Trump's Fed pick has envisioned a major overhaul of the central bank

In naming Stephen Miran to the governor spot vacated Friday as Adriana Kugler steps aside, President Trump is seeking to place someone who wants a root-and-branch overhaul of the Fed inside the central bank.The big picture: In the near term, Miran will, if confirmed, be a voice for Trump's desired interest rate cuts.But Miran's critique of how the Fed operates goes much deeper — and his conception of central bank independence is distinctly non-mainstream.His boldest ideas could only be enacted by Congress, and he will likely be a short-timer at the Fed (the term he is to occupy expires Jan. 31). But it is the latest evidence of Trump's appetite for deep change in the U.S. monetary order.Zoom in: Last year, Miran and former Treasury Department senior adviser Dan Katz published a paper through the Manhattan Institute arguing that the Fed has succumbed to groupthink that has caused policy errors, such as the 2021-2022 inflation surge. They envisioned major structural change.That included shorter terms for Fed governors — eight years instead of the current 14 years, and enabling the president to fire governors.They argued for shifting greater power to presidents of the 12 reserve banks across the country by giving them all a permanent vote on monetary policy. Miran and Katz also wanted to change the way bank presidents are selected so that state governors would select the boards of directors of regional Fed banks, who in turn would select their presidents.They sought to subject the Fed's budget to the Congressional appropriations process, ending the control over its own finances — traditionally a key source of central bank independence.Zoom out: Overall, their concept of central bank independence is one in which the Fed has independence in making tactical monetary policy decisions, but in which elected leaders are much more up in the Fed's business.It also amounts to a Fed with much less centralized power — and, Miran and Katz argued, more vibrant debates.What they're saying: "You need healthy disagreement," Miran said on the Macro Musings podcast last year, discussing the paper. "You need healthy arguments. ... You don't get that with block voting and lack of dissents.""[W]e want to introduce a system in which there is a lot more dissent, in which there is a lot more debate, open debate, about what policy should be."The Bank of England, where the governor of the bank sometimes gets outvoted on policy, "is a much healthier intellectual environment, I think, to try and arrive at good policy," Miran said.Between the lines: The structural changes Miran and Katz proposed would require a rewriting of the Federal Reserve Act. That would require a filibuster-proof majority in a Senate where there's strong support for more traditional notions of Fed independence.But the paper suggests Miran, however long he remains at the Fed, will defy the modern norms in which governors tend to toe the party line and go along to get along.Miran is not the first person to go from leading the White House Council of Economic Advisors to the Fed — some very familiar Fed names like Alan Greenspan, Ben Bernanke and Janet Yellen also led the CEA.But he might be the first to have attacked the notion of officials moving between service at the central bank and a presidential administration.The intrigue: "We also think that it's important to close the revolving door between the Fed and the White House," Miran said on Macro Musings."So, once one leaves the Federal Reserve, one should be prohibited from taking a role in the Executive Branch for a period of time," he added."You have to remove the incentives that Fed officials have for trying to please a sitting president," Miran said.He was implicitly criticizing former Fed vice chair Lael Brainard's joining the Biden White House as director of the National Economic Council in 2023.Trump clearly envisions Miran performing at the Fed according to his rate-cutting wishes.Given the short-term nature of the assignment, it would be unsurprising if Miran returns to the White House next year.

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