The independence of central banks, much like other institutional integrities, has fallen out of favor in Washington. Its staunchest supporters and defenders are departing, replaced by partisan figures and monetary policy dissenters. The impending retirement of Federal Reserve Chair Jerome Powell presents President Donald Trump with an opportunity to recalibrate his 2018 appointment decision—one he now regrets. Scott Besant’s firm grip on the selection process ensures that, regardless of the nominee, the Treasury Secretary will effectively wield influence over the Fed’s leadership.
Trump has repeatedly criticized Powell publicly, accusing him of sluggish rate cuts, labeling him a "fool" and "always too late," and delegating candidate vetting to Besant. The President claims to have narrowed the list to one name, widely speculated to be National Economic Council Director Kevin Hassett. Besant has seized this moment to amplify his institutional critiques of the Fed—crafting a policy framework that aligns with Trump’s grievances on interest rates. While paying lip service to Fed independence, Besant’s definition starkly diverges from conventional interpretations.
In a recent academic article, Besant argued that the Fed has strayed from its historical role. During the 2007-2009 financial crisis and the 2020 pandemic, it deployed unprecedented tools that expanded its economic influence with minimal democratic oversight. This overreach, he contends, is most evident in the Fed’s $6.6 trillion balance sheet (as of early November), which repurposed crisis-era asset purchases into stimulus measures favoring homeowners and shareholders. Besant also asserts that the Fed consistently overestimates fiscal stimulus effects while underestimating growth from tax cuts and deregulation.
Post-crisis, the Fed’s mandate expanded into financial regulation, gender equity, and climate issues under the 2010 Dodd-Frank Act. Though Besant stops short of proposing structural reforms, critics suggest revisiting the 1951 Fed-Treasury Accord—a pivotal step toward central bank independence that ended wartime Treasury dominance. Trump, however, is challenging this arm’s-length relationship. His administration aims to install a majority of Trump-appointed Fed governors, even as the Supreme Court weighs his attempt to remove Biden-appointed Governor Lisa Cook.
Besant’s selection criteria for Powell’s successor reveal clear priorities: regulatory alignment with the White House, significantly lower rates (dismissing tariff-inflation concerns), and Treasury-led debt management. The Fed has already made incremental moves toward Besant’s preferences. Newly appointed Vice Chair for Supervision Michelle Bowman is cutting bank examiners by 30%, and the Fed exited a global climate risk coalition days before Trump’s 2025 inauguration, citing mission creep. Even Fed defenders like former regulatory czar Daniel Tarullo acknowledge recent overreach, though they stress the necessity of tools for financial stability.
Trump’s erratic trade policies, dismissal of statisticians over unfavorable data, and promotion of speculative crypto assets (where his family holds substantial exposure) underscore his disregard for institutional guardrails. When the next crisis hits, a constrained Fed could cede unprecedented power to the executive branch. Central banks require public trust to manage inflation and credit—a currency this administration seems unlikely to mint.
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