Packing the Fed with Trump allies

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President Trump is mulling another controversial nominee to the Federal Reserve's board of governors: former GOP presidential candidate Herman Cain, said Nick Timiraos and Alex Leary at The Wall Street Journal. The plan to nominate Cain, announced last week, follows the nomination of Trump's former campaign adviser Stephen Moore. Trump has repeatedly berated the Fed chairman, Jerome Powell, demanding the Fed lower interest rates to boost the economy. If both Cain and Moore are confirmed, that would put two loyal "Trump supporters on the central bank's powerful seven-seat board," who could accede to Trump's demands for economic stimulus with little regard for long-term consequences. Cain's 2012 presidential run is most remembered for his "9-9-9" tax plan and his advocacy of a return to the gold standard; the campaign fizzled out after multiple sexual harassment allegations. Both Fed choices have been met with "heavy public scrutiny," said Paul Kiernan, also at the Journal. In response, Moore and Cain have "departed from the traditional rule book" for nominees by frequently speaking in public and hitting back at opponents. Cain this week waded into the debate to say that he was being attacked because "I am an outspoken voice of conservatism."

The Fed has always been subject to politics, said Neil Irwin at The New York Times — after all, the president appoints its board of governors. But its deliberations on how to steer the economy and interest rates have a nonpartisan cast. There aren't even any "political bumper stickers in the underground parking lot." These two choices, though, will make the central bank yet another partisan battleground. Much has been made of the fact that Cain and Moore don't have Ph.D.s in economics, said Justin Fox at Bloomberg. Yes, most recent Fed governors have had one, but "the whole point of assigning key decisions to a group is to make room for a diversity of backgrounds and opinions." The real problem here is that Moore and Cain are "transparently partisan" hacks. If the president wants to appoint hacks to run the Fed, nothing in the law stops him. But they're likely to have zero influence on the rest of the board.

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Even so, the Fed shouldn't have two seats given over to governors who will pander to the president, said Roger Lowenstein at The Washington Post. There is precedent for a Fed knuckling under to a president, and it did not end well. Richard Nixon, fearing his re-election was at risk, ordered his Fed chairman, Arthur Burns, "not to allow a recession, even at the risk of stimulating inflation." The White House went so far as to leak a false story that Burns had asked for a pay raise while urging others to keep wages low. Burns caved, Nixon won, and inflation soared to double digits. Moore and Cain would likely be similarly beholden to Trump. We've seen how a responsible Fed board should behave, and it sets the standard the U.S. Senate should expect before approving a nominee: At the height of the financial meltdown in 2008, then-chairman Ben Bernanke made the case to President Bush for a necessary but deeply unpopular bank bailout. Not so he could "please his political patrons" but because he knew it was right.