President-elect Donald Trump said he is nominating Scott Bessent, who runs macro hedge fund Key Square Group, as the next U.S. Treasury secretary, enlisting a key adviser to manage the sweeping economic agenda he has vowed to enact in a second term.

“Scott has long been a strong advocate of the America First Agenda,” Trump said in a statement Friday. “On the eve of our Great Country’s 250th Anniversary, he will help me usher in a new Golden Age for the United States, as we fortify our position as the World’s leading Economy.”

Bessent, 62, emerged as the pick after an extended search for a Treasury chief that saw Trump consider multiple candidates — and Wall Street executives and business leaders vie to influence the president-elect’s decision. Allies believed that Trump sought a candidate that would be favored both by Wall Street as well as an electoral base eager for him to implement sweeping tariffs, embrace cryptocurrencies and crack down on undocumented migration.

Stefani Reynolds/Bloomberg

Bessent beat out other prominent contenders including Apollo Global Management Inc. executive Marc Rowan, former Federal Reserve Governor Kevin Warsh and Tennessee Senator Bill Hagerty as well as Trump transition co-chair Howard Lutnick, who was named to lead the Commerce Department.not supported.

If confirmed by the Senate, Bessent would be the first openly gay Treasury chief, and one of the wealthiest in modern times. Bessent has said that he has always wanted to serve his country, but in the 1980s his sexual orientation prevented him from going to the U.S. Naval Academy, and after graduating from Yale University, from joining the State Department.

He joins an economic team beginning to take shape just weeks after Trump won a second presidential term. Trump announced that his former budget director, Russ Vought, would be returning to the same role in a statement to his social media platform later Friday.

“He did an excellent job serving in this role in my First Term – We cut four Regulations for every new Regulation, and it was a Great Success!” Trump said.

Vought, a key architect of Project 2025, the controversial Heritage Foundation policy document released during the campaign, will work alongside Bessent to implement Trump’s economic agenda.

Political thickets

As the nation’s highest ranking economic policymaker, Bessent will have to wade through political thickets in Washington, spearhead international economic diplomacy and bring Wall Street know-how to crisis situations. He will also be closely watched by investors and financial institutions, who are looking for predictability and stability.

He has been a proponent of realigning U.S. currency policy, but has stopped short of supporting an overt strategy of depreciating the dollar. During Trump’s first term, the then-president called out dollar appreciation for being harmful to US manufacturers and even considered government intervention to manage the greenback’s value. 

Bessent has acknowledged that while a weaker dollar would be good for some parts of the economy, some of Trump’s proposals would drive up its value. 

He has criticized President Joe Biden’s administration for its management of federal debt financing, and has talked about expanding its “friendshoring” policy to create a tiered system among trade partners.

At the Treasury, Bessent is expected to advise Trump on candidates to chair the Federal Reserve when that job opens up in May 2026. Earlier this year, he talked about the idea of nominating a new Fed chair well in advance of the expiration of current chair Jerome Powell’s term. Financial markets would turn their attention to that shadow Fed chair instead of Powell, Bessent has said.

He has said the Fed was too slow to respond to rising inflation in 2021, and criticized the US central bank for its large interest-rate cut in September.

Bessent spent part of his career managing money for billionaire George Soros. He lived in London and was part of the team, under Stan Druckenmiller, that made $1 billion in 1992 shorting the pound — a wager that helped force the currency out of the European Exchange Rate Mechanism, and made Soros famous as the man who broke the Bank of England.

He would be the second Treasury secretary, after Steven Mnuchin, who has worked for groups with close ties to Soros.

Soros’ family office made about $10 billion in profit under Bessent as investment chief, or about 13% annualized. Since then, he’s run Key Square, which started with a $2 billion investment from Soros — funds he later returned as other investors came in.

“I think he’ll be outstanding,” said Druckenmiller. “Having worked for me and George for all those years, he’s been exposed to everything a Treasury secretary has to deal with. He has a deep knowledge of markets and he’s also an intellectual who has the chops to work with academic policymakers. It’s a rare combination.” 

Bessent will be returning his hedge fund clients’ capital as soon as possible after Dec. 1, according to a person familiar with his plans. Federal rules require cabinet members to develop plans to remove their potential conflicts of interest, and then follow through on them, usually within as little as 90 days.

Here’s a look at some key areas of responsibility for the role of Treasury Secretary:

Oversight, taxes

Bessent is expected to play a key role in pushing for a renewal of Trump’s 2017 tax cuts through Congress, many of which are set to expire at the end of 2025. 

The Treasury chief could be charged with liaising with Republicans in Congress to expand the scope of the tax bill to include some of Trump’s campaign-trail tax promises, including a 15% corporate rate and exempting tipped wages from taxation.

The Treasury Secretary is also charged with running the Financial Stability Oversight Council, a panel set up after the financial crisis. Under outgoing Treasury Secretary Janet Yellen, FSOC looked at the issue of climate change, triggering criticism from Republicans who have been wary of any requirement for banks to incorporate climate in their lending or capital decisions.

FSOC under Yellen also recommended stronger oversight of stablecoins, which the Fed has likened to bank deposits and money market funds — and which are subject to much more regulation. Trump’s advocacy of the crypto space on the campaign trail likely will put the new Treasury chief’s stance under the spotlight.

Economic diplomacy

Peppered through the year are meetings of the finance chiefs of the Group of Seven, G-20 and other international organizations, which the Treasury secretary typically attends as the chief U.S. representative.

The Treasury Department implements U.S. sanctions on foreign countries, companies and individuals, which have soared in number over the past several years. Yellen helped to lead efforts at the G-7 to isolate Russia after its full-scale invasion of Ukraine, and to step up financial assistance for Kyiv.

The secretary also has often served as point person on engagement with China. The Treasury chief tends to be a cautionary voice when it comes to proposals aimed at America’s biggest strategic rival. Mnuchin, Trump’s Treasury head in his first term, was seen as playing that role when tensions escalated in 2018 and 2019.

Debt management

In charge of the nation’s purse strings, Bessent will have to deal with a costly, and ballooning, debt load. The federal budget deficit crept up to 6.4% of GDP in fiscal 2024, historically high for a time of economic expansion and full employment. A key driver has been soaring interest costs, in the wake of Fed rate hikes in 2022 and 2023.

“No one has been more terrified about this debt stack and the coming refinance we’ve got to do,” Bessent said on a recent War Room podcast with longtime Trump adviser Stephen Bannon. What can “stabilize the bond market” is a fiscal package that reins in spending, he said.

Bessent has also complained about the Treasury’s debt financing strategy, claiming that Yellen was trying to juice the economy and help her boss ahead of the November election — a charge she rejected.

Debt managers may need to be active in managing the Treasury’s liquidity, because the federal debt ceiling is scheduled to kick back in at the start of January. That bars the department from issuing new debt, and triggers an oft-deployed sequence of maneuvers to prevent the U.S. government from running out of cash or, worse, defaulting on its debt — an event that could have catastrophic repercussions.

Glen Capelo, who spent more than three decades on Wall Street bond-trading desks and is now a managing director at Mischler Financial Group, called Bessent a “fiscal hawk.”

“He definitely will be positive overall for the economy and the markets. He wants to rein in spending. Bessent wants to get the Secretary of the Treasury back in line with the markets – because he does believe Janet Yellen has twisted the issuance around a bit,” Capelo said.

Macy’s Inc. said it would delay its third-quarter earnings release after an investigation revealed an employee hid more than $100 million of expenses. 

An employee “intentionally” made erroneous accounting accrual entries to hide about $132 million to $154 million of cumulative delivery expenses stretching over multiple years, the company said Monday. 

The worker, who was responsible for small package delivery expense accounting, is no longer employed with the company. 

Yuki Iwamura/Bloomberg

The retailer said it identified an issue with its delivery expenses while it was preparing its quarterly financial statements, prompting the initiation of an independent investigation. The probe revealed a single employee hid the expenses from the fourth quarter of 2021 through the fiscal quarter ended Nov. 2, 2024.

Macy’s shares fell 4% in Monday trading in New York. The stock had lost 19% this year through Friday’s close as Wall Street remains skeptical of Spring’s plan to close poorly performing stores and boost sales at its top locations. 

The company said there’s “no indication” the erroneous accounting accrual entries had any impact on the company’s cash management activities or vendor payments.

Macy’s was slated to release its earnings report and hold a call with analysts on Tuesday. It said it will issue the release, as well as its fourth quarter and full-year outlooks, by Dec. 11. 

Sales drop

Comparable sales at the retailer’s owned and licensed stores during the third quarter dropped 1.3%, according to preliminary results, slightly better than analyst expectations. The picture was rosier at Bloomingdales, where third-quarter comparable sales rose 3.2%, and at Bluemercury, which showed a 3.3% increase on an owned basis. Chief Executive Tony Spring, who took over in February, said November comparable sales are “trending ahead” of third-quarter levels across its various brands.

Third-quarter sales fell 2.4% to $4.74 billion, below Wall Street estimates.

“While we work diligently to complete the investigation as soon as practicable and ensure this matter is handled appropriately, our colleagues across the company are focused on serving our customers and executing our strategy for a successful holiday season,” Spring said.

As the largest department-store chain in the U.S. by revenue, Macy’s often serves as a barometer of mass-market consumer spending during the all-important holiday season. A delay of earnings until after the annual Black Friday shopping extravaganza may provide investors with a deeper look into holiday spending trends.

While the accounting issue and the delay in earnings isn’t good, “the scope of the issue doesn’t seem terribly alarming,” a Vital Knowledge note said. 

Still, the incident — and the fact that the accounting errors go back to 2021 — “raises the question as to the competence of the company’s auditors,” wrote Neil Saunders, managing director at GlobalData. 

“Such things create more nervousness for investors who are already concerned about the company’s performance,” he added.

Major accounting firms have been placing huge bets on artificial intelligence, having invested billions upon billions of dollars in the past few years alone. This is done with the understanding that AI will ultimately reduce expenses and drive profits. Yet, as always, it takes money to make money: fully realizing the potential of artificial intelligence can come with a hefty price tag, encompassing both short and long term expenses for not just the AI systems themselves but everything else that enables their effective use. 

The AI models themselves, of course, represent a significant R&D expense. Whether for internal efficiency, client engagements or both, building and training these models is no casual affair, requiring skilled specialists operating sophisticated software to create, something with which Doug Schrock, managing AI principal for top 25 firm Crowe, is well familiar. His own firm has spent a great deal of money developing custom AI solutions for things like tax and audit that are now used by staff every day, as well as Crow Mind, a gateway portal for all of the firm’s AI solutions. It has also devoted significant resources towards building bespoke AI solutions for clients, particularly in cases where they need something that simply does not exist in the market today. He compared it to making a custom Excel spreadsheet but far more complex. 

“It’s like you buy Excel. Here’s Excel. But you’ve got to configure it to your business case, so there’s a whole lot of customization to make the actual spreadsheet do what you need it to do. We see that a lot: you buy the suite, but you need a bespoke solution… Configuring the hardware, chaining together multiple agents to do the tasks, automating it, that takes work,” he said. 

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Chris Kouzios, chief information officer for top 50 firm Schellman, added that developing an AI system may appear to be a one-time spend at first, but considering things like maintenance, integrations and upgrades, each model can also represent an ongoing expense. 

“If you think of the initial build, you could call the initial build one time, although like any piece of software it will be continually approved over time, so I look at it from both perspectives,” he said. 

Big data, big costs

But the development costs of AI models are only one part of the overall expense. Just as significant, perhaps even more so, are the fees that come with hosting and accessing these models in the cloud. Running AI, especially generative AI, is very data intensive, which has served to accelerate cloud costs that have already been on the rise. Kouzios, from Schellman, noted that his own firm’s costs will likely rise apace with its AI infrastructure, especially as client services demand more use. 

“Your compute will go up at least exponentially over time and one of the things I think we’re going to see, and this is just future forecasting a little bit, I think clients will in general, not just in my space, be more comfortable when they feel they’ve got a little control over what they’re doing and what is done. In the cloud at the beginning people were terrified of putting their stuff there, we’ll see the same stuff with AI, we’ll probably have additional costs for spinning up instances for clients nervous about what goes where,” said Kouzios. 

Crowe’s Schrock reported similar things, noting that the major cloud hosting companies saw the opportunity for revenue generation via AI hosting and are already capitalizing on the situation, as evidenced in the fees they charge. The reality is that generative AI uses a lot of data, which means higher data costs from cloud providers who run the infrastructure it rests on. He talked about a recent meeting he had with Microsoft, a strategic partner with Crowe. 

“They’ve got 4 million servers across the US. They’re super interested in AI, not just because of Copilot but because we’ll be using Azure, using their server computing power to run the LLMs we write. They want to drive more Azure service dollars. So… we’ll be having more computing power costs for us through Azure,” he said. 

Accounting solutions vendors have noticed this too. Brian Diffin, chief technology officer for business solutions provider Wolters Kluwer, also noted that generative AI has indeed led to higher cloud costs, which has challenged the company to find ways to release AI-functional products in an economically sustainable way. 

“Gen AI is very CPU intensive, so one of the challenges we face—we’re doing a lot of experiments with this— is there’s so many approaches on how you would implement a gen AI based piece of functionality in software. We’re evaluating not just the LLMs in terms of what those capabilities would produce but what is going to be the cost of that feature when we go to production,” he said. 

Data shows that this is happening not just in the accounting space but across the economy as a whole. Recent reports from expense management solutions provider Tangoe has found that 92% of IT leaders report cloud spending on the rise, and that they mostly attribute AI (50%) and generative AI (49%) for this increase. Further, 72% of IT leaders feel these rising costs are becoming unmanageable. 

“GenAI is creating a cloud boom that will take IT expenditures to new heights,” said Chris Ortbals, chief product officer at Tangoe. “With year-over-year cloud spending up 30%, we’re seeing the financial fallout of AI demands. Left unmanaged, GenAI has the potential to make innovation financially unsustainable.”

The report noted that cloud software now costs businesses an average of $2,559 per employee annually. Large organizations spend an average of $40 million on cloud fees annually, with very large organizations worth more than $10 billion spending $132 million annually.

However, while cloud costs are rising due to AI, leaders are also confident that they can be managed. Schrock said his own firm has controls in place specifically to monitor data usage to avoid outsized costs. For instance, recently they tried a new LLM tool from Microsoft that caused a short 3,000% spike in usage, but firm leaders received an alert and quickly stepped in. 

“It’s not like when you get surprised by the electric bill. You put controls in place to do things smart,” he said. 

Further, while the costs have increased, he said they have still gained more than they lost in terms of increased efficiency and productivity. The extra fees are still lower than the cost of hiring an entirely new human, and the quality of work is better than what humans would accomplish alone. So while their Microsoft Azure bill is higher, they’re also able to deliver more for less cost overall, so it has been a net positive. 

“What we’ve been talking about are the costs to run AI. I’ve got the cost to run a car but it also gets me places more easily. The cost will be a thing but used appropriately it will be great,” he said, adding that it’s important to use the right tool for the right situation; maybe you don’t need to access the high-data AI model to solve a problem, maybe Copilot would work fine. 

Diffin raised a similar point. While he conceded overall costs have gone up, the money has been well-spent in terms of product development. 

“Certainly gen AI capabilities are increasing in cost, and overall costs have gone up because we’re using more and more of what [Microsoft] offers, and so what translates into for us is developing and releasing products faster than if we were to develop everything ourselves,” said Diffin. 

On top of cloud fees, subscriptions and licenses were also mentioned as a significant ongoing expense. This includes subscriptions not only for the tools used to create and maintain AI systems but also for AI solutions that the firm chooses to buy rather than build.  While the individual subscriptions may not be much, when considering the size of certain firms, like Crowe, they can quickly add up, especially considering there are multiple products the firm subscribes to. 

“Everything is a subscription. So you have all the different types of subscriptions. Crowe is making significant investments in ongoing software licensing for the leading enterprise AI solutions, things like Microsoft Copilot for example. We expect everyone in the firm to be using that in 2025. It’s over half right now … We’re also buying specialty AI based applications to fit particular needs and things like copy AI for marketing and search, and there’s a whole suite of specialty apps that we sign up for with specialty use cases, so that becomes the ongoing expense,” he said. 

Labor costs, training costs

And then there are the people who create and maintain these models, often software engineers and data specialists. While often touted as a labor saving device, AI can come with surprisingly large labor costs, according to Schellman’s Kouzios. 

“I would say in general, probably as close to 15-20% of my IT budget will be spent on AI, closer to 25% for the first year [of deployment]. Of that, if you take that number and break it out, 85-90% is labor,” he said. 

The firm, which already hosts a large number of technical specialists, recently hired more to support the firm’s AI ambitions, seeking to shore up its machine learning, data analytics and product management expertise, which allows its staff to focus on “building what it is we want to do.”  While this does represent a spending increase, he is confident that the efficiencies they uncover will increase firm-wide capacities over time. 

“I think we’ll get to a point where, [though] we know the costs will go up, ROI on this should be deferral of cost or deterrence of cost, not having to spend money in the future we’d otherwise have to spend. For example, peak season comes up and you need to either hire employees or temp employees,maybe we can avoid that in the future,” he said. 

Another component of labor costs is training the non-technical staff in using the AI systems the technical staff develops and maintains. Schrock, from Crowe, said that, in addition to hiring more experts, the firm has dropped cash on in-depth training and development in things like how to use Microsoft Copilot and other generative AI tools and incorporate them into a workflow. With this training has also come changes in business processes and job descriptions that needed time to properly digest. While there is some learning curve involved, he felt education like this was essential to fully implement the firm’s AI vision. 

“These tools don’t inherently have value, they derive it only through their application to solve problems. So there is one time cost of upskilling and process redesign to incorporate that into the business,” he said. 

And it is not just the humans who need training. Kouzios said one idea he has been exploring lately is assigning those trainers who’ve been educating the human staff to the AI models themselves, which often begin in an almost child-like state and require data input to be effective. 

“I’ve been exploring talking to them about training the models because, this is my experience in IT, nerds are very good at the tech, but here are some things we lack and teaching—when I brought it up to them, I meant teaching the models—the tech people hated the idea, so I might tap into some of [the trainers’] time too,” he said. 

Heat vs light

Yet, while big money is being spent on AI at accounting firms, they should not necessarily take too much stock in the marquee headlines of this firm spending that many billions on AI or that firm spending many more billions still. 

“The billions of dollars here, is more bragging about an investment level. Well, investment level can be measured in a number of different ways. It can be measured by some ginned up cost where you reallocate peoples time and come up with some marketing number on costs, but I don’t put a lot of confidence in those as an expert in the field,” said Crowe’s Schrock. 

Kouzios, from Schellman, raised a similar point, noting that there are a lot of people making big dramatic announcements that, upon closer inspection, are not that significant. 

“You’ve seen those press releases, saying we bought chatGPT for our 85,000 employees, we’re AI enabled. Yippee, well done. For 20 bucks a month I could do that too,” he said. 

When looking at what firms are spending on AI, Schrock said to look not at the jaw-dropping number they announce but in actual deliverables they produce. 

“What I wanna understand is how many people are utilizing it, what unique IP they have created, how aggressively is it being incorporated into service lines, how aggressively do they take this into market—that is a measure of your investment level in AI more so than some number,” he said.

But what about smaller firms? Turns out, their experiences with AI costs are much different than large scale firms with international footprints. We intend to explore this issue more deeply in another story soon.