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- [00:06]
Jessica Mendoza
During his campaign, one of President elect Donald Trump's top issues was the economy.
- [00:12]
Donald Trump
Kamala Harris and Crooked Joe have driven our economy off a cliff. The Harris price hikes have cost the typical household $28,000. Congratulations. Hope everyone's happy. I'm going to make America affordable again. In addition to making it great again, we're going to make it affordable again.
- [00:35]
Jessica Mendoza
Trump promised big changes by levying tariffs, cutting taxes, and deregulating parts of the economy. Which is why, as Trump has named his Cabinet picks over the past few weeks, our colleague Andrew Rastuccia has been watching for one role in particular.
- [00:51]
Andrew Rastuccia
Yeah, we've been sort of chasing our tails over the last few weeks, trying to figure out what the President is going to do before he does it. But this is a big one for us. On Friday, the President Elect announced that he was going to pick Scott Besant to run the Treasury Department.
- [01:10]
Jessica Mendoza
Scott besant, he's a 62 year old hedge fund manager from South Carolina. And unlike some of Trump's other Cabinet nominations, this one took some time.
- [01:20]
Andrew Rastuccia
There were plenty of other decisions that happened quickly. The Defense Secretary, the Attorney General, big positions that happened in just a matter of days. The fact that this took more than two weeks says a lot about the political importance of the economy for Trump. I mean, he knows that this is one of the issues that sunk Biden and then later Harris, and he knows his political fortunes are really tied up in it.
- [01:39]
Jessica Mendoza
Right. And the Treasury Secretary is key to making his economic promises happen.
- [01:44]
Andrew Rastuccia
The Treasury Secretary, if Bessin is confirmed, will be at the center of the entire economic agenda for the President elect. He has made the economy kind of the centerpiece of his political campaign. And the Treasury Secretary will be at the center of all that. And whether he succeeds or fails will of course be at the feet of the President, but will also really be at the feet of Scott Besson.
- [02:12]
Jessica Mendoza
Welcome to the Journal, our show about money, business and power. I'm Jessica Mendoza. It's Tuesday, November 26th. Coming up on the show, what Trump's pick for treasury secretary might signal for the US Economy.
- [02:41]
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- [03:08]
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- [03:47]
Jessica Mendoza
What does the Treasury Secretary do?
- [03:50]
Andrew Rastuccia
Good question. So the Treasury Secretary does a lot of things. So they are essentially the core economic policymaking engine of the federal government. They are in charge of lots of wonky things. They implement tax policy, they manage the nation's debt, they lead financial regulations, they oversee sanctions, and they conduct economic diplomacy abroad. So it's a huge mandate, it's a massive department, and it's a really crucial job.
- [04:18]
Jessica Mendoza
Like Trump's last Treasury secretary, Steven Mnuchin, Scott Besant is a longtime Wall street investor. He started his career at Soros Fund Management, the investment firm founded by the billionaire George Soros. Soros, by the way, has been a big supporter of liberal causes and a big target of the right wing. Back in the 90s, Besant worked with Soros team to short the British pound, a move that led to a billion dollar windfall. Later, Besant co founded his own investment company called Key Square Capital Management.
- [04:50]
Andrew Rastuccia
He sort of spent his entire career in this sort of investing world. And for someone like Donald Trump, a businessman who thinks in terms of dollars and cents, that's really important. He really likes people who have experience on Wall street and people who have, in his view, been successful on Wall Street. He sees that as a really important asset, particularly at the Treasury Secretary role in his first term. Steven Mnuchin, who was a Wall street guy, was his first term Treasury Secretary and maintained a relatively good relationship with.
- [05:20]
Jessica Mendoza
Trump throughout his term, which is remarkable for Trump.
- [05:24]
Andrew Rastuccia
It's unusual. It's unusual for Trump, Yeah. I mean, you saw a lot of people come and go during the first term. Some lasted only weeks or months. And for someone to stick around for years is really notable.
- [05:37]
Jessica Mendoza
So what's Besant's relationship like with Trump? Do they know each other well?
- [05:41]
Andrew Rastuccia
They know each other well now, but it's a relatively recent relationship. Besin has known the Trump family in a sort of acquaintance type way for decades, but he really started getting to know Trump about a year ago. Trump was impressed with Bessin's unequivocal support at a time when a lot of people on Wall street were backing people like Nikki Haley or just staying out of it altogether. So he really caught Trump's eye when he was on tv, you know, praising him up and down.
- [06:06]
Howard Lutnick
I think what's very interesting about President Trump, he understood he's been in the financial markets through his real estate holdings. He has a deep understanding of financial markets as opposed to most politicians.
- [06:21]
Andrew Rastuccia
And then they met at Mar a Lago and he traveled with him to some campaign events. He at one point was brought up on stage by Trump where he praised him and called him one of the smartest people on Wall Street.
- [06:32]
Donald Trump
Come up here, please. Just come up here for a moment. He is considered one of the most brilliant men on Wall Street.
- [06:43]
Jessica Mendoza
So Besant is a Wall street guy. That's a check for Trump. He is somebody who has defended Trump. Also a check for Trump. Is there anything else about Besant that sort of speaks to why Trump is picking him?
- [06:55]
Andrew Rastuccia
So two things we were told after he made the decision. One, and the most important thing is they had a personal rapport and Trump came to trust him and he trusted that he would be the best positioned people of all these other candidates to actually implement his agenda. And then secondarily, and this is quite secondary, Trump has also told people that he likes the way he looks.
- [07:14]
Jessica Mendoza
Like his physical appearance.
- [07:15]
Andrew Rastuccia
His physical appearance Trump talks about. One of the highest forms of praise from Trump is when he describes someone as straight from central casting. It means that they look the part. And Scott Besant does look the part. He has sort of gray hair that's swept back and he wears glasses and he looks sort of almost professorial. And he looks like the kind of guy that you sort of want to be the face for the Treasury Secretary, at least in Trump's opinion.
- [07:40]
Jessica Mendoza
Besant seemed like a natural fit. But he wasn't the only name in the mix. There was also Howard Lutnick, the CEO of a financial services company called Cantor Fitzgerald. Lutnick is a close Trump ally and a strong supporter of Trump's economic plans. What did Howard Lutnick bring to the table?
- [08:00]
Andrew Rastuccia
So he actually has known Trump for quite a while. They have a relationship that dates back decades from just being in New York circles in the 80s and 90s. He was also a fierce defense of Trump on television. And that's how he ended up, in part, getting this job as co chair of the transition team. And he developed a really close relationship with Trump over these last few weeks. In Particular as he was sort of going over the ins and outs of what the administration should look like.
- [08:27]
Jessica Mendoza
Lutnick had won the backing of some high profile people in Trump's inner circle.
- [08:32]
Andrew Rastuccia
Over the last week and a half, Trump allies come out in favor of Lutnick for Treasury, and that is Elon Musk, the businessman, and Robert Kennedy Jr. Who's now the nominee to lead the Health and Human Services Department. And they both came out on social media and said, you know, he's our guy, essentially. And not only that, Musk sort of directly criticized Besson, arguing that he was a more business as usual approach and that he wouldn't sort of shake up the Treasury Department in the way that they wanted him to.
- [09:05]
Jessica Mendoza
So what's wrong with the business as usual approach, according to Besant's critics? And like, what was it that Lutnick was bringing that they felt was more desirable?
- [09:13]
Andrew Rastuccia
So one of the biggest things is their approach to trade. Besant, up until recently, has taken a more traditional Wall street view of trade. And he's described Trump's sweeping plans for aggressive tariffs on basically all US Imports as a negotiating tactic, as something that when you sit down with other countries, this threat is enough to reach an agreement that is beneficial to both sides. And then ultimately some of these big campaign promises might not come to fruition. Because of that, Lutnick has been a little bit more of a just straight up cheerleader for Trump's trade agenda, with fewer caveats. And so there was a sense that, like, he was a more true believer MAGA type guy.
- [09:54]
Jessica Mendoza
Lutnick's last minute play for the treasury job almost derailed Besant's nomination. And Andrew says the infighting got pretty fierce. One Trump adviser called it a knife fight.
- [10:05]
Andrew Rastuccia
It was pretty intense. So these are some veteran people that lived through a lot of fighting in the first term, and they even were surprised by the degree to which not only were they sort of badmouthing each other behind the scenes, but also how aggressively and public the campaign became. You had multiple candidates sort of publicly making the case on Twitter and elsewhere and in interviews for the job. And it irritated Trump, according to people that we talked to, to the point where he actually broadened the search at the last minute beyond Lutnick and Besant to other people like Kevin Warsh, who's the former Fed governor, and Apollo Global Management CEO Mark Rowan.
- [10:44]
Jessica Mendoza
But ultimately, Trump went with Besant. What made him come to pick him over Lutnick or any of these other folks?
- [10:51]
Andrew Rastuccia
So one thing happened in the interim, which is What? He decided to give Lutnick the Commerce Secretary job. So that ended up taking him out of the running. Notably, he also was giving Lutnick a pretty broad portfolio, including oversight of trade itself. And I just think he wasn't happy with the other candidates. And so I think he decided that his first initial gut instinct was the best one.
- [11:12]
Jessica Mendoza
How Besant might implement Trump's big economic ideas. That's next. Okay, so Trump has nominated Scott Besant for Treasury Secretary. What do we know about Besant's plans if the Senate confirms him for the job?
- [11:46]
Andrew Rastuccia
So Besant did his first interview with the Journal just the other day, and he laid out a few things that he's at least in his initial thinking. So the sort of first and biggest thing is making the 2017 tax cuts that Trump oversaw permanent. That's going to be a massive undertaking that's going to unfold in 2025. That's going to involve lots of negotiations with lawmakers. He also wants to follow through on the campaign promises that Trump made. So that's including eliminating taxes on tips, Social Security benefits, and overtime pay. And he wants to focus on rolling back regulations, which is at the core of Trump's campaign pledge.
- [12:22]
Jessica Mendoza
Besant also pitched Trump on a plan to stimulate economic growth, and he gave the idea a catchy name, 333.
- [12:30]
Andrew Rastuccia
It is based on Shinzo Abe, the former Prime Minister of Japan's approach to sort of turning around the economy in the 2000s. And there are sort of three planks to that approach. So they include cutting the budget deficit to 3% of gross domestic product by 2028, spurring GDP growth of 3% through deregulation, and also producing an additional 3 million barrels of oil per day. So that's the 333. Yeah. I mean, he was smart to kind of create a name for it, because I think Trump thinks that way. He sort of thinks in slogans. And it's unclear if Trump will explicitly adopt this 333 approach, but it was certainly a powerful selling point for him behind the scenes.
- [13:13]
Jessica Mendoza
But the big thing that many people are watching for is what Besant does about tariffs. During his campaign, Trump talked a lot about tariffs, but to me, the most.
- [13:25]
Donald Trump
Beautiful word in the dictionary is tariff. And it's my favorite word. It needs a public relations firm.
- [13:34]
Jessica Mendoza
Trump has even said he wants to put a tariff on every import into the US In a post last night on Truth Social, he said that one of his first executive orders will be to impose a 25% tariff on all products coming from Mexico and Canada, and an additional 10% tariff on products from China. But remember, Besant had in the past taken a less aggressive position on tariffs, and that was a sticking point for some inside Trump's transition team during the campaign.
- [14:02]
Andrew Rastuccia
One of the things that he said was that he saw tariffs as a negotiating tool. In a letter to investors, he said the tariff gun will always be loaded and on the table, but rarely discharged, which is an indication that he believed that these are a useful negotiating tool and a threat, but that you should really only use them when you have to. That really differs from the way that the president elect thinks about tariffs. I mean, he, you know, got up on the campaign stage time after time and said, I'm going to slap 60% tariffs on China. I'm going to do up to 20% across the board tariff on all US imports. He's talked about a 200% or higher tariff on vehicles from Mexico. These were not framed as simply negotiating tactics during the campaign. Now, I should note Besant has sort of tried to tweak that position, especially because it was one of the reasons why people were trying to take him down in the final days. And he published an op ed in Fox on Fox News website just days before the announcement where he basically said that, you know, I'm a true believer on tariffs. And he criticized people who criticized tariffs. So he said in the op ed the reflexive opposition to tariffs represents political ideology and advocacy not considered economic thought. So he's trying to make this sort of economic academic case for why tariffs are important.
- [15:24]
Jessica Mendoza
So it sounds like it could go either way on tariffs.
- [15:27]
Andrew Rastuccia
It remains to be seen how he'll actually approach it if he's confirmed and becomes treasury secretary. And my guess is, at the end of the day, there's going to be a lot of very spirited fights about this behind the scenes.
- [15:37]
Jessica Mendoza
What does it say to you that Trump went with him as his Treasury Secretary?
- [15:41]
Andrew Rastuccia
I think it says that for all the bluster and for all of the campaign rhetoric, Trump wanted us a relatively steadying force at the Treasury. And then he was worried that that if he picked someone that was a little bit more unknown or didn't have a whole lot of bona fides on Wall street, that the market would be spooked. He just really didn't want to see the market's downturn as a result of whoever he chose. And in the days leading up to his decision, he called people on Wall street and asked for their advice. And the advice that they gave was that Besant would be seen as a sort of steady leader and that they would reassure the markets. And it did.
- [16:14]
Jessica Mendoza
Besant still needs to be confirmed by the Senate early next year. How is that process likely to go for him? Is there anything from his past, maybe, that might come up during confirmation hearings?
- [16:25]
Andrew Rastuccia
Yeah. So this is just starting now. He does not have a lot of strong relationships on Capitol Hill, so he's going to have to go to the Senate and meet and introduce himself to senators. As of now, we see no indication that he's not going to get confirmed. Remember, the Republicans now control the Senate, but they will certainly ask about his investment history. Republicans, I'm sure, will be curious about his longtime affiliation with George Soros. But as of now, we're not seeing any red flags. That should slow down the confirmation battle, but it's something we're gonna be watching closely.
- [16:58]
Jessica Mendoza
And so nominations for Cabinet posts are continuing to roll in. What do these picks tell us about Trump's second term?
- [17:07]
Andrew Rastuccia
One of the things that Trump talks a lot about and his close allies talk a lot about is they wanna do things slightly differently than they did the first time. In the first term. They felt that they had too many people that were growing in a different direction than them and that opposed fundamentally some of the things they. This time, though, the thing that they've really stressed is that, like, yes, there will be disagreement on the specifics, but you have to sort of be in line with Trump ideologically in order to serve in his administration. And we'll see if that is actually the case, if there are people who harbor some concerns about some of his policies behind the scenes. But they really want people sort of all on the same page.
- [17:53]
Jessica Mendoza
That's all for today. Tuesday, November 26th. The Journal is a co production of Spotify and the Wall Street Journal. Additional reporting in this episode from Ben Schwartz, Nick Timoros, Alex Leary, Peter Rudiger, and Gregory Zuckerman. Thanks for listening. See you tomorrow.