If I had to choose between the rule of law and the laws of the rulers, I would choose the former every time. The same applies if I agree with the ideologies of people who are currently changing. Therefore, I have consistently opposed “court packing,” regardless of which political party is in power at the time.
One of the lesser-known aspects of Fed regulation is that the interest rate on bank reserves is technically set by the seven-member Federal Reserve Board (rather than the 12-member FOMC). The president appoints members of the Reserve Board, but does not appoint the five reserve bankers who are also members of the FOMC.
In fact, the FOMC has a sort of “gentleman’s agreement” that allows all 12 members to vote on where to set the IOR, since the IOR has become such a key tool for policymakers, but technically only prospective board members have a vote. Ben Steil Barron’s has an article discussing how President Trump might use that loophole to reorganize the Federal Reserve.
Article 505 A draft of the Financial Regulation Improvement Act of 2015 by former Sen. Richard Shelby (R., Alabama) would have transferred authority to set interest rates on reserves to the FOMC, restoring the full committee’s ability to control short-term interest rates. In general. Ironically, it was the Democrats who opposed this bill because the central bank governors participating in the FOMC were quasi-private appointees. But until such legislation is passed, the Board, not the FOMC, will have the real power to control interest rates.
Here comes President Trump.
The most important way for him to control both the Board and the FOMC is to replace Chairman Powell, if possible. But this is not the only way. The two directors appointed to the board during Trump’s first term were Christopher Waller and Michelle Bowman. next vice president JD Vance Bowman was recently quoted favorably. She has been widely mentioned as a replacement for the vice chair for oversight of Democratic nominee Michael Barr, whose appointment as vice chair (but not governor) expires in July 2026. Democratic nominee Adriana Kugler’s term expires in January 2026, after which Trump could be replaced. She is with someone who is loyal. If Waller and Democratic nominees Philip Jefferson and Lisa Cook decide to pursue other opportunities before their terms on the board expire, Trump will have more room to control his influence over the board and rates.
Democrats have been reluctant to give more power to local bank presidents because that group has sometimes tended to be a little more hawkish than Reserve Board members. But be careful what you wish for. Giving more power to subgroups directly controlled by the executive branch may lead to unfavorable results when those government agencies are controlled by the opposition party.
It is worth considering another example. At a time when presidents (of both parties) tended to be more supportive of free trade than Congress, Congress gave the president broad discretion in setting tariff rates. They probably never imagined that a future president would use that power to dramatically increase tariff rates. here Yetter Institute:
The U.S. Constitution grants Congress the power to impose tariffs on goods, but over time, Congress delegated some of that power to the executive branch. Article I, Section 8 of the U.S. Constitution states, “Congress shall have power to lay and collect taxes, duties, imposts, and excises.” Congress passed general tariff legislation by the early 1930s. However, to give the president more flexibility to stimulate world trade during the Great Depression, Congress, through the Reciprocal Trade Agreements Act of 1934, gave the executive branch authority to negotiate tariff reductions within levels preapproved by Congress. President Franklin D. Roosevelt became the first president to have the authority to impose tariffs and negotiate bilateral trade agreements without congressional approval.
There is a reason why the Framers gave Congress the power to set tax rates and tariffs.
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