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Economist Goodfriend Said to Be a Finalist for Trump Fed Nomination

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Marvin Goodfriend, a widely respected monetary economist and sometime critic of the Federal Reserve under Chair Janet Yellen, is a finalist among candidates President Donald Trump is weighing for a seat on the central bank’s Board of Governors, according to a person familiar with the process.

Goodfriend, a professor at Carnegie Mellon University and a former director of research at the Richmond Fed, serves on an independent panel of economists known as the Shadow Open Market Committee aimed at providing alternative views on monetary policy.

In testimony before a congressional subcommittee in March, Goodfriend spoke of “the Fed’s failure to secure the credibility of its inflation target” and the risks that created for policy and the economy. He’d join at critical junction for U.S. monetary policy, as Fed officials deliberate over how fast to raise interest rates and shrink their $4.5 trillion balance sheet.

“He’s an exceptional thinker about monetary policy and is deeply respected at all levels of the Federal Reserve system,” said Gregory Hess, president of Wabash College in Crawfordsville, Indiana, and a fellow Shadow member. “I wouldn’t characterize him” as either a hawk or a dove, said Hess. “He looks at each situation on merit.”

In a March 3 interview on Bloomberg Radio, Goodfriend described himself as “someone who believes in the stability of the price level.”

Quarles Awaits

Goodfriend’s candidacy was reported earlier by the New York Times. He would join Randal Quarles, a senior Treasury official in the administration of President George W. Bush, in waiting for the White House to formally nominate him for a spot on the Board of Governors.

It was reported in April that Trump picked Quarles as the Fed governor who would also serve as vice chair for supervision, heading the central bank’s financial regulatory efforts.

In his testimony in March, Goodfriend said the Fed needed to solidify its commitment to its 2 percent inflation target, arguing that its adherence to that goal will be tested now that the economy has recovered and the U.S. is at full employment.

“The Fed’s history of falling behind the curve on inflation is cause for concern,” he told lawmakers.

Goodfriend, who was born in New York in 1950 and earned a Ph.D. from Brown University in Providence, Rhode Island, said the Fed should publicly measure its monetary policy decisions against a familiar monetary policy rule, such as the formula developed by Stanford University professor John Taylor, in order to enhance legislative oversight.

Taylor Rule

Some Republican lawmakers have proposed that the Fed tie monetary policy to a rule, like Taylor’s, with decisions subject to review by Congress’ Government Accountability Office. Yellen has opposed those as an attack on the Fed’s independence.

Goodfriend, however, is no knee-jerk inflation hawk. He has argued the Fed should be as vigilant in guarding against deflation as it is in combating excessive inflation.

He also also spoken favorably of the theoretical merits of pushing interest rates into negative territory, if needed, to combat a severe economic downturn, arguing that would be preferable to quantitative easing.

“The effectiveness of more balance-sheet stimulus is questionable,” Goodfriend wrote in a paper he presented at the Kansas City Fed’s Jackson Hole symposium in August 2016. “Interest-rate policy is far superior.”

A Fed spokeswoman declined to comment Friday on Goodfriend’s reported candidacy.


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