Trump Picks Partisan Nominees For Apolitical Federal Reserve
MICHEL MARTIN, HOST:
And now we're going to turn to the Federal Reserve. President Trump has two vacancies to fill on its board. Thursday, he announced plans to nominate the former restaurant executive and former GOP presidential candidate Herman Cain. And last month, he said he wants economic analyst Stephen Moore to fill the other. Both are considered Trump allies. And both have become controversial nominees.
We wanted to take this opportunity to look at the work of the Federal Reserve and the significance of President Trump's picks. We've called on Donald Kohn to help us with this. He's a senior fellow at the Brookings Institution and a former vice chairman of the Federal Reserve Board. And he's with us now from Annapolis, Md. Mr. Kohn, thank you so much for talking to us.
DONALD KOHN: It's a pleasure to be with you, Michel.
MARTIN: And I do need to start with the basics because I'm not sure what everyone might know about this. But what exactly does the Federal Reserve do?
KOHN: So the Federal Reserve is a critical and key player in shaping the overall health of the U.S. economy. It has several very important functions in that regard. I think two of them are monetary policy. Monetary policy is changing interest rates in order to promote the Congressional objectives for the Federal Reserve of maximum employment and stable prices. And another key function it has is protecting the safety of the banking system. So it supervises and regulates banks.
MARTIN: So why is there controversy about these two selections that - well, at least President Trump has indicated that these are the people he wants to appoint to these two vacancies? You know, Stephen Moore, I think many people will have seen him on television as a surrogate, you know, for President Trump - candidate Trump and President Trump - and his policies, a very sort of vocal and active surrogate. And Herman Cain, you know, a former candidate himself who's set up a PAC in support of President Trump's, you know, policies. But they're both people with backgrounds in in business and in finance. So what is it about them that's so controversial that's pushing all these people's buttons?
KOHN: So I think a couple of things - one is that they were so visibly and directly involved in the political environment rather than in the policymaking environment before their appointments. And second point would be that they have some very strong views apparently on how monetary policy should be run. And those views are not consistent with the way the Federal Reserve has been running monetary policy, really, for the past several decades. So they have controversial views on that. Mr. Cain doesn't really bring the expertise in banking or finance or economics that most appointees bring to the position of the board.
MARTIN: President Trump has been quite critical of the Fed, including Jerome Powell, the chairman. And that is somebody he chose as chairman. Do you see his picks - these two potential nominees, how can we put this as an attempt to rein him in in some way as an indictment of the board's current decisions?
KOHN: Well I think he's definitely trying to choose people that he thinks agree with him that the board and the Federal Reserve have gone off, in his view, in the wrong direction. The Federal Reserve is an apolitical, a nonpolitical, institution in which decisions are made by looking at economic facts and bringing economic analysis to bear on those facts.
One or two people can't change the direction of the institution. Their job will be to convince other policymakers that their approach is better than the approach that's been followed before.
MARTIN: Before I let you go, do you have an opinion about the performance of the current chairman, Jerome Powell? As we indicated, he is President Trump's choice for that job. Do you have an opinion about how he's conducted himself in this role so far?
KOHN: So I think I have known Jay Powell for some time. And I'm an admirer of his. I think he's a very smart guy who has worked hard at understanding monetary policy and getting on top of the issues. I think Federal Reserve has got monetary policy in about the right place. And they're - in have the right posture, which is we've got interest rates up. Let's see what happens to the economy. That will dictate where we need to go next with our interest rates. I think he's got him in a good place. And I think the economy will prosper with the Fed under his leadership.
MARTIN: That is Donald Kohn. He's a senior fellow at the Brookings Institution. That's a think tank based in Washington, D.C. Mr. Kohn, thank you so much for talking to us.
KOHN: You're welcome, Michel.
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