Please Mr. President, No More Bubbleheads

May 30, 2019

 

 

It has been almost a month since both of President Trump’s picks for the Federal Reserve Board have taken themselves out of the running as a result of, shall we say, less than stellar personal pasts. Now I don’t want to beat up on the President, but did he really believe Stephen Moore and Herman Cain were the best possible picks for positions with such immense responsibility? Stephen Moore is a political pundit who has supported every move the President has made since taking office (without respect for reason or rational thought) and thoroughly believes, despite ample evidence, that supply side economics actually works. Herman Cain is a former pizza chain CEO and former surrogate for Trump 2016 who routinely proves how little he understands monetary policy despite having served as the Kansas City Fed president for five years.

 

Interestingly enough though, it was the President’s staff that took issue with Moore and Cain. The problem was not that these two don’t understand basic macroeconomics or appreciate the vast responsibilities of the Fed that go well beyond monetary policy, it was that they have little to no respect for women. And for an administration that has very low approval rate among women, and an election coming up, submitting their names for consideration was just a bridge too far. Moore wrote multiple articles containing vulgar tropes, condescending language, and general disrespect towards women as recent at 2014, and Cain has a history of abusing women—physically and verbally. So it was fortuitous that these indiscretions were caught in the administration’s vetting process rather than during a confirmation hearing, or worse, during their tenure at the Fed. 

 

But what is unnerving is that they were in contention in the first place. Can you imagine having the same conversation about Ben Bernanke or Janet Yellen? No chance.

 

But going back to their qualifications for a bit, neither are considered economic scholars by the general public, nor have they thought of themselves as economic scholars until they were potential nominees. And lacking significant experience in finance, law, banking, or academia— especially for a Fed post, is a major red flag for those in the Senate who would need to confirm them. But for President Trump, it is precisely what he is looking for. He has shown little respect for the Board and certainly doesn’t accept the widespread belief that central banks should remain apolitical. His strategy is to nominate sycophants who will parrot his wishes during open market committee meetings, regardless of whether they are good for the economy, and let Republican Senators decide if they want to confirm his pick or risk a primary challenger next spring.


So, now now that both Moore and Cain have pulled their names from contention, what should the President do? Who should he nominate to fill the two vacant posts? Well, if it were up to me, I would recommend searching among the qualified candidates such as Loretta Mester, John Williams, or Gauti Eggertsson and try to pair their talents with the current needs of the Board. But such an approach is highly unlikely for this president, as these candidates certainly won’t entertain his petulant demands for easy money. Even monetary doves like former President Yellen believe macroeconomic policy should be well designed, rigorously tested, and policy prescriptions forming only as a result of thorough analysis—something the President has never fully appreciated.

 

I propose leaving the positions vacant, but if the President must put forth a name, the very least he could do is appoint someone who can survive the vetting process without embarrassment and has at least some professional economics experience. And punditry doesn’t count. No Jim Cramers. No Neil Cavutos. No Lou Dobbses. Let's appoint someone who doesn’t publicly humiliate themselves when asked about basic monetary theory during their confirmation and—if confirmed—can hold their own among the intellectual heavyweights of Clarida and Brainard.

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