One nugget of information in Axios’ big scoop of months of internal White House schedules is that President Trump met last Wednesday with Herman Cain, the former fast-food CEO and presidential candidate whom he is reportedly considering appointing to the Federal Reserve Board.
Cain, despite his service as chairman of the board of the Federal Reserve Bank of Kansas City in the 1990s, would be an unorthodox choice for the Fed Board. But Trump has been frustrated with the relatively orthodox figures he has appointed so far, who voted repeatedly in 2018 to raise interest rates, even though he thinks interest rates should be low. National Economic Council head Larry Kudlow said last month that the president is looking to appoint members who share his view that the Fed should worry less about inflation right now — inflation concerns are a major reason the Fed raises interest rates.
A problem with Cain as an unorthodox choice Trump could make is that Cain has a record as a monetary policy hawk. If we take Cain at his past word, he’d be likely to pursue monetary policies the president likes even less than the ones the Fed has already been making during his term.
In a presidential debate in 2011, Cain spoke critically of the Fed’s dual mandate (to maintain full employment and price stability), saying the Fed’s mission should be “refocused on price stability” — that is, more focused on fighting inflation. In 2012, Cain wrote an op-ed for The Wall Street Journal urging a return to the gold standard, which would tie the Fed’s hands and prevent the sort of easy money policies the president now wants the Fed to implement. In 2017, Cain wrote that rising interest rates were a good thing, benefitting savers and increasing the soundness of the financial system.
It is possible the president believes Cain has no fixed policy principles and would fight for low rates and easy money if that’s what Donald Trump wants. But that seems like a risky guess, when the president could instead pick Federal Reserve Board nominees who have a demonstrated record of favoring policies that emphasize full employment and who are on the record as believing that the inflation threat is overstated.
A problem for the president is that many of the qualified candidates who share his views on monetary policy are liberals and Democrats who have views on the Fed’s other main responsibility — bank regulation — that Republicans would object to. But the current president of the Federal Reserve Bank of Minneapolis, Neel Kashkari, is a Republican in good standing (he was even the Republican nominee for governor of California in 2014) and a monetary dove.
The president has a bad habit of wanting to put people he has personal relationships with in positions of power they’re not good fits for. (Remember when he reportedly wanted to put his personal pilot in charge of the Federal Aviation Administration?) Trump likes what Cain has to say about him on television, so Trump thinks about that rather than Cain’s lengthy record of opposition to the president’s preferred monetary policies. If Trump wants to put his mark on the Fed, he’d be better off calling in Kashkari for an interview than Cain.