Almost two years ago, not long after Donald Trump was sworn in, I wrote several articles on the theme that “Trump owns the Fed.”

The logic behind this claim was simple. There are seven members on the board of governors of the Federal Reserve System. When Trump came into office, only five of those seats were filled and there were two vacancies.

Those vacancies represented a political miscalculation on the part of President Obama. The Obama administration would have had difficulty filling those two seats during Obama’s last year in office because of opposition from the Republican-controlled Senate. Obama didn’t worry because he liked the five members who were already on the board and was confident that Hillary Clinton would win the 2016 election and would fill the vacancies with safe hands.

Trump’s shock victory handed the vacancies to Trump. It gets better.

Within Trump’s first thirteen months in office, three other governors either retired or resigned. These three were Janet Yellen (resigned Feb. 3, 2018), Stan Fischer (resigned Oct. 16, 2017) and Dan Tarullo (resigned April 5, 2017). Those three resignations combined with the two vacancies left Trump in the position of being able to fill five of the seven seats on the board.

One of the holdovers was Jay Powell, the current chair and a loyal Republican. This left Lael Brainard as the only Democrat on the board of governors — a lonely position indeed.

Trump has filled three of the five vacancies by appointing Richard Clarida (the new vice chair), Michelle W. Bowman (filling the “community bank” seat) and Randy Quarles (the new vice chair for regulation). This still leaves the two original vacancies.

As explained in this article, Trump’s prospective nominees are Herman Cain (founder of Godfather’s Pizza and a former presidential candidate) and Steve Moore (a supply-sider and think-tank head). The article’s author points out that a Ph.D. in Economics is not a requirement for membership on the board and too many Ph.D.s may actually be detrimental because of groupthink and lack of cognitive diversity.

The latest reports show that Cain may have to withdraw his name because of opposition by Republican senators to claims of sexual harassment. In that case, Trump is sure to nominate another close ally with similar views and no personal baggage.

The point is to nominate governors who favor lower interest rates and will hold Jay Powell’s feet to the fire to make sure that rates are not raised. The object is to avoid a recession and pump up the stock market in the run-up to the 2020 presidential election.

We’ll see if Trump’s strategy works. Meanwhile, there’s no question about the long shadow that Trump casts over the mighty Fed.

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