Donald Trump's Nominee for Financial Post Backs 'America First' Policies

By Ian Talley Features Dow Jones Newswires

The Trump administration's nominee to be Washington's top financial diplomat, ex-Bear Stearns chief economist David Malpass, will advocate an America-first revision of the world's economic architecture when senators review his nomination Wednesday.

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Mr. Malpass, a former senior official in the Reagan and George H.W. Bush administrations, has long been critical of global trade agreements and multilateral financial institutions that represent the backbone of world economic diplomacy.

As the Treasury's undersecretary for international affairs, Mr. Malpass would act as the administration's key advocate for dealing with sensitive economic diplomacy on issues such as exchange rates and cross-border rifts over financial regulation, including at the Group of 7 and Group of 20.

In a slew of public comments over the past two decades, Mr. Malpass has said many of these trade agreements and financial institutions have failed to deliver on their original mandates, aren't serving American interests and are ripe for a U.S.-led revamping.

He has reproached the International Monetary Fund for failing to tame global currency volatility and for focusing bailout programs on budget austerity, higher taxes and exchange-rate depreciations.

He has taken Europe to task for the centralization of fiscal power, disparaging the European Union's expanding bureaucracy. He has called the North American Free Trade Agreement a "monstrously large, managed trade process" that didn't work for small U.S. firms. And he has denounced the prolonged cycle of global monetary easing -- including the Federal Reserve's efforts -- as counterproductive policies that delayed the global economic recovery.

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But that doesn't mean he will reject global institutions, according to former officials who have worked with Mr. Malpass in past Republican administrations. Rather, they say, he will likely seek to leverage America's power to Washington's advantage through them, even if that means downsizing them.

Mr. Malpass is expected to win the backing of the Senate Finance Committee after his hearing Wednesday. A vote hasn't yet been scheduled.

"I think he'll be a pragmatist too," said Tim Adams, president of the Institute of International Finance, who worked with Mr. Malpass in the Reagan administration's Treasury.

Mr. Malpass, who speaks Spanish, Russian and French, isn't a stranger to multilateral institutions. In the Reagan administration, he was responsible for approving aid through them during the Latin American debt crisis in the 1980s.

The 61-year-old Michigan native would take on the mantle of top financial diplomat at a time when many U.S. allies are worried President Donald Trump's "America First" platform could spark trade wars and upend the economic order the U.S. established in the wake of World War II.

The administration sees reviving the U.S. economy as critical to strengthening global growth. And that means challenging other countries on policies the administration believes come at the expense of U.S. businesses and workers.

One core theme in Mr. Malpass's career as an economist is calling for greater global exchange-rate stability. Although the administration recently declined to label any country a currency manipulator, it has warned China, Japan, South Korea and several other countries against future exchange-rate interventions that give their economies an unfair trade advantage over U.S. companies.

The IMF's Greek bailout has been also been a special target for Mr. Malpass. The near decadelong debt-debacle hasn't only put a major dent in the IMF's credibility, but it has also given critical U.S. lawmakers ammunition in appropriation fights over funding for the emergency lender.

Mounting problems in several of the world's largest emerging-market economies could test the IMF's finances. Meantime, Greece's still-simmering debt problems could give the administration an argument to counter requests from the fund for more bailout resources.

Mr. Malpass, who wants smaller, more streamlined multilateral institutions, will also be responsible for making the case to Congress for administration plans to cut U.S. lending to the World Bank.

One position Mr. Malpass has likely had to change heading into the Trump administration is on the U.S. trade gap. The White House sees the trade deficit with China, Germany and other countries as evidence of unfair terms that give other economies an advantage at the expense of U.S. workers. But a little over a decade ago, Mr. Malpass penned a Wall Street Journal commentary that said policy makers should "Embrace the Deficit."

"The trade deficit and related capital inflow reflect U.S. growth, not weakness," Mr. Malpass said in late 2006.

That is a view more in line with many U.S. economists, who say that the Trump administration's fixation on the deficit is leading it to craft policy solutions that won't help the economy's underlying troubles.

(END) Dow Jones Newswires

June 07, 2017 08:14 ET (12:14 GMT)