Who should Trump pick for the Fed Board of Governors?

That is the topic of my latest Bloomberg column, here is the opener:

First, we should not forget that the Federal Reserve system is actually a private corporation of sorts, albeit one with a unique government-backed charter. So if you are on the board of the Fed, you are not just a figurehead — you are responsible for parts of the company. You could be in charge of the Fed’s pension and benefit plans, for instance, or its payments system.

To be sure, running monetary policy for the entire nation, and to some extent the entire world, is more important than the smooth internal workings of the Fed. Still, those managerial responsibilities will impinge on a board member on a regular basis. If he or she screws them up, it will be harder to have high status within the Fed, and harder to keep one’s confidence and emotional equilibrium. Alternatively, a governor might become completely dependent on aides to perform those internal practical functions. That is not conducive toward broader autonomy on monetary policy front, either.

The bottom line is this: A good candidate for the Fed should have at least some practical managerial experience. You don’t have to be the next Bill Gates or Steve Jobs, but you should be just competent enough to forestall internal crises of bad management and to avoid losing face. For a lot of potential candidates, that is actually a pretty tall order, especially if they come from academia or have unorthodox backgrounds unrelated to finance.


Of course the next board member will also be expected to have well-informed views, however you might define them, on monetary policy and regulation. But it would be a mistake to start with a set of agreeable or required views, and then use it to build a short list of advocates. It bears repeating: For a board member to be effective, political and bureaucratic skills are paramount. Without them, a board member may well end up as counterproductive, even when correct.



Sounds to me like Herman Cain fits your criteria.

Cain is not 'boring,' but admittedly that comes from the headline, meaning it is unlikely to be something that Prof. Cowen wrote.

Well, maybe Trump should just consult with a center bridging the gap between academic ideas and real-world problems, assuming that it ever gets mentioned on Hannity or in the NY Post so he becomes aware that it exists.

Easy-peasy - just like asking the Federalists who should be nominated to the Supreme Court.

Cowen: "It bears repeating: For a board member to be effective, political and bureaucratic skills are paramount." What Cowen means I suspect is that the effective board member must not be disruptive, maybe a little disruptive but not to much, a team player, a consensus builder, one who builds bridges rather than destroying them. But I thought disruption is good, that it helps prevent complacency, that it is the necessary ingredient for innovation? Maybe what Cowen means is that the Fed doesn't need disruption and innovation as much as it needs consistency and predictability.

I'm glad to see the Fed moving into marketing from PR. The other is
opposite to it, dark night, a compact and heavy body. "Of these
I tell thee the whole arrangement as it seems to men,
in order that no mortal may surpass thee in knowledge."

On the question of disruption, I read an article today by a faculty member at GMU Law School calling for the impeachment of Donald Trump. I suspect it might cause some disruption in DC. No, not at the While House or on Capitol Hill, but at GMU.

Call it 'Right to coin"

Such is life in Trump's America.

For me someone who is capable to ask why, when regulating banks, everyone insists on that what’s perceived as risky is more dangerous to our bank system than what’s perceived as safe… and is able to hang in there until he receives a satisfactory answer or a non-answer

I don't buy it. Get someone who understands monetary policy. There aren't very many of them.

Tangential thought: one way to help student loan borrowers (and those with mortgages and debtors generally), is to not undershoot inflation by half a percent a year for a decade.

Beckworth, Sumner, Selgin. Hell, get Lars Chtistiansen. Isn't a Canuck running the UK central bank?

Of course, all these guys hate Trump. So he'll end up with a conventional GOP hawk and shoot himself in the foot.

I agree, Brian.

Yes, Scott Sumner, since he replies on occasion to my needling emails arguing money is largely short term neutral.

Bonus trivia: is Ricardian equivalence equivalent to long-term money neutrality? Yes. To short term? Jury still out IMO (monetarists would differ). And if money is 100% neutral, why do cultures round the world seem to want to expand the money supply to maintain the "unit of account' aspect of money. You can see this with increased Cu, Ag, Au production in metallic standard money societies around the world as populations expand, even in Roman times say archeological evidence preserved in Arctic ice, Google this. Seems people really don't like deflation, I must admit. What does that say about the future of Bitcoin?

I believe so. Money is a veil; if you remove the veil and look only at the real economy, Ricardian equivalence applies.

The tax code already favors borrowers. Why do they deserve even more favors?

Somebody is impersonating Brian Donohue.

Aside from that, the problem isn't that Trump may (likelihood is 99%) nominate someone you all don't like. The problem is that it too much matters who Trump nominates to the omnipotent Federal Reserve Board.

No, what I'm saying is that orthodox GOP approach to money is bad. Sober, judicious tight-money folks have always been clueless about the damage they can inflict. I mean, it's oh so sober and judicious and responsible, how can Republicans resist?

The only downside to monetary accommodation is inflation. You may have noticed this hasn't been an issue in the developed world for a generation at least. Persistent undershooting of inflation has costs too (to borrowers). And benefits (to lenders.)

You're correct. Lower inflation and near-zero rates (from 2009 to 2015, still negative in the EU) are/were bad for we the people. The Fed is not of the people, by the people and for the people. It is of the banks, by the banks, . . .

I'm 68. I've seen different economies.

Anybody under 35 or 40 y.o. has only experienced low (for years negative in Europe) rates; low inflation or disinflation; and slow GDP growth. Was that good?

No. So, let's give the central bankers more power.

Of course, the sole purposes of the US Fed's QE's (expanded the Fed balance sheet by more than $3 trillion to $4 trillion) was to keep LT interest rates super low (stated) and bail them out (unstated). All at the expense of ordinary Americans millions.

I don't think Nixon and Bush II were practitioners of orthodox GOP money policies.

The Fed was created to use monetary policy to stabilize the economy. They have had this power for more than century. They have done ok with a couple of glaring exceptions.

QE did not hold down long-term rates. On the contrary, long-term rates started crashing in late 2008 and responded to every tranche of QE by moving upwards. The 30-year Treasury yield bottomed out at 2.53% on December 18, 2008, before any QE.

The yield bottomed again at 2.11% on July 8, 2016, 1.5 years after QE3 ended and the Fed already had begun hiking short-term rates.

I follow the 10 year US T rate. "They" price off it mortgage rates.

The first rate rise was December 2015 when the FF target rose to from 0.25% to 0.50%; prime rate from 3.25 % to 3.50%. Net raise was December 2016 after Trump's glorious election victory.

In July 2016, the 10 year was 1.32%. With, as you cite, the 30 year rate at 2.11%, the spread would be 79 basis points. Now on TV, it's 2.99% and 2.57% = 42 basis point spread. The yield curve flattened. What gives?

The December 2008, 2.53% 30 year UST rate wasn't Fed policy. It was a symptom of the financial catastrophe with billions of dollars fleeing to safety. It was similar for gold, which went over $1,900 an ounce, while the Dow was 14,820 in August 2011.

There have been 11 or 13 (who's counting?) recessions since WWII. The Fed has been doing OK.

The Fed was mid-to-late 20th century (Humphrey-Hawkins) transformed to empower it to attempt to employ monetary policy to shoot for full employment, and price and rate stability. In 1913 (same year as the income tax - coincidence?), it was chartered to do something similar, but not exactly that. It was empowered to discount creditworthy member bank paper to provide liquidity, or an elastic money supply, in cases of imminent financial panics - "lender of last resort."

The Fed's stated purpose for the QE's was to keep LT rates low. I didn't fabricate that. I believe the real motive was bank bail out - buy/receive as bank reserves at par banks' deeply market-depreciated mortgage derivative paper. The Fed cannot be audited and it does not present financial statements that comply with US GAAP.

Go figure. The Fed attempts to raise market rates, but the market will not have it. Some call it a flattening yield curve a harbinger of bad times ahead.

The Fed hasn't screwed up (despite seven or eight FOMC 25 bp rate rises) the Trump recovery, yet. Maybe they'll achieve it early enough in 2020.

@ BD - you do realize the dollar is the 'de facto' anchor currency in the world and if the world loses their faith in the dollar, it will collapse, right? Costa Rica I think has no money of their own, and other countries de facto peg their currency to the dollar (China). Your lust for inflation, like that of Benjamin Cole, is dangerous madness to quote a phrase from L. Brezhnev.

Yeah, remember when the US had double-digit inflation in the 1970s and the dollar lost its reserve currency status?

Me neither, but I'm sure a few years of 3%-4% inflation now would be the end.

Scott Sumner

I think he'd agree only if he could work via telepresence from his home in Southern California.

He needs to have a history of sexual assault in order to get nominated so no, he won't work.

Yeah, I'm sure the other board members will be tickled pink when he gets flustered and blurts out 'you really are an idiot'. And they'll love the two-step when he makes a vehement utterance on day 1 and denies he said any such thing on day 3. And they'll cotton well to his attitude: that the rank-and-file business professor from Boston knows how to do everyone's job better than they do.

" It bears repeating: For a board member to be effective, political and bureaucratic skills are paramount."

Yes, government is political. Does anyone actually expect it not to be?

President Captain Bolsonaro has made technical appointments for his Administration. Brazil's Economy Minister is rich businessman Mr. Guedes,
a Chicago University PhD-holder. Brazil's Science Minister is Brazilian astronaut Mr. Pontes. Brazil's Defense Minister is General Azevedo e Silva. President Captain Bolsonaro has said he will not sell cabinet spots to the highest bidder.

He sounds like Trump with a brain.

Exactly. He has been called the Tropical Trump.

The role requires someone with managerial skills, an understaning of the relevant policy issues, is concerned with effective operations, and who takes the job seriously.

Lol you do realize we are talking about a Trump appointment

"Of course the next board member will also be expected to have well-informed views, however you might define them, on monetary policy and regulation."

Because of the quality and structure of US post-secondary education, the criterion that the next pick for the Fed Board of Governors be a graduate of Harvard, Yale, Princeton, or another Ivy League finance or business school (who else in the US could possibly "be expected to have well-informed views, however you might define them, on monetary policy and regulation"?) remains an entirely tacit requirement for the job.

DC-to-Boston Corridor cosmopolitan provincialism, cultural hegemony, and "managerial competence" remain preserved for another day.

"Professionalism" and professional standards are on of the self-perpetuation tools of the lite.

Tyler the "Libertarian" is essentially arguing for a professional standards definition as a minimum threshold requirement for public service.

This sounds a lot more technocratic than libertarian. But I understand there's overlapping constituencies.

(This is similar to arguments made for literacy tests at voting places, licensing for hairdressers, tenure for professors, and the like.)

Good thing we had these folks at the helm in 2007. 🤢🤮

That is why we have Trump.

See "The Case for Trump" by Victor Davis Hansen.

Those pedigreed technocrats are mostly the dull witted offspring of the ruling class. We're going to take the reigns out of their incompetent, entitled, and soft hands.


Don't be silly, you plebes will never disturb us. 1789 was a long time ago, we're smarter now.

But our guy is in, and you are out and looking in.


Trump us like caddy day at the club.

Tolerated as long as he delivers tax cuts and suitably red justices

Oh my are the lowers really this dense? My boy, we've gotten nothing but tax cuts and deregulation from 'your guy'. It's adorable how you think that your class will ever be anywhere but lower.

One day you will understand, we are the elites. We are the educated, coastal, rich, connected Americans. We control the media, the culture, the money, the government. You lot throw tantrums and have rallies and elect clowns. We get tax cuts and ever more wealth from global network effects. But please, continue bleating. It's part of our entertainment.

John Cochrane.

I agree, Jeff R. He could do it. Solid ideas on Banking.

Now you're talking!

Someone who wants to pioneer the sensible use of helicopter drops.

Adair Turner. Or me.

It took orthodox economists a full 10 years to somewhat tolerate QE.

I think we are 10 years away from money-financed fiscal programs. My guess is that 10 weeks is too long to wait.

Good point, Benjamin.

In general, I think highly of your commentary, but this seems to misunderstand the balance of responsibilities within the Fed.

The ordinary managerial responsibilities are substantial discharged by the regional presidents. I agree that managerial aptitude is essential there in overseeing the staff and diverse work of the Fed (and most people certainly underestimate that work).

The board, on the other hand, is mostly active as a policymaking forum not an executive/managerial organ. It makes sense to bring on smart managers for the regional banks and smart policymakers for the board and that's been the loose historical norm. You don't need to stack the board with managers in order to ensure that the system maintains some managerial expertise.

Many of the non-policy tasks are explicitly delegated out to regional banks. You mention payments, for example. The Board has essentially no role in payments, which are run out of FRB Chicago. To give another example, system-wide IT is run out of FRB Richmond not by the Board of Governors.

The Board's management role is just not akin to that of cabinet secretary vis-a-vis a cabinet department or something.

Yes, I was going to say much the same thing. Since when do board members have "managerial responsibiities"? That's what managers are for; board members, among other things, oversee the managers.

Empirically, how many of the Fed's board members have had "practical managerial experience"; a lot of them have been professors of economics or in business schools and I suspect many/most of them never even served as a department chair prior to being on the Fed's board.

It is indeed important the the Federal Reserve system have huge banking and financial expertise, but we've got the regional banks for that. And yes it needs good managers too but that's not what the Governors are for.

Tyler's observations about political and bureaucratic skills are more on target, although one could imagine that those skills are most paramount for the president and vice-president of the Fed. I conjecture that the other governors can let them do the political/bureaucratic heavy lifting while they concentrate on economics, policy, finance, etc.

Or does Tyler know about bad internal management at the Fed that has not been publicized? Is that his secret/Straussian point?

Most people, even knowledgeable economists, don't know anything about the internal structure of the Fed.

And you don't need to know any of that in order to comment intelligently on monetary policy or financial regulation. I imagine Tyler knows nothing about how the bureaucracy of the Fed works and just blundered into assuming that the board is running day to day management.

I worked at the Fed, so I know that and it looks like a few other folks here do too. But I have no idea, for example, what role the SEC commissioners play in internal management. It's a really niche concern.


Which of your own columns would you not recommend reading?

It's my understanding that Jeffrey Skilling has just become available? Surely a man for whom Trump would recognize for his management expertise and shared values?

I highly doubt the day to day responsibilities of administration are onerous, I would bet there are highly trained experienced professionals managing the pension fund of the fed for instance who will provide necessary advice on any decision. The idea that a Fed board governor would want to go against the professional advice is very low.

My view is the job is pretty simple even without introducing my preferred approach (NGDLT) - 1) check long term market expectations for inflation - 2) if below 2% vote for more QE at the next meeting 3) if above 2% vote for 1/2% interest rate increase. You don't need to be a monetary policy expert to do this.

Seriously, Yudkowsky for Fed Chair:


Indeed - see my comment above. The governors really aren't engaged on management issues, they're on board to do policy.

He should pick a guy with the most Russian name possible -- just to rub it in.

Yeah, Vladimir something. Should ask Erik Prince first since he evidently knows folks in the Russian banking system.

Is Ivanka available? If she's good enough for the World Bank, she should be good enough for the Fed.

I am shocked that we have not had a grammatical debate about the headline of this post, and whether it should be Who or Whom.

Here is a link discussing this important issue: https://english.stackexchange.com/questions/226282/is-whom-should-i-give-this-job-to-grammatically-correct

"So I have a question about correctness of the following question:

Who should I give this job to?
According to this rule we should have used whom instead of who, because I should give this job to him, not I should give this job to he. But there's a man who keeps telling me that"

Whom should I give this job to?"

Whom dares bring up grammar on this forum?

There's no real debate: "whom" is correct in formal writing. The only relevant question is whether a blog post is formal writing.

Ivanka - "she is good with numbers"

I believe my uncle George Kopits would be an outstanding candidate. He spent five years on Hungary's equivalent of the FOMC. Very well qualified. Safe pair of hands. DC-based.

- From 2004 to 2009, he was a member of the Monetary Council, National Bank of Hungary. (FOMC equivalent)
- 26 year IMF veteran, prior at Treasury
- Global fellow at the Woodrow Wilson International Center for Scholars, where his primary research interest is policymaking in the European Union.
- Member of Portugal’s Public Finance Council and is on the adjunct faculty of Central European University.
- In 2014-15, he was an advisor at the IMF’s Independent Evaluation Office. In 2012-13, he chaired the OECD Reference Group on Independent Fiscal Institutions and participated in Peru’s Commission on Strengthening the Macro-Fiscal Framework.
- From 2009 to 2011, Kopits served as the first chair of the Fiscal Council in Hungary—elected unanimously by Parliament. (He founded this.)
- Previous positions include assistant director at the International Monetary Fund, and financial economist at the Office of the Secretary, U.S. Treasury Department.


It is not a choice, it is a contest. I am submitting 963 lines of c code. It will appear in spreadsheet form, it finds the interest swap needed to keep the deposit to loan market stale.

The human choice is, who will deal the the 'right to coin' and the necessary bias in currency risk that causes cycles.

"running monetary policy for the entire nation, and to some extent the entire world, is more important than the smooth internal workings of the Fed." It sounds as if a bit of Division of Labour would be desirable.

And, indeed, just such a division has been implemented. The board has minimal involvement in the functions identified. The board handles the policymaking portfolio while the management portfolio is mostly handled by the regional banks.

Prof. Cowen's point is so bizarre that I'm having trouble figuring out how he came up with it.

The Board of Governors employs 2,847 of the 22,801 employees in the system. Most of the workers, and nearly all of the non-policy functions, are divvied out to the 12 regional banks. The bank presidents are the managerial officers in the system.

Note that the bank presidents don't work for the Board of Governors. Each bank has its own board that selects its own president (albeit subject to approval from the Board of Governors).

The right analogy here is the Supreme Court. The Chief Justice of the Supreme Court heads the Judicial Conference of the United States which in turn oversees the Administrative Office of the United States Courts, so on paper the Chief Justice discharges an important managerial role. In fact, though, there are professional managers and administrators to handle that.

Saying that we should select a Fed governor who can manage the administrative side of things well makes exactly as much sense as saying that we need a Chief Justice for that. That's just not the job.

Notice that, even though I loathe Trump, I'm saying he can make a good appointment, and, as well, I agree with his general point about the correct path for the Fed currently, although he could express his views without sounding like a parody of an emperor. Speaking like a gentleman is not in his nature.

Nobody. Let it go. Don't touch it.

Hans Herman Hoppe

Let me see. Why not pick a guy who got the story right and predicted many of the problems long before they happened. Reagan trusted him to have a say. Why not Trump?

Sorry. Forgot the reference.


I have it on high authority

That President Trump

Will name a well known economic prognosticator

To the Fed.

Lou Dobbs.

It's gotta be Jim Cramer

2008: "They know NOTHING!"

How about Penny Pritzker? We need more trust fund babies in the mix.

Trust fund babies have already been rewarded with last year's tax bill.

I'm available. I recently retired after a career at the Fed, and I mostly agree with Scott Sumner except for his severe case of TDS. I like Nick Rowe even more.

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