National Economic Council Director Gary Cohn is Donald Trump’s top economic policy aide. He was also, until recently, widely regarded as a leading candidate to succeed Janet Yellen at the helm of the Federal Reserve when her term expires next year. But a report from Michael C. Bender, Harriet Torry, and Nick Timiraos at the Wall Street Journal says that’s now “unlikely”.
Trump, it seems, soured on Cohn when Cohn told the Financial Times on August 25 that the Trump administration “can and must do better in consistently and unequivocally condemning” neo-Nazi and white supremacist groups.
Cohn, who is still the administration’s point person on the development of a tax reform plan, is apparently in the doghouse.
This is perhaps a fitting comeuppance for Cohn who, like so many before him, tried to walk the line between Trump-fueled ambition and maintaining his sense of self-respect only to find that it’s impossible. And it’s probably no great loss to the world of central banking, since there’s never been any particular reason to think that Cohn would be a good choice for the job.
But it does seem to indicate that Trump is interested in making slavish personal loyalty to Donald Trump a core qualification for the Fed job — a potentially dangerous situation.
Gary Cohn is no great shakes
Cohn himself was never all that promising as a Fed candidate.
He’s an experienced financial markets practitioner and successful businessman, but he has no training in economics, and the job of running a central bank in the public interest is not closely related to the job of running an investment bank for profit.
“He’s not an academic,” Cohn’s former boss, Goldman Sachs CEO Lloyd Blankfein, said at a recent conference, “I don’t know that he reads a lot of policy papers, let alone writes them.”
Perhaps a turn away from the past several decades’ worth of emphasis on selecting central bankers who are well-acquainted with macroeconomic theory would be a good idea. But Cohn’s close personal ties to the financial industry seem like a double-edged sword at best, as few people feel the big problem with American public policy over the past decade has been insufficient attention to the needs of major bank conglomerates.
That he fell out of favor with Trump is probably for the best, all things considered. There are plenty of other good candidates out there. But the particular reason for the falling out — the Journal reports that “the president visibly bristles at the mention of his economic adviser” ever since the August 25 interview — does not instill a ton of confidence.
The Fed is independent, with good reason
The power to appoint a Federal Reserve chair is among the president’s most important powers. It’s appropriate for presidents to try to pick chairs who align with their views and priorities, and it’s a mistake for political leaders to treat the Fed’s independent status as a reason to fussily avoid engaging with monetary issues at all.
But the Fed isn’t like a White House staff job or even a Cabinet appointment.
It’s more like a Supreme Court seat. The Chair runs a significant freestanding government agency. He or she is not part of the president’s “team” and isn’t supposed to try to narrowly serve the president’s agenda. That’s because the job of presiding over stable long-term economic growth is inherently in conflict with serving the president’s political interest — timing rapid economic growth to coincide with his reelection campaign.
Reasonable people can disagree about exactly how much independence it’s realistic to expect. But “is willing to defend the president’s defenses of neo-Nazis” is an extraordinarily high bar for obsequiousness — virtually everyone under the sun criticized Trump on this score. It’s hard to imagine anyone that lacking in concern for their reputation, public standing, or self-respect being able to appropriately balance the national interest against the president’s whims.