Trump’s Fed pick to face grilling in the Senate

President Trump’s latest potential addition to the Federal Reserve board of governors is set to face the Senate Banking Committee on Thursday, marking the first step of the president’s push to remake the central bank in his image.

Stephen Miran, chair of the White House Council of Economic Advisers (CEA), will appear before the Banking panel this week as the Senate mulls his nomination to the Fed board.

Trump has unleashed an unprecedented pressure campaign on the Fed to gain control of the traditionally independent monetary authority, berating Fed Chair Jerome Powell online and in person, and ordering the removal of Fed board member Lisa Cook, who is suing Trump to block the order.

Amid the campaign, Fed board member Adriana Kugler resigned unexpectedly last month.

If confirmed by the Senate as expected, Miran would take her position, becoming the first Fed board member — possibly of several — to be appointed by Trump in his second term.

Miran has already been confirmed by the Senate to lead Trump’s CEA and should face little trouble being approved for his new position by the GOP-controlled upper chamber.

But as one of the chief designers of Trump’s unorthodox economic policies, which have rattled investors and bucked conventional thinking, Miran and his wide-ranging proposals for Fed reform and the role of the U.S. economy on the world stage are set to get intense scrutiny from lawmakers.

A Trump loyalist on the Fed board

Trump is thinking in no uncertain terms about having a favorable monetary policy and a Fed board under his control.

“We’ll have a majority very shortly, so that will be great,” Trump said during a Cabinet meeting last month.

Trump is considering appointing Miran to Cook’s Fed board position if courts deem her ouster acceptable, which could mean he remains on the board for longer. Terms are 14 years long, a duration that is meant to insulate them from the sort of political pressures Trump is overtly exerting.

“We just put a very good man in one position,” Trump said during the meeting, apparently referring to Miran. “We might switch him to the other — it’s a longer term — and pick somebody else.”

“We’re very happy with the person we have in there,” he added.

Treasury Secretary Scott Bessent, in an interview with Reuters published Monday, urged the Senate to quickly confirm Miran to the board seat Kugler occupied.

What’s going to get attention from the Senate?

Miran has published a number of papers with controversial positions on topics like reforming the Fed and the role of the U.S. dollar in the global economy.

Last year, he proposed nationalizing the Fed’s reserve banks and putting them under gubernatorial control, arguing their designation as private corporations controlled by private banks lacks “democratic legitimacy.”

He also proposed changing the voting structure of the Fed’s interest rate-setting committee, taking majority power away from Washington-based governors and giving it to regional banks, all 12 of whom would vote on the interest rate level. Currently, there are 12 members of the committee — seven governors and five regional bank presidents who rotate in.

One paper by Miran that caught the eye of financiers last year railed against the overvaluation of the dollar due to its status as the world’s reserve currency, which is traditionally linked to the trade deficits the White House is now seeking to reduce.

That argument hinges on foreign governments’ purchasing U.S. treasuries, a practice that has been in decline for decades.

“This empirical reality decisively undercuts the claim that the US is still operating under a … constraint in which supplying the world with safe dollar assets necessarily undermines its external position,” international financial adviser Biagio Bossone wrote for the European Centre for Economic Policy and Research earlier this year.

Miran has also proposed outlawing the “revolving door between the executive branch and the Fed” — a position likely to draw attention from Democratic senators, given Miran’s current White House post.

“Stephen Miran is a Trump loyalist and one of the chief architects of President Trump’s chaotic tariff policy that has hurt Americans’ wallets and our economy,” said Sen. Elizabeth Warren (Mass.), the top Democrat on the Banking Committee, in a statement upon Miran’s nomination. 

Warren said she’ll have “tough questions” for Miran during his confirmation hearing “about whether he’d serve the American people as an independent voice at the Fed or merely serve Donald Trump.”

Miran’s proposed voting and personnel reforms for the Fed would require new laws from Congress, something investors don’t think is likely.

“Most of the reforms that are being proposed … would need Congressional approval, and I seriously doubt that you would get a Congressional consensus to put a lot of this stuff forward,” Rebecca Patterson, a senior fellow at the Council on Foreign Relations, told The Hill.

Trump has followed Miran’s blueprint

Much of what Miran has spelled out in his research program — notably in the paper where he defines a prospective “Mar-a-Lago Accord” — has already come to pass during the second Trump administration.

The U.S. is set to reduce its fiscal deficit by $4 trillion over the next decade and reduce its trade deficit — both effects of Trump’s tariffs.

The U.S. has prompted security partners to expand their military budgets and pay for more of their own security costs, with Germany pledging to double its defense spending over the next five years despite the country’s historical aversion to deficits.

The dollar, in a potential boost to domestic production, has lost about 10 percent of its value relative to other currencies while maintaining its reserve currency status due to a dearth of viable alternatives.

All of this was in line with Miran’s arguments.

While Trump has not compelled trading partners to switch their reserve holdings to longer-dated treasuries — another of Miran’s recommendations that he argued would improve the U.S. fiscal situation — Republicans nearly passed a significant capital tax on foreign debt holders in the form of the Section 899 “revenge tax,” which investors think could resurface in other forms.

Could markets react adversely to Trump’s Fed and Treasury initiatives?

The Treasury Department has also been focusing debt issuance on shorter-duration bonds, resisting supply increases for longer-term securities with higher interest rates, in a move designed to alleviate the $36 trillion U.S. debt burden.

Referred to as “activist treasury issuance,” this was another one of Miran’s recent research topics and is another area where the traditional divide between fiscal and monetary policy is getting blurred. Incentivizing short-term bonds is similar to the Fed’s quantitative easing.

Trump’s moves to influence the Fed and rejig the bond market to pursue macroeconomic and security goals is reminding some investors of episodes of market revolt. 

“[It] reminds me of Brexit in the U.K. in 2016,” Patterson said. “After the referendum date was announced, until the actual vote, British markets didn’t react. It was only after the referendum outcome was announced that you saw dramatic selloffs in the UK stock market and currency. I think the Fed situation today is similar.”