Goldman Sachs could be about to tighten its stranglehold on global markets

President Trump is reportedly considering naming economic advisor Gary Cohn, former president of Goldman Sachs, to head the Federal Reserve.
His appointment would make the Fed the third major world central bank currently led by a former top Goldman executive.
Cohn would bring market experience to the job, but lacks any real foundation in monetary policy.

Thankfully, my colleague and fellow long-time Fed-watcher Simon Kennedy at Bloomberg was on the case after Politico reported Donald Trump is ready to hand over the central bank’s reins to the former president of Goldman Sachs, who is currently director of the National Economic Council.

Indeed, Cohn is a former president of Goldman Sachs. The current heads of the Bank of England and the European Central Bank both worked at Goldman, although Mark Carney actually made a career of it while Mario Draghi just racked up a few million bucks over three years. New York Fed President William Dudley is a former Goldman partner, while Robert Kaplan and Neel Kashkari, presidents respectively of the Dallas and Minneapolis Fed banks, both used to work at the megabank.

Since the election, Trump has embraced Wall Street advisors including Cohn, Treasury Secretary Steven Mnuchin and several others.

"What is most concerning about such a significant changing of the guard at the Fed, particularly given the potential for a change in approach is that it comes late cycle," Julia Coronado, president of MacroPolicy Perspectives and a former Fed economist, told Business Insider. "And there is little doubt the Fed will have to confront the same tricky choices about a menu of unconventional policies when the next recession hits and experience would be helpful."

Curiously, there’s another side to the potential instability. Cohn has, under the circumstances, been seen as a sober, moderating force on a president who understands little about economic policy. His departure from the White House might shatter any remaining confidence investors have in Trump , if there’s any left to be had following the repeated, fiasco-ridden failure of his signature healthcare law.

"If you see Cohn go to the Fed, to me, that's an escape path for him and that means that Goldman has given up the Trump administration," bank analyst Chris Whalen told CNBC Tuesday.

The shift from presidential advisor to Fed chair would not, in itself, represent a break with protocol.

"A Wall Street trader's temperament makes a bad match for the staid central-bank job," argues Gina Choi of Reuters Breakingviews.

Press conferences after meetings by the interest-rate-setting committee are carefully scripted. Blunt talker Cohn may find such restrictions suffocating. Markets will prefer a more boring choice."