Trump knocks out an awful Fed chair contender -- for an awful reason
Or that the unemployment rate "is a very, very fictitious rate. It's only that low because the participation rate has gone downward." (The labor force participation rate has fallen, part of a longer-term trend, but that's not the main reason the unemployment rate is low.)
To justify rolling back post-crisis financial regulations, Cohn has also argued that banks are afraid to lend. (Available evidence suggests credit is cheap and pretty amply available.)
With Fed Vice Chair Stanley Fischer's unexpectedly early resignation taking effect next month, Trump will get to fill a majority of the seats on the Fed's board of governors. He has so far dragged his feet on this personnel project, nominating only one candidate for the existing three (soon to be four) openings. That nominee is Randal Quarles, a forceful deregulation advocate selected to serve in the Fed's top regulatory post.
Maybe Trump has too many other things on his plate, or maybe he's just having difficulty finding suitable candidates. The traditional Republican Fed possibilities -- John Taylor, Kevin Warsh, Glenn Hubbard -- are all probably far too hawkish for Trump's taste. The self-proclaimed "King of Debt," Trump has said repeatedly that he loves low interest rates, seemingly regardless of where we are in the business cycle.
In fact, Trump will be hard-pressed to find a qualified candidate more dovish than Yellen. Cohn, whose views on inflation and interest rates are less well understood, seemed to be the leading Fed contender primarily because Trump knew him.
Cohn's removal (for now, anyway) from the pool of candidates boosts Yellen's chances of reappointment quite a bit. Which would actually be a great outcome. Yellen is a brilliant economist, a skilled and consensus-building leader, and an unusually strong prognosticator. The vice chair under her predecessor Ben Bernanke, she's part of the reason we didn't plunge into another Great Depression a decade ago.
Let's hope Trump does the right thing, even if it might be for the wrong reasons.
Catherine Rampell's email address is email@example.com. Follow her on Twitter, @crampell.
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