Introduction to Trump’s Fed Plans
President Donald Trump is intent on reshaping the Federal Reserve’s top ranks. After the president said he fired Fed Governor Lisa Cook, Trump relished the prospect of soon having a “majority” on the Fed’s Board of Governors, which helps set interest rates and manages the central bank’s day-to-day activities.
Trump’s Nomination and Confirmation
At the time, Trump had also already nominated Stephen Miran, his top economic adviser, to the Fed’s powerful Board. Miran was sworn in on Tuesday after Republicans pulled off his swift confirmation process. “We’ll have a majority very shortly. So that’ll be great,” Trump said during a Cabinet meeting on August 26. “Once we have a majority, housing is going to swing, and it’s going to be great.”
The Impact of a Trump Majority
It’s not clear how much of a difference that would make. “When Trump talks about having a majority of the Fed, that’s not how anyone has historically thought about the institution. It’s not the Supreme Court,” Daniel Altman, an economist and writer of the High Yield Economics newsletter, told CNN. “The Fed is technical. It’s supposed to be data driven.”
Potential Consequences of a Packed Fed Board
But there is one way a Fed board packed by Trump loyalists could make a difference: if a majority of Fed governors siding with Trump decide to fire regional Fed presidents. According to Fed rules, anyone nominated by the board of directors of a regional Fed bank is subject to approval by the Fed’s Board of Governors in Washington, DC. The governors also have the power to fire them, if they have a enough votes on the board to do so.
The Dynamics of the Fed
“That would completely change the dynamics of the Fed, make it a much more political organization, and the bottom line is that would make a less effective Fed,” Altman said. This potential shift in the Fed’s dynamics could have significant consequences for the economy and the country as a whole.
Conclusion
The potential for a Trump-packed Fed board to make significant changes to the central bank’s operations is a concern for many economists and experts. While it’s still uncertain how much of a difference a Trump majority would make, the possibility of a more politicized Fed is a scenario that could have far-reaching consequences. As Altman noted, “But we’re a few steps away from that nuclear scenario.” Only time will tell how Trump’s plans for the Fed will play out and what impact they will have on the economy.
