How Trump’s Nominee for the Fed Could Turn Central Banking on Its Head

Jay L. Zagorsky, The Ohio State University
President Donald Trump on July 10 nominated Randal Quarles to be one of the seven governors of the Federal Reserve System, the central bank of the United States.
Before I get to Quarles and his qualifications, it’s important to understand the Fed and what it does. Its decisions are vital to every person on the planet who borrows or lends money (pretty much everybody) since it has enormous influence over global interest rates. Its board of governors also influences most other aspects of the global financial system, from regulating banks to how money is wired around the world.
Quarles, for his part, is clearly qualified for a job at the pinnacle of financial regulation. He has held numerous positions in the US Treasury Department, including undersecretary for domestic finance under George W. Bush, and was the US executive director at the International Monetary Fund (IMF). He has also worked on Wall Street for The Carlyle Group and founded his own investment company, The Cynosure Group. He also has a law degree from Yale.
The issue that I believe deserves careful scrutiny, however, does not involve his qualifications. Rather it’s a view of his that, if allowed to permeate the Fed, would represent a seismic shock to how the central bank operates and could potentially have severe consequences if – or when – we stumble into another financial crisis like the one we endured only a decade ago.

This post was published at FinancialSense on 07/12/2017.