Trump Set to Shake Up Fed, Nominate Conservative Bankers onto Ultra-Liberal Board

Trump is set to nominate Robert Jones chair, CEO of Old National Bank, Carnegie Mellon University professor Marvin Goodfriend and former Treasury Department staffer Randal Quarles to fill the three open seats on the Federal Reserve’s Board of Governors.

Both Goodfriend and Quarles are considered to be politically conservative and will serve as a poison pill for the ultra-left leaning Yellen. They’ve both been highly critical of the Fed’s approach to fiscal stimulus, dealing with the financial crisis, and may pave the way for Yellen’s eventual departure.

They believe the Fed should adopt a more ‘formulaic’ approach to policy — limiting the caprices of human judgment. We might as well have a ROBO-Fed and discontinue the Fed altogether.

“If you’re going to be transparent in an activity like the Fed, you have to be much more rule-based in what you’re doing,” Mr. Quarles told Bloomberg Television in 2015. He described the Fed’s current approach as “a crazy way to run a railroad.”

Christopher Whalen, the man who begged Bank of American to declare bankruptcy to ‘save itself,’ likes the change.

“Clearly, these appointees are a significant departure from the crowd that we’ve had on the board,” said Christopher Whalen, head of Whalen Global Advisors and a former investment banker and long-time financial analyst. “Yellen is probably the most left-wing Fed chair we’ve ever had. I also think both Quarles and Goodfriend have much better grounding in the financial markets. That would be refreshing.”

Krishna Guha, vice chairman at Evercore ISI, says the nominations would be hawkish for rates, which is the exact opposite of what Trump asked for (weak dollar, low rates) just a short while ago.

“Interestingly, these nominations would not on the face of it be consistent with the notion that Trump will seek to foster low rates and a weaker dollar by nominating doves,” Guha said in a research note. “Whether this is a strategic choice or an unintended consequence at a time when the administration is consumed by multiple dramas is hard to tell at this juncture.”

Brian Gardner, managing director at Keefe Bruyette & Woods doesn’t think Quarles and Goodfriend are ‘overly hawkish’, just a little more than the current cadre of fuckheads.

“I don’t think they’re overly hawkish, but probably slightly more than what is represented on the board right now,” Brian Gardner, managing director at Keefe, Bruyette & Woods, said of Quarles and Goodfriend.

 

Ultimately, a more conservative Fed means less regulations, especially for smaller banks, and higher rates — providing the economy can absorb them. This would be bullish for bank stocks, the dollar, and bearish for precious metals, bonds.

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