Trump Treasury pick Bessent backs Fed independence, dollar, sanctions on Russian oil

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Bessent makes Senate debut as Trump's economic point man

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Hedge fund manager a vocal advocate for Trump's tariff agenda

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Bessent says US needs stronger sanctions on Russian oil

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High debt curbs US crisis-fighting fiscal capacity, Bessent says

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Bessent vows to maintain dollar reserve currency status

(Rewrites throughout with Bessent comments from hearing)

By David Lawder

WASHINGTON, Jan 16 (Reuters) -

President-elect Donald Trump's pick for Treasury secretary, Scott Bessent, said on Thursday that the dollar should remain the world's reserve currency, the Federal Reserve should stay independent, and that he is ready to impose tougher sanctions on Russia's oil sector.

Bessent

, testifying at a Senate Finance Committee confirmation hearing, underscored an urgent need to extend Trump's 2017 tax cuts due to expire at the end of this year, to avoid a $4 trillion tax hike that could crush the U.S. economy.

"If we do not renew and extend, then we will be facing an economic calamity," Bessent said. "We will see a gigantic middle class tax increase."

Bessent,

a hedge fund manager

and founder of Key Square Capital Management, voiced support for Trump's plans to impose

steep tariffs

, saying they would combat

unfair trade practices

, raise revenues and increase U.S. negotiating leverage, including on non-trade issues.

Bessent said that U.S. sanctions against

Russia's oil sector

have been too weak, partly because the Biden administration was too concerned about increasing prices at the same time it was constraining U.S. oil output. Increased U.S. oil production would allow for tougher sanctions on Russian oil majors, he said.

"I think if any officials in the Russian Federation are watching this confirmation hearing, they should know that if I'm confirmed, and if President Trump requests as part of his strategy to end the Ukraine war, that I will be 100% on board with taking sanctions up - especially on the Russian oil majors - to levels that would bring the Russian Federation to the table," Bessent said.

Bessent coolly fielded questions ranging from U.S. competition with China, to child tax credits, and did not stray from answers consistent with previous Republican Treasury nominees.

FED INDEPENDENCE

Some analysts had said markets would be scrutinizing Bessent's comments

keeping the Federal Reserve independent

given Trump's frequent disagreements over the U.S. central bank's interest rate decisions and his own comments about a "shadow" Fed chair. But he came down firmly on the side of

Fed monetary policy independence

, adding that Trump would still make his views known.

"I think on monetary policy decisions, the FOMC should be independent," Bessent said, referring to the Fed's rate-setting panel, the Federal Open Market Committee.

Despite Trump's longstanding complaints about a strong dollar, Bessent said: "Critically - critically - we must ensure that the dollar remains the world's reserve currency."

Bessent also rejected the idea of a central bank

digital currency

for the Fed, saying that the dollar's wide use and security made this unnecessary.

He said he was open to the idea of creating a U.S. sovereign wealth fund, but said the U.S. needed to get control over short-term deficit growth first.

The high level of U.S. deficits means that there is less capacity to borrow heavily to

combat a crisis

, he said, citing examples of the 1930s Great Depression, World War Two and the recent COVID-19 pandemic.

"Treasury - along with the whole of government and Congress - has used its borrowing capacity to save the union, save the world, and save the American people," Bessent said. "What we currently have now, we would be hard pressed to do the same."

In prepared remarks released on Wednesday night, Bessent laid out a vision for "a new economic golden age" that included prioritizing strategic investments that grow the U.S. economy and making permanent Trump's 2017 individual and small business tax cuts that are due to expire on Dec. 31, 2025.

"We must secure supply chains that are vulnerable to strategic competitors, and we must carefully deploy sanctions as part of a whole-of-government approach to address our national security requirements," Bessent also said in the remarks.

(Reporting by David Lawder; Editing by Tom Hogue and Nick Zieminski)