There is perhaps no better way of summing up the direction of any organization than the phrase: “Personnel is policy.” With regard to government, that means that the people who are put into positions of power indicate the direction of actual policy more clearly than the President’s statements. President Ronald Reagan’s tenure was a good example of this. Despite his many public statements in favor of gold, his appointments to key positions and in particular to the Gold Commission were people who undermined his publicly-stated positions. Whether he was aware of this or not is up for debate, especially as we now know of his battle with Alzheimer’s.
That is the danger that might face the current Trump Administration where, despite his many public statements favorable to the gold standard, President Trump may end up appointing officials who hold exactly the opposite view as he does. This is particularly important now that news outlets have been reporting this week that President Trump is set to appoint Randal Quarles to the Federal Reserve Board as Vice Chairman of Regulation. Mr. Quarles’ biography is as establishment as it comes. He received his A.B. from Columbia University and his J.D. from Yale Law School. He worked at the Carlyle Group, a leading private equity firm whose close political connections to former senior Administration officials are legendary. His wife is Hope Eccles, grand-niece of Marriner Eccles, the Federal Reserve Board’s Chairman from 1934-1948, after whom the Fed’s headquarters building is named. Mr. Quarles also served as Under Secretary of the US Treasury, Assistant Secretary of the Treasury for International Affairs, US Executive Director of the IMF, US Executive Director of the European Bank for Reconstruction and Development, etc. Doesn’t exactly sound like a guy who is about to shake things up, right?
While his nomination isn’t official yet, let’s look at some other possible candidates President Trump might appoint to the Federal Reserve’s Board of Governors. We’ve split them into four categories.
1. The Dream Team – those candidates who would be the best possible from the perspective of those of us favoring sound monetary policy.
2. Establishment Favorites – the favorite candidates of the Establishment, or those already under consideration by the Administration.
3. The Compromise Candidates – these candidates are all former Presidents of regional Federal Reserve Banks. While they wouldn’t be the first choices of either the Establishment or of advocates of sound monetary policy, sending former regional Fed Presidents to serve on the Board might send a message to the Board to take into account not just the views of the Washington/New York financial-political elites.
4. The Dark Horses – while perfectly qualified for serving on the Board, these candidates are probably not as well known to the general public, and even to most policymakers, as some of the others.
Remember, President Trump will have at least four appointments to make in his first term, maybe even five if Chairman Yellen resigns her seat after her chairmanship is up, so his decisions on appointments could have a strong impact on the conduct of monetary policy going forward.