets to U.S. manufacturers. When he ran for governor of California a few years ago, Kashkari put forth a program to revive manufacturing in the state that often sounded like Trump could have advocated on the campaign trail.
Kashkari has also criticized advocates of open borders, telling California governor Jerry Brown in 2014 debate that, “The solution to suffering kids is not open borders.” Kashkari even advocated deporting juvenile illegal immigrants.
“We need to change the law so we can send them home quickly,” he said. “The only way we are going to stop the next wave of kids from this dangerous journey is if they see the kids that left last month are back.”
Kashkari has said that U.S. immigration policy should focus on high-skill immigrants. Trump recently endorsed the RAISE ACT, an immigration bill that would do just that. Importantly, Kashkari has also voiced skepticism about claims that there are worker shortages in the U.S., saying that those claims rang hollow if not accompanied by rising wages.
“I think I’m the only guy on God’s green earth that believes it will be Neel Kashkari,” Gundlach said.
That may not be true for very long.
Gundlach is known for his unconventional views. He grew-up in Buffalo, New York, the son of an employee at a bowling alley. When he moved to L.A. he played drums in a punk band called Radical Flat. He was inspired to work in finance by watching an episode of “Lifestyles of the Rich and Famous.” He spent years helping TCW build its bond investing business before being thrown out of the firm in 2009. That led him to start his own firm, DoubleLine Capital, which now manages over $100 billion.