Fed officials keep breaking with protocol in a way that could compromise the central bank’s independence

Stanley fischer
Fed Vice Chair Stanley Fischer, left and White House National Economic Advisor Gary Cohn, right Getty Images

Only one person gets to choose the Federal Reserve’s chair, and that’s the president of the United States.

Which makes it all the more curious that a second top Fed official, Vice Chair Stanley Fischer, has taken the unusual step of opining on whom Donald Trump might pick as his future boss.

Like William Dudley, the president of the New York Fed and a former partner at Goldman Sachs, Fischer, himself a former banker at Citigroup, appeared to tacitly endorse Trump’s preferred candidate, the head of the National Economic Council and former Goldman Sachs president Gary Cohn.

In an interview with the Financial Times, Fischer said the reappointment of Janet Yellen, whose first term as chair expires in February, would be an “excellent choice.”

But Fischer added he likes Cohn after having gotten to know him while dining together at events thrown by Goldman Sachs during the IMF’s annual meetings, the FT reported. Fischer has attended those meetings in several capacities over the years, first as a senior IMF official, then as head of Israel’s central bank and now as the No 2. Fed official.

Fischer also downplayed Cohn’s most important weakness: his absolute lack of the economics background typical of a central bank chair.

“The chairman of an institution such as the Fed, one of the primary things he needs is the ability to judge the advice he is getting,” Fischer said.

Why is the Fed’s vice chair speculating on his future boss? Or endorsing potential candidates? This represents a direct breach of central bank independence, which the Fed is loathe to concede when it comes to Congressional interference in its affairs.

The Fed did not respond to a request for comment.

Fischer’s remarks come on the heels of Dudley’s own curious endorsement of Cohn, a fellow former banker with whom he overlapped at Goldman Sachs.

The next time Congress attempts to meddle in the Fed’s affairs, lawmakers could point to just this sort of statement to show that policymakers have disregarded the basic tenets of independence when it suited them.

It’s not the first time Fischer has appeared to skirt the Fed’s own rules. In April, he gave a speech on bank regulation to a private audience at the Brookings Institution that included big investors, and concluded with a question and answer session on interest rates. Even the smallest insights into top central bankers’ thinking can be extremely valuable to a knowledgeable Wall Street crowd.

Fischer’s own term as vice-chair due to end in the middle of next year, but he declined in the FT interview to speculate on his chances of a reappointment.