In 2017, we advised readers that Trump “owns” the Federal Reserve. This was not hyperbole; it was just simple math.

There are seven seats on the Fed board of governors. The seven seats include a chair, a vice chair and five other governors. But two of the seats were vacant when Trump was elected.

Not long after Trump was sworn in, three other governors (Janet Yellen, Stan Fischer and Dan Tarullo) all resigned, bringing the total vacancies for Trump to fill to five. With five out of seven seats to be picked by Trump and Jay Powell already on the board as a reliable Republican, the only liberal Democrat on the board was Lael Brainard.

Since 2017, Trump has filled three of the five vacancies with Randall Quarles, Richard Clarida and Michelle Bowman. He still has two seats left to fill.

Trump has nominated two of his economic loyalists — Herman Cain and Steve Moore — to fill those two seats. No president has had as much control over the board of governors as Trump since the Federal Reserve was founded in 1913.

As this article reports, this dominance of the board by Trump loyalists is creating headaches for Fed Chair Jay Powell. On the one hand, Powell wants to raise rates to prepare for the next recession. On the other hand, Powell knows he cannot raise rates too fast without causing a recession or market crash.

Powell has resolved this dilemma by deciding to “pause” on rate hikes for the time being and end the Fed’s balance sheet normalization by September. But this may not be good enough for Cain and Moore if they are confirmed. They have called for interest rate cuts now to keep the economy growing and stocks booming through Trump’s reelection campaign for 2020.

We’ll leave the politics to others. One thing we do know is that if Trump appointees get their easy money policies, the big winner will be gold.

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