President-elect Donald Trump's stunning November 5 victory has initiated a wave of what-if scenarios in the realm of economics, foreign policy, health care, and everything else the federal government has become a fixture of. One area that should be popcorn entertainment for economists, business reporters, and Wall Street watchers will be the Federal Reserve. Whether in his first four years residing in the White House or on the 2024 campaign trail, Trump has been a vocal critic of the world's most powerful institution. Is the Fed poised for an overhaul under a second Trump term?
Federal Reserve Attends Trump University
In November 2017, Trump appointed Jerome Powell to helm the Federal Reserve, succeeding Janet Yellen. The move was surprising at the time as many had expected chief Trump economic advisor Gary Cohn or former Fed Gov. Kevin Warsh to lead the US central bank.
"He’s strong, he’s committed, and he’s smart, and if he is confirmed by the Senate, Jay will put his considerable talents and experience to work leading our nation’s independent central bank," Trump said at a White House Rose Garden event.
Nearly a decade later, Fed Chair Jerome Powell's tenure is set to expire in 2026. Trump’s relationship with Powell has not been as cordial throughout his term in the Oval Office. Trump often took to X and called him a "disappointment" and accused the Fed chief of having "no guts." It is safe to say that it will be two years of bedlam in the Eccles Building.
In February, Trump confirmed that he would not reappoint Powell. Months later, in a Bloomberg interview, Trump clarified that he would allow Powell to complete his term, "especially if I thought he was doing the right thing." On the road to the presidency, Trump repeatedly stated that Powell and his colleagues should not be easing monetary policy or cutting interest rates so close to the election. When the Fed followed through on a super-sized half-point reduction to the benchmark federal funds rate in September, Trump was unhappy.
"I guess it shows the economy is very bad to cut it by that much, assuming they're not just playing politics," he told reporters at a Bitcoin bar in New York. "The economy would be very bad, or they're playing politics, one or the other. But it was a big cut."
The monetary authorities have consistently conveyed to the public that they do not monitor the US election calendar, averring that the institution is independent of politics – Republicans or Democrats. This is “literally essential,” too, for the broader economic landscape, says Powell.
"I think that's pretty broadly understood … on both sides of the aisle. I believe that people understand that we need to do our work in a way that's outside the political process, to the maximum extent," Powell told the Senate Banking Committee during his semi-annual monetary policy report in July.
Trump slightly disagrees. This past summer, speaking to reporters from his Mar-a-Lago residence, the president-elect believes presidents should possess “at least a say” in monetary policy decisions. "I think that in my case, I made a lot of money, I was very successful, and I think I have a better instinct than in many cases, people that would be on the Federal Reserve or the chairman," Trump noted.
These comments were made in the wake of a report from The Wall Street Journal claiming Trump allies were crafting plans to blunt Fed independence. According to reports, a phalanx of former Trump economic aides drafted a document recommending Trump be consulted on rate decisions, subject the Fed to White House reviews, and employ the Treasury Department to monitor the Fed. The campaign denied the article and noted that “no aspect of future presidential staffing or policy announcements should be deemed official.”
As Liberty Nation News has noted, the Fed is not an independent agency. Its century-long history has been filled with handshakes, nudges, winks, and even fawning with the executive branch. Unsurprisingly, the media will likely ignore its past come January 2025 as Trump will continually lambast the Federal Reserve System.
Who Is on Deck?
Over the last year, many names have floated around to succeed Jerome Powell. The most commonly cited name is Kevin Hassett, the Trump-era Council of Economic Advisors Chairman, an administration seat that is currently occupied by Jared Bernstein. Former Fed Gov. Kevin Warsh and eminent economist Art Laffer are other potential picks in 2026.
While she may not be selected to lead the Fed in a Trump 2.0 economy, economist Judy Shelton has been considered someone he could nominate for a second time to join the Federal Reserve Board – her first bid was rejected in 2020. Shelton recently proffered a suggestion that is music to the ears of Americans infected with the inflation virus since 2021: The central bank should lower its 2% inflation target to 0%. "Why not just go all the way and make it zero and make life much less complicated for all of us who have to use the dollar and constantly express things in terms of inflation-adjusted?” Shelton told CNN last month.
One idea making the rounds in the business media is a "shadow Fed Chair." Scott Bessent, chief executive of the hedge fund Key Square and a Trump economic advisor, told Barron's in October that Trump "could do the earliest Fed nomination and create a shadow Fed chair," meaning "no one is really going to care what Jerome Powell has to say anymore.” For a financial market that obsesses over the central bank, experts argue this would be a horrific idea, especially considering that investors loathe uncertainty, which could be ubiquitous heading into 2026.
It Doesn’t, er, Shouldn’t Matter
In a 2012 interview with Hoover Institution's Peter Robinson, legendary economist Thomas Sowell was asked, "If you remove the Federal Reserve, what would you replace it with?" His response? "When someone removes a cancer, what do you replace it with?"
The Federal Reserve System engineers the boom-bust cycle and distorts economic conditions by micromanaging the economy, whether by running the printing press or arbitrarily raising or cutting interest rates. Trump, Vice President-elect JD Vance, and many of their campaign members espoused the various monetary transgressions. If Trump truly drained the Swamp, it would not matter who was on deck to steer the Fed ship.
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