The Senate Banking Committee is set to consider the potential expansion of President Trump’s latest committee of presidents, marking a step toward reshaping the central bank in alignment with Trump’s vision.
This week, Stephen Milan, the chairman of the White House Economic Advisors Council, is scheduled to appear before the committee as they deliberate on his nomination to the Federal Reserve Committee.
Trump has asserted control over traditionally independent financial institutions, engaging directly with Fed Chairman Jerome Powell and recently ordering the removal of Fed board member Lisa Cook. He has also initiated an unprecedented campaign of pressure on the Fed.
In fact, last month, Fed member Adriana Kugler unexpectedly stepped down.
If confirmed, as many expect, Milan would take her place, becoming part of the first Fed board appointed by Trump for a second term.
Milan has already indicated he will lead Trump’s council from his potential Senate-confirmed position, and he should face minimal opposition in the GOP-controlled chamber.
However, Milan’s position as a key architect of Trump’s unconventional economic policies, which often unsettle investors and challenge traditional thinking, is likely to draw scrutiny from lawmakers.
Trump’s Influence in the Federal Reserve Committee
Trump clearly desires a favorable monetary policy alongside a Fed committee that aligns with his agenda.
“We have a very strong majority, so that’s fantastic,” Trump remarked during a cabinet meeting last month.
The president is contemplating appointing Milan to take over Cook’s position on the Federal Reserve Board if her removal is deemed legitimate. She had a 14-year term aimed at shielding her from political pressures, which Trump appears to be circumventing.
“We’ve just placed a great guy in one role,” Trump noted, presumably referencing Milan. “We might move him around as this is a long-term vision, and we’ll find someone else.”
“We’re quite pleased with our team,” he added.
In a recent interview with Reuters, Treasury Secretary Scott Bescent encouraged senators to support Milan’s nomination for the board seat formerly held by Kugler.
What Will the Senate Focus On?
Milan has authored several controversial papers regarding Fed reform and the role of the US dollar in the global economy.
Last year, he suggested nationalizing the Fed’s reserve banks and placing them under the governor’s oversight, contending that their status as private entities lacked “democratic legitimacy.”
He also recommended changing the voting structure of the Fed’s interest rate committee, redistributing power from Washington-based governors to local banks, where 12 members would vote on interest rates. Currently, the committee consists of seven governors and five regional bank presidents.
In another of his papers, Milan critiqued the dollar’s over-valuation due to its role as a global reserve currency, a situation which he argues is becoming increasingly precarious.
He posited that the US no longer operates under constraints that undermine its external position as it provides the world with secure dollar assets.
Additionally, Milan advocates for banning “revolving doors” between the administrative department and federal roles, a stance that may attract attention from Democratic senators, given his current position in the White House.
“Stephen Milan embodies Trump loyalty and has played a significant role in Trump’s erratic tariff policies that have hurt American wallets and the economy,” stated Sen. Elizabeth Warren (Massachusetts), a prominent Democrat on the Banking Committee. “He’s going to face critical questions on whether he serves the American public as an independent voice or simply as a loyalist to Donald Trump.”
Milan’s proposed reforms for appointments would require new laws from Congress, which many believe won’t garner bipartisan support.
Trump’s Vision Mirrors Milan’s Ideas
Many concepts Milan has outlined in his research align with what could be termed the “Mar-a-Lago Accord,” particularly during a potential second Trump term.
Over the next decade, the US aims to cut its fiscal deficit by $4 trillion and lessen the impact of Trump’s tariffs.
The US has pushed its security allies to bolster their military budgets, with Germany promising to double its defense spending over five years, despite its historical hesitance towards deficits.
Although the dollar has seen a decline in value—about 10% compared to other currencies—its status as the world’s reserve currency has spurred domestic production.
While Trump has yet to fully shift his financial partners, Milan’s other recommendations claim to bolster US financial standing. Republicans are reportedly close to implementing a capital tax on foreign debt holders, an idea some investors believe may resurface in various forms.
Will the Market React Negatively to Trump’s FED and Treasury Plans?
The Treasury is now focusing on issuing shorter-term bonds to alleviate a $36 trillion debt burden, resisting the temptation to flood the market with more short-term securities.
This initiative has been described as a strategy by the “Activist Ministry of Finance,” highlighting another area where traditional fiscal and monetary policies converge.
Many investors draw parallels between Trump’s influence on the Fed and episodes of market upheaval, likening it to the Brexit aftermath in 2016 when the UK market saw dramatic shifts following the referendum.
“It’s reminiscent of the situation with Brexit,” one observer commented. “After the vote was announced, the UK stock market and currency faced significant turmoil, and I think we’re seeing similar dynamics with the Fed right now.”
