Concern among bankers

Trump's pick of Moore for Fed sparks concern among bankers

By VICTORIA GUIDA

President Donald Trump’s choice of former campaign adviser Stephen Moore to serve on the Federal Reserve Board is stirring misgivings among some bankers, who worry that the conservative economist would erode the Fed’s political independence.

Moore hasn’t been formally nominated or even fully vetted by the White House yet, but Trump’s enthusiastic announcement that he would tap the Heritage Foundation economist for the central bank caught both Washington and New York off guard.

A half-dozen bank representatives interviewed on Tuesday privately said they aren’t planning to take a position on the nomination, but their reservations are likely to come up in conversations with Republican senators, which could complicate Moore's path to confirmation amid strong opposition from Democrats.

“Bankers are very strongly and institutionally committed to the Fed,” said Karen Petrou, managing partner at Federal Financial Analytics. “They disagree individually and sometimes collectively with what it does, but I don’t think there’s any substantive dispute from the smallest to the biggest banks of the need for an independent Fed.”

Moore has picked up support from a handful of Republican senators but most GOP members of the Banking Committee have not yet taken a position at this early stage, including Chairman Mike Crapo (R-Idaho), whose backing is crucial.

For his part, Moore pushed back on the fear that he would do Trump's bidding at the central bank.

“I will be independent,” he told POLITICO in a phone interview Tuesday night, though he admitted, “I’m a big fan of Donald Trump’s.”

But he said he also has differences of opinion with the president, citing trade and antitrust issues.

Still, Moore, who would fill one of two open seats on the Fed board, has previously cast doubt on the need for the institution to be independent from short-term political considerations, a key element of the central bank’s design that's intended to help it make decisions that are in the long-term interest of the economy.

He has also received criticism over his qualifications from economists across the political spectrum.

That’s a stark departure from Trump’s other nominees to the central bank, who have been widely respected and conventional picks, including Chairman Jerome Powell, a frequent target of the president's because of the Fed's interest-rate-hike campaign last year.

Bankers' hesitation about Moore is also striking, given that he would likely be a reliable voice in support of deregulation.

“The Fed has been viewed as an entity that would be immune to the fate of other departments where political considerations trumped qualifications when it came to appointments,” said Tim Duy, a professor at the University of Oregon in a recent op-ed. “That is no longer the case.”

Moore has been a fierce promoter of the president on television, channeling him by accusing central bank officials of committing “economic malpractice” by raising rates in December — a move that reportedly led Trump to consider firing Powell.

“Who is the Fed responsive to, if not the president?” Moore said on CNN that month.

He has walked that sentiment back since his nomination, saying he wouldn’t take political considerations into account. “I get that the Fed has to be independent of what the president wants,” he told the Washington Examiner last weekend.

He also pledged to work with his fellow Fed officials, if confirmed, in an interview with Bloomberg TV.

“I don’t want to be a disruptor,” he said. “I want to be somebody who can really help Chairman Powell and the others on that board to construct the best pro-growth, stable price system that we can for this country.”

Central bankers are given 14-year terms, and Sen. Richard Shelby (R-Ala.) expressed confidence that that fact alone is enough to ensure that the president’s nominees won’t be beholden to him.

“Whoever goes over there will be independent, because once you get long term at the Fed you are independent,” Shelby told reporters Monday evening.

Moore would also be only one of six Fed governors, meaning he won’t single-handedly be able to change the outcome of any votes. “He’s going to be a dissenter, which the Fed would rather avoid, but can live with,” Ian Katz, a director with Capital Alpha Partners, said in a note to clients. “His impact on policy will probably be limited as a governor.”

But Katz also noted that if Trump is reelected, he could then appoint Moore as chairman when Powell’s term expires in 2022.

POLITICO spoke with most of the Republicans on the Senate Banking Committee, many of whom praised Moore's intelligence and conservative credentials, and Sen. David Perdue (R-Ga.) said he planned to support the candidate.

The rest declined to take a firm position, though Moore was complimented by Sens. Shelby, Mike Rounds (R-S.D.), Kevin Cramer (R-N.D.) and Pat Toomey (R-Pa.), who called him a “great guy.”

Crapo declined to comment on whether he would support Moore but said it's “a priority to fill every seat on the board.”

On the question of independence, Cramer argued that it’s perfectly natural for the president to nominate someone with whom he’s familiar.

“Of course [Fed officials] are and should be independent, but they get appointed by people that know them, and that’s an asset, not a conflict in my view,” Cramer said. “Stephen’s a guy with great integrity and great intellectual capacity. … I don’t think he’d be politically swayed.”