During the campaign, candidate Donald Trump did not hold back in his criticism of the Federal Reserve and chair Janet Yellen.
In April, President Trump said that he could bring Yellen back for a second term, saying “I like her, I respect her.”
What changed? Apparently, Gary Cohn.
The former Goldman Sachs executive and current economic adviser to Trump reportedly impressed upon the president the importance of the Fed’s independence after joining the White House, according to the Wall Street Journal’s Nick Timiraos and Kate Davidson.
Reports consistently refer to Cohn as a mitigating influence, and according to the Journal this was the same for the Fed. Cohn impressed upon Trump the need for the Fed to remain politically independent and the macroeconomic consequences of any interference.
Previous examples of presidents exerting influence on Fed policies — such as President Richard Nixon in the 1970s and following World War II — tend to turn out negatively for the border US economy.
According to the Journal, Cohn facilitated a meeting between Yellen and Trump in February. Additionally, Cohn and Treasury Secretary Steven Mnuchin both meet with Yellen regularly.
While Trump may not be exerting direct influence on the Fed, he will be able to exert significant influence through appointments to the Fed’s Board of Governors. There are three open seats currently and reports suggest that Trump is nearing appointments for two of those seats.
The Journal reported that Cohn has begun a search to find the next Fed chair, citing a senior administration official. Yellen’s term expires in February 2018.
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