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One of the important powers of any U.S. president is to appoint members and heads of the many agencies that are responsible for implementing the country's laws and regulations and, in many cases, governing the economy.Probably no chair has done a better job, in a particularly difficult moment, than Janet Yellen.Whereas her two immediate predecessors greatly tarnished the Fed's reputation by looking the other way as massive risk was accumulating – and massive fraud occurring – within the financial sector, Yellen restored the Fed's reputation. Trump broke with precedent in another way: He chose a noneconomist. The Fed will face great challenges in the next five years, as it reverts to more normal policies. While the Fed's tool kit has been greatly expanded in the last decade, the Fed's low interest rates and huge balance sheet – and the possibly massive increase in debt, should Trump get his tax cuts – would challenge even the best-trained economist.Politicization of the Fed should be viewed as just another part of Trump's battle against what his former chief strategist, Steve Bannon, has referred to as the "administrative state".While the Fed may be safe for now, whatever possible economic benefits this agenda could bring pale in comparison to the magnitude of the political and social risks posed by Trump's assaults on America's most cherished institutions and values.
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