President Donald Trump doesn't like to lose, but his two recent recommendations for posts on the Federal Reserve board have come up short.
Former GOP presidential candidate and CEO of Godfather's Pizza Herman Cain backed out of the Fed process on Monday after renewed focus on existing sexual harassment and assault allegations and lack of support from Republicans in the Senate. Stephen Moore, an official with conservative think tank Heritage Foundation and television pundit, continues to face scrutiny about past writings and personal actions.
But all is not lost, according to Dino Kos, who spent two decades at the Federal Reserve Bank of New York and now serves as chief regulatory officer at the foreign-exchange services firm CLS.
Kos sees four main takeaways from Trump's struggle to nominate an unconventional pick to a top spot at the Fed.
1. Trump's anti-Fed messaging continues, even with a failed pick.
Trump has relentlessly attacked the Fed and the leadership of Fed Chairman Jerome Powell. The Fed recently reversed course on interest-rate hikes, a decision the central bank said was driven by changes in economic data but also matched the president's publicly aired grievances.
Even in the Cain nomination failure, Kos said the Trump anti-Fed messaging continues.
Cain, like Trump, is an outspoken critic of the Federal Reserve. Moore, though he held shifting views during the Obama presidency, has attacked the Fed for its interest-rate hikes and the economic measures it uses to weigh changes in interest-rate policy.
The Cain failure was "not unexpected," Kos said on CNBC's Squawk Box on Monday, "and once he lost support of enough Republicans, Trump did the wise thing and withdrew his name. But having said that, President Trump sent a message to the Fed."
2. A non-economist can still succeed to the Fed board.
Kos said the failed Cain recommendation says more about the candidate than the ability of a non-economist to be considered a serious candidate for the Fed. He pointed out that current chairman Powell does not come from an academic economics background.
"There has been a lot of comment about qualifications, but you don't need to be an economist. You can be a lawyer."
He noted that Fed board member Randal Quarles was a financial lawyer with a private equity background, like Powell.
The argument that an academic economics background is required misses a lot of what the Fed does. The Fed does monetary policy, but it also regulates banks and oversees the payments systems.
Kos is not a fan of the Moore pick. "I would not make a case for him ... but again, you don't need to be an economist; that does not disqualify him. But does he bring a body of work commensurate with what is required? ... Lots of people seem to think he doesn't.
"Think about a Powell or Quarles, lawyers with private equity and Treasury experience and policy experience. With these other picks, it is harder to make that case," Kos said.
3. Trump making his own Fed picks led to a flawed background-check process.
Trump bypassed the Treasury Department in selecting these candidates, and while that allowed him to pitch ideologues more in line with his own Fed views, it led to a breakdown in the background-check process.
"President Trump's picks to date have been pretty good," Kos said, noting that several nominees were approved.
Those picks included Quarles, former Bush Treasury official and Pimco executive Richard Clarida, and Michelle Bowman, who came from a Capitol Hill and legal background and is considered a specialist in community banking.
"What it shows is the value of having someone do a full search and vetting process," Kos said. "Nominees that went through Treasury vetting and got confirmed. These went through other means, and you can see what happens when an important pick doesn't get the right vetting. We get the kind of commotion you see now."
A few earlier Trump picks for the Fed were unsuccessful, including the stalled nomination of Carnegie Mellon professor Marvin Goodfriend, and former Federal Reserve economist Nellie Liang, a Democrat and strong critic of banks, who withdrew her name for consideration.
4. The Cain, Moore stumbles suggest the next Fed pick with be an Establishment candidate.
The flaws in the background checks and the failure of the Cain nomination do suggest that a more typical, Treasury- approved candidate with an Establishment background is a more likely choice to go forward as a replacement for Cain, Kos said.
"The next pick will be a less controversial, less colorful, traditional Republican kind of economist." Though he added, the pick will need to be "aligned with Trump's views but not have the baggage."
While many Establishment Republicans may not share Trump's views on the Fed, Kos said a lot can change depending on the opportunity presented. "As they say, where you stand depends on where you sit. Candidate Trump was in favor of higher rates and President Trump in favor of lower rates."
"The last two [picks] were a lot more confrontational and a lot more about sending messages. We will see who he follows up with, but probably more like the first four."