What always worried Wall Street about President Trump was his unpredictability. Despite being one of the best-known faces on television and having opinions well-publicized by media new and old, he lacked a legislative resume that investors could use to assess the strength of his commitment to campaign-trail promises.
The antidote to their anxiety was Trump’s early selection of Gary Cohn, a 57-year-old investment banking executive, to fill the post of National Economic Council director. So, it wasn’t a surprise when Cohn’s resignation brought the fear factor back.
The blue-chip Dow Jones Industrial Average tumbled as much as 349 points, or 1.5 percent, when New York trading opened the day after Cohn’s announcement late on March 6. That his exit followed a failure to dissuade the president from imposing double-digit tariffs on metal imports, widely opposed by corporate executives and congressional Republicans, didn’t help.
“Gary Cohn was the most important and powerful, pragmatic, pro-business member of the president’s inner circle,” said Jaret Seiberg, an analyst with Cowen Washington Research Group, which has tracked U.S. government policy for more than four decades. His departure increases the odds that supporters of protectionist trade policies will gain more influence in the administration.
“It’s a setback for reasonable economic policy,” said Mark Hamrick, senior economic analyst with Bankrate.com. “Cohn, with his Goldman Sachs experiences, was seen as being a voice of moderation,” he added, one who could effectively debate Trump’s more protectionist trade impulses, such as tariffs of 25 percent on steel imports and 10 percent on aluminum.
Inside the White House, “Cohn was likely key in preventing anti-globalization sentiment from overwhelming the economic agenda,” said Ryan Sweet, director of real-time economics at Moody’s Analytics.
At the time of his resignation, Cohn was among the longest-serving members of the Trump administration, and his departure adds to West Wing turnover that, according to the Brookings Institution, was already higher in Trump’s first year than that of any of the previous five presidents.
“It seems as if we can’t go 48 hours without having a major departure in the White House,” Hamrick said.
The administration, however, argues that Trump’s accomplishments, from winning passage of a large corporate tax cut to appointing conservative judges, show that turnover isn’t an issue.
The president said there’s no shortage of qualified applicants for administration jobs, even if his preference for making decisions based on full-throated debate between supporters of differing positions makes the environment tough. He said he will choose Cohn’s successor wisely.
“They all want a piece of that Oval Office,” Trump said. “I could take any position in the White House, and I’ll have a choice of the 10 top people having to do with that position. Everybody wants to be there.”
Wall Street will be paying close attention to the president’s choice, and not just for economic implications. The former banker’s resignation also raises the risk of policies that large financial institutions oppose, such as attempting to restore Glass-Steagall, the Depression-era law that separated investment and commercial banks.
Cohn and Treasury Secretary Steve Mnuchin, another Goldman Sachs alum, had guided the White House away from such measures, Seiberg noted.
“Wall Street just lost its security blanket,” said Chris Krueger, another Cowen Washington analyst. “It is not just Cohn’s offensive market skill that will be missed. He was arguably the best defensive player in the West Wing at keeping the protectionist advances at bay.”
As for the council itself, the group’s stature rises and falls based on its staff, Krueger said, gaining heightened influence under directors such as Robert Rubin and Lawrence Summers.
Rubin, who held the post under former President Bill Clinton, went on to become treasury secretary and temporary chairman of Citigroup, one of the largest U.S. banks. Summers, who was council director under Barack Obama, had served as treasury secretary and president of Harvard University.
“We can think of no one who can fill this seat that will give Wall Street as much comfort as Cohn,” Krueger said. “The fact that the administration cannot get someone to take the deputy treasury secretary position along with numerous other incredibly high-profile and prestigious finance jobs in the administration is all you really need to know in terms of the recruitment deficit.”
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