Donald Trump and his allies have floated ideas suggesting that Federal Reserve independence could be compromised if the GOP nominee wins, from firing Chairman Jerome Powell to the president having a "say" in setting interest rates.
But even as Trump has tried to distance himself from some of those suggestions, a range of other options remain on the table that could fundamentally change the White House relationship with the central bank if the former president wins.
These range from the notion of a "shadow" Fed chair to ideas laid out in a document known as "Project 2025" to an effort to upend D.C. (and possibly the Fed's) bureaucracy.
"The fact is that the Federal Reserve brought the interest rates down a little too quickly," he told the Detroit Economic Club Thursday. "Everyone knows that was a political maneuver that they tried to do before the election," he added.
Former President and Republican presidential candidate Donald Trump before the Detroit Economic Club on Oct. 10. (JEFF KOWALSKY/AFP via Getty Images) ·JEFF KOWALSKY via Getty Images
The idea of a "shadow" Fed chair that emerged this past week came from top Trump economic adviser Scott Bessent, the former Soros Fund Management investing chief (and a possible Trump pick for Treasury Secretary).
He floated the notion in a Barron's interview that Trump could nominate that "shadow" chair to essentially make Powell a lame duck long before his term ends.
Powell's full term as a member of the Fed's board of governors doesn't end until 2028, but his time atop the Federal Reserve as chair ends sooner, in 2026.
This idea would lay out a post-Powell Fed path even while he's still in office, and "based on the concept of forward guidance, no one is really going to care what Jerome Powell has to say anymore," Bessent told the outlet.
Then-President Donald Trump waves after announcing Federal Reserve board member Jerome Powell as his nominee for chair of the Federal Reserve at the White House in 2017. (Jabin Botsford/The Washington Post via Getty Images) ·The Washington Post via Getty Images
Trump hasn't expressed an opinion on the idea — and a Trump official cautioned that anything not endorsed by Trump himself shouldn't be deemed as official second-term policy — but Bessent himself is clearly top of mind for Trump, who brings him up often at his rallies.
He called him "one of the top analysts on Wall Street" during the Detroit Economic Club stop this week.
They range from changes to how the Fed intervenes in the economy to institutional changes "to take the monetary steering wheel out of the Federal Reserve's hands and return it to the people."
Trump has sought to distance himself from the ideas in the book, but it was authored by many of his former aides. The 13-page Federal Reserve chapter was penned by Paul Winfree, who previously served in the Trump White House as deputy assistant for domestic policy.
Many of the ideas Winfree proposes are focused on paring back the Fed's powers that, according to the book, have overly broadened since the central bank was created in 1913.
It would, for example, abolish the Fed's "dual mandate," focusing instead solely on inflation.
Winfree is also critical of the central bank's ability to influence commercial banks' capital requirements. It's a critique that overlaps directly with a raging current debate in Washington around the "Basel III endgame" capital requirements.
A Democratic billboard decrying Project 2025 is seen outside the vice presidential debate sight in Manhattan on Oct. 1. (Roy Rochlin/Getty Images) ·Roy Rochlin via Getty Images
The chapter weighs in on another ongoing debate: the Fed's policy of "quantitative easing," where the central bank has used purchases of securities to impact the money supply.
The Project 2025 proposal would force a winding down of the Fed's balance sheet and also limit future purchases.
Winfree's biggest idea — and perhaps his least politically realistic one — would replace the central bank with more diffuse banks committed to a concept he calls "free banking" — overlooking that the Federal Reserve was created largely in response to the failures of a similarly diffuse system.
Greater control over 'independent' federal agencies
A third area where a second Trump White House and the Fed could clash is Trump's priority of asserting greater control over the federal bureaucracy and independent government agencies like the Federal Trade Commission and Federal Communications Commission.
It's an effort Trump hasn't said would include the Fed, but Powell and his colleagues could be in his sights. On his campaign website, Trump promises "a top-to-bottom overhaul of the federal bureaucracies."
This is an effort to lessen the protections that thousands of government employees have enjoyed from changing political winds. When taking office, presidents typically have around 4,000 so-called "political" appointments to make. But Trump and his allies want to balloon that number to more than 50,000.
The Federal Reserve's Marriner S. Eccles Building is seen 2022 in Washington, D.C. (Kevin Dietsch/Getty Images) ·Kevin Dietsch via Getty Images
Agencies like the Fed and FTC also currently operate at arm's length from the White House, in a structure the GOP nominee has long critiqued.
"We need to make it much easier to fire rogue bureaucrats who are deliberately undermining democracy," Trump said back in 2022.
If his proposed reforms are enacted, he added, "Washington will be an entirely different place."
Ben Werschkul is Washington correspondent for Yahoo Finance.
