March 27, 2017
We hear quite a bit about the Supreme Court and President Trump’s potential affect on it. Beyond nominating Justice Neil Gorsuch, the president could end up nominating more, especially if he wins a second term.
But there’s another venerable institution that could be hugely impacted by President Trump – the Federal Reserve Board of Governors.
It’s the policy-making arm of the Fed and is made up of seven people, each of whom is appointed by the sitting president to serve a 15-year term. Their terms are staggered by design, to avoid too much political influence.
Historically, board members do not serve their full terms, as they’re often in high demand professionally. In fact, the last board member to serve a full term was Alan Greenspan. In early 2017 board member Daniel Tarullo resigned, making it three open seats out of seven, which is where we currently stand. Two seats were unoccupied before his resignation.
There are questions about whether Chair Janet Yellen will resign, be asked to resign or somehow otherwise be removed from power. If she left, it would be four of seven seats open. Usually when the chairperson goes, the vice chair exits too. That would mean Stanley Fisher, who is 74-years-old, would leave. He could retire too.
And that would mean President Trump would appoint an unprecedented five out of seven Fed board members, all in his first term. To compare, here are the presidents with the most Fed appointments.
The market is already responding favorably to the looming regulatory cuts. I can’t imagine what the response will be if more than 70 percent of the Fed policy-making arm is appointed by President Trump.