President Trump said he will nominate former GOP presidential candidate Herman Cain to the Federal Reserve’s board of governors, a move that would significantly escalate the White House’s effort to exert political pressure on the U.S. central bank.
Cain, a restaurant industry executive, rose to national prominence during the 2012 GOP primary season as his campaign became famous for a simplified tax plan, known as 9-9-9. But his candidacy unraveled over complaints that he sexually harassed multiple women.
There are two empty seats on the Fed’s seven-member board. The president is hoping to fill the other empty seat with conservative economist Stephen Moore, a Trump ally whose nomination has led to an outcry from former White House officials in both parties because of Moore’s political background and lack of Fed-related experience.
While Senate Republicans seemed largely amenable to Moore’s nomination, the prospect of Cain’s nomination unsettled some in the party. A Senate GOP leadership aide, speaking on the condition of anonymity to discuss the nominee’s prospects, predicted Cain would not have the support to be confirmed.
The additions of Cain and Moore would put two Trump allies on the Fed’s board at a time when the president has been critical of Fed Chair Jerome H. Powell’s handling of the economy. Under Powell’s leadership, the Fed steadily raised interest rates last year, infuriating the president because he said it harmed economic growth.
Powell said last month that the bank was unlikely to raise rates in 2019, saying the economy was showing signs of a slowdown, but Trump is now calling on him to lower rates, a move that could juice the economy at the height of Trump’s campaign for a second White House term.
Cain told Fox Business in February that the Fed should worry less about inflation and the economy overheating, implicitly suggesting he supports Trump’s push for low interest rates. Moore has called for Powell’s removal.
Trump, more than any president in recent decades, has frequently chastised the central bank in public in a way that critics allege threatens the central bank’s independence.
“It seems that President Trump has no respect for expertise. He is more interested in filling the Fed jobs with political allies than people well suited for the positions,” said Harvard economist Greg Mankiw, a top adviser to Mitt Romney and then-President George W. Bush.
Trump’s support for Cain and Moore reflects a sharp pivot from the past two years, when the president was more deferential to Treasury Secretary Steven Mnuchin for Fed personnel decisions. It was Mnuchin who persuaded Trump to nominate Powell, a pick Trump has said he regrets.
One of Trump’s top advisers defended the president’s approach on Wednesday.
“We have our views,” said Larry Kudlow, director of the White House National Economic Council. “You can have your views without breaking the independence of the Fed. That’s never been our intent.”
Republicans have a 53-to-47 majority in the Senate, and a few defections would be enough to sink the nominee. The White House has not sent the Senate the paperwork to officially nominate either Cain or Moore.
By attempting to install two loyalists to the central bank’s board, Trump could end up with much more political sway at the Fed than any of his predecessors since Ronald Reagan, who used his Fed appointments to try to gang up on then-Chairman Paul Volcker and possibly force him out.
The Fed has seven governors, and each one votes during major decisions on interest rates or banking regulations.
“You have to be very careful not to damage the independence of the Fed, both in reality or symbolically,” said Richard Fisher, a former president of the Federal Reserve Bank of Dallas. “This new iteration of names the White House put forward risks the perception of Fed independence.”
Moore was an adviser on Trump’s campaign, and he helped launch the Club for Growth in the late 1990s, an entity that attempted to help conservative Republicans win office. The Club for Growth eventually paid a $350,000 penalty to settle Federal Election Commission violations during a period when Moore led the organization.
From 1992 to 1996, Cain served on the Federal Reserve Bank of Kansas City’s board of directors, a group of business and community leaders who advise the head of the Kansas City Fed on the state of the economy.
As a candidate in the GOP presidential primaries, Cain in 2011 faced a string of sexual harassment allegations, including an accusation that he groped a woman and tried to force her into a sexual act.
Two of the women had previously settled sexual harassment claims against Cain with the National Restaurant Association. A spokesman for the association said the organization does not comment on personnel issues related to current or former employees.
Cain did not admit wrongdoing as part of the settlements, the association said in 2011, and he has repeatedly denied the accusations.
The Washington Post reached out to three of the four women who in 2011 had accused Cain of sexual harassment. Sharon Bialek, who said Cain had reached beneath her skirt in 1997 and tried to pull her head toward his crotch, said Thursday that his record of harassment should disqualify him from the Fed post.
“I don’t wish him anything ill, but I don’t think he should be awarded this position,” Bialek said in her first public comment about Cain’s nomination. “Instead of being punished, Trump is rewarding him.”
She said she suffered years of “grief and anguish” following her accusation and had a difficult time getting a job because of the publicity.
“I just want him to admit what he did and apologize,” she said. “That’s the thing that still frosts me to this day.”
Two other women did not immediately respond. The fourth accuser remains anonymous. A White House spokesman declined to comment.
Josh McKoon, a former Georgia state senator who has known Cain since the pizza magnate’s unsuccessful 2004 Senate bid, disputed the harassment allegations. He called them an “orchestrated political assassination” against a political novice whose “fresh ideas were really catching fire.”
Joel P. Bennett, formerly an attorney for one of Cain's accusers, pushed back against McKoon's characterization of the women's allegations. He noted that his client, Karen Kraushaar, filed her complaint with the National Restaurant Association in 1999 without publicity.
Reports of Cain’s impending nomination were met with mixed reaction in Congress.
Sen. Sherrod Brown (Ohio), the ranking Democrat on the Banking Committee, suggested Cain and Moore were both underqualified for the Fed board.
"I thought it was a joke at first when I heard that, but I guess it's at least as serious as Stephen Moore," he said. "I'll just leave it at that for now."
Sen. David Perdue (R-Ga.), another Banking Committee member, said he supported Cain. "I think he'd be a great addition; he's a business guy, he's got a great background for it. I know him personally. I think, personally, he'd be a great addition."
Both Moore and Cain have positions that fall outside a bipartisan mainstream sentiment about the Fed’s role and practices, including advocating a return to the gold standard.
Moore has been criticized for his lack of knowledge of monetary policy, especially when he said the Fed should raise interest rates in 2008 during the severe downturn. He has also been ridiculed for claiming the United States is experiencing deflation, a claim contradicted by federal data.
Cain has called for an additional audit of the Fed’s monetary policy decisions, a proposal many central bankers and economists have said would compromise the Fed’s independence. Cain has also said he doesn’t think the Fed’s dual mandate to keep unemployment low and inflation under control makes sense.
“We’ve had good Fed governors in the past who were not economists,” said David Wessel, director of the Hutchins Center on Fiscal and Monetary Policy at the Brookings Institution. “But these two potential nominees have rather bizarre economic views and don’t seem to be the kind of people who would strengthen the quality of decision-making.”
But some analysts suggested the Fed could benefit from an injection of heterodox thinking. The central bank’s interest rate committee voted unanimously in December to raise rates, the fourth increase of 2018. Some investors and economists now say that decision was a mistake, one that could have been avoided with more internal debate.
“There should be a diversity of views inside the Fed,” said Andrew Levin, a Dartmouth University professor and former Fed economist. “Not a single person dissented on the December decision to hike.”
A Fed spokesman declined to comment.