In this year's financial meetings in Washington, there's one standout figure, and it's not Rachel Reeves; Alex Brummer takes the limelight.
In the bustling heart of Washington, one star shines brighter than any political figure, and that's Scott Bessent, the U.S. Treasury Secretary. The Willard Hotel, a historic venue that once hosted peace conferences to prevent civil war, needed a live feed to accommodate the overwhelming number of people eager to catch a glimpse of him.
The enthusiasm among the attendants has a common reason—hope that Bessent can tame the social media beast that is President Trump. In the past 72 hours, he's earned credit for halting the campaign against Jay Powell at the Federal Reserve. After Trump publicly labeled Powell a 'loser', calling for his resignation, Bessent apparently helped to reverse the president's stance. The markets had nosedived in response, but Bessent managed to instigate change.
Moreover, Bessent extended an olive branch to China, suggesting sensible trade negotiations that weren't based on the threat of increasingly hostile trade barriers. At the International Monetary Fund (IMF) and the World Bank, there's palpable relief that Bessent chose to work on reform rather than demolish these institutions, as some conservative groups proposed.
Bessent and the U.S., having the most significant share in both the Fund and World Bank, are demanding real change. The global narrative around these institutions is shifting under his influence. No longer is the IMF focused solely on fashionable issues like climate change and gender reforms; instead, it's returning to its roots. Bessent aims to revive the mission of the IMF to a closer resemblance of what its founders envisioned, with a stronger focus on surveillance, policing country policies effectively, and resolving balance of payments imbalances.
Some critics argue that the IMF has overstepped its boundaries, venturing into social policy instead of sticking to macroeconomic issues. For example, in the UK, the IMF has been advocating for charging for health services, venturing into political waters. Bessent wants a clampdown on such ventures, focusing on the core mission of the IMF.
The World Bank faces its unique challenges. With the Biden administration pledging $4 billion for the International Development Association (IDA), the poorest countries' lifeline, there are doubts about whether the U.S. will honor the full commitment, or disburse nothing at all. Behind closed doors, the World Bank serves as a battleground for the U.S.-China struggle. The U.S. views no justification for China receiving $1 billion in loans from the Bank, a reduction from $2.5 billion in the past.
If the U.S. were to withdraw funding for IDA, it would pave the way for China to become more influential, both as a borrower and a funder. Bessent and his supporters emphasize the need for the World Bank to maximize market funding using its 'triple AAA' credit rating.
Reforming rather than demolishing the Bretton Woods institutions seems to be Bessent's motto. As the most influential funder, he's forcing the grandees running the show to swallow some tough medicine. Whether they adapt to the new reality or resist the change, remains to be seen.
Author's note: For those curious to learn more about Scott Bessent's background, he's a well-known investor and hedge fund manager. Before entering politics, he served at Brown Brothers Harriman & Co. and later became the Chief Investment Officer at Soros Fund Management. In 2015, he founded Key Square Group. As U.S. Treasury Secretary, his tenure has been marked by economic policy decisions with significant international implications.
Sources:
[1] – Washington Post
[2] – Forbes
[3] – Bloomberg
[4] – Reuters
[5] – Investopedia
- Scott Bessent, the U.S. Treasury Secretary, is recognized as a beacon in Washington, with many looking towards him to control President Trump's social media influence.
- Bessent has earned praise for halting the campaign against Jay Powell at the Federal Reserve, after Trump publicly criticized him, and, in turn, helped reverse the president's stance.
- In the realm of finance and general news, Bessent is working on reforming the Bretton Woods institutions, starting with a focus on the IMF, aiming to revive its original mission.
- The World Bank is under pressure to maximize market funding, using its 'triple AAA' credit rating, as per Bessent and his supporters, to avoid becoming more influential to China.
- In his past, Bessent has had success as a well-known investor and hedge fund manager, working at Brown Brothers Harriman & Co. and Soros Fund Management before entering politics.
