Trump and the Fed
Trump doesn't understand (nor respect) the role of the Fed.
Via Bloomberg: Trump Discusses Firing Fed’s Powell After Latest Rate Hike, Sources Say.
President Donald Trump has discussed firing Federal Reserve Chairman Jerome Powell as his frustration with the central bank chief intensified following this week’s interest-rate hike and months of stock-market losses, according to four people familiar with the matter.
Advisers close to Trump aren’t convinced he would move against Powell and are hoping that the president’s latest bout of anger will dissipate over the holidays, the people said on condition of anonymity. Some of Trump’s advisers have warned him that firing Powell would be a disastrous move.
Yet the president has talked privately about firing Powell many times in the past few days, said two of the people.
It is not comforting that we should have to hope that “the president’s latest bout of anger will dissipate over the holidays” so that we can avoid him attempting to engage in behavior that the entire structure of the Federal Reserve was designed to avoid, as well as creating serious stress in financial markets (after an already abysmal December).
On the first count: the very design of the Federal Reserve is supposed to create distance between political considerations (i.e., what the President may want in terms of interest rates) and the professional consideration of the Board. This is one of the reasons the Board serves staggered, 14-year terms, so that no given president can fully influence its makeup or decision-making.
Indeed, as I understand the process, Trump cannot fire Powell. Rather, he would have to be removed by Congress. However, there may be enough ambiguity in the law for him to try. Even trying would just add further chaos to an administration without a permanent Chief of Staff, and with a lame duck Secretary of Defense who resigned in clear protest to Trump’s approach to governing.
According to the Bloomberg piece:
It’s unclear how much legal authority the president has to fire Powell. The Federal Reserve Act says governors may be “removed for cause by the President.” Since the chairman is also a governor, that presumably extends to him or her, but the rules around firing the leader are legally ambiguous, as Peter Conti-Brown of the University of Pennsylvania notes in his book on Fed independence.
The problem is, if the “cause” is “Trump doesn’t like the interest rates” then it really would be for a policy reason, which would destroy the purposefully designed independence of the body.
Such a move would represent an unprecedented challenge to the Fed’s independence. Though he was nominated by the president, Powell was thought to be insulated from Trump’s dissatisfaction by a tradition of respect for the independence of the central bank.
That separation of politics from monetary policy is supposed to instill confidence that Fed officials will do what’s right for the economy over the long term rather than bend to the short-term whims of a politician.
This leads to the potential effects of a fight with the Fed:
Any attempt by Trump to push out Powell would have potentially devastating ripple effects across financial markets, undermining investors’ confidence in the central bank’s ability to shepherd the economy without political interference. It would come as markets have plummeted in recent weeks, with the major stock indexes already down sharply for the year.
[…]
Even routine changes at the top of central banks create uncertainty in markets as investors try to assess how tough a new leader may be in preventing the economy from overheating and accelerating inflation. Another problem with dismissing a sitting Fed chief may be finding a replacement who wants assurance that he or she won’t succumb to the same fate as Powell.
This might be a good time to remind everyone that one of the reasons he didn’t reappoint Janet Yellen because she was too short (via WaPo):
Powell’s appointment was very unusual, as he is not an economist. He had served in a past Republican White House but was first tapped to serve as a Fed governor by Obama. During his initial tenure at the Fed, Powell was seen as largely supportive of the slow-but-steady interest rate increase strategy used by then-Chair Janet L. Yellen.
Trump considered reappointing Yellen to the post, and she impressed him greatly during an interview, according to people briefed on their encounter. But advisers steered him away from renominating her, telling him that he should have his own person in the job.
The president also appeared hung up on Yellen’s height. He told aides on the National Economic Council on several occasions that the 5-foot-3-inch economist was not tall enough to lead the central bank, quizzing them on whether they agreed, current and former officials said.
A major problem with Trump is his unfailing belief that the people in government work for him, when it is he who is supposed to be working for us. He truly does not understand his job.
At that point we would be in Great Depression II.
Amen.
Trump is building a case for impeachment beyond collusion and obstruction.
That will do for an understatement, until a better one comes along.
It’s like having a chimp with impulse control problems operating a nuclear reactor. Maybe nothing terrible will happen, but odds of a disaster are huge.
The extent to which El Cheeto is convinced the government works for him, is illustrated, yet again, in this story regarding his hand-picked successor for Sessions.
From the piece: “Trump was frustrated, the sources said, that prosecutors Matt Whitaker oversees filed charges that made Trump look bad.”
He doesn’t even understand that what makes him look bad is taking part in criminal conspiracies.
Think about it. here’s this man who believes he should be able to break the law not just with impunity, but without it even being known.
His behavior seems to become more erratic, the closer Mueller gets to him.
@Teve: That may be a factor. I think it also time–the longer he is in, the more opportunities he has to be erratic and also the more chances for the handful of semi-establishment types to be around to hold him back.
Really, the attitude here is pretty close to his attitude about Comey and Sessions.
I’m not worried, Kelley isn’t there to do trump’s firing for him anymore.
This is just his little way of soothing the rattled markets.
@Teve: I’m not suggesting Mueller or anyone else back off from doing their jobs, but I worry about some crazed poo flinging Trumperdammerung. Followed by Pence. Gawd help us.
@gVOR08: I’m just trying to quickly find a decent job before the Trump Ultrarecession of 2019 hits.
@gVOR08:
Yes, that is a legitimate worry, but I think that the most ardent Trumpkins–the ones who are always threatening to pick up guns and fight for a white Christian America–are too fat, stupid, and lazy to do anything but be keyboard warriors.
As for Janet Yellen being “too short” to head the Fed: That’s typical Trump. Didn’t he once say say something about one of his appointees looking as if he’d come straight from Central Casting? That’s Trump in a nutshell for you. He likes people whom he thinks “look” the part. Forget any other qualifications.
It’s surprising that Trump didn’t appoint Ann Coulter, she has to be 6 feet tall.
Trump really is so much less than he appears to be, which makes it more perplexing that so many conservatives, like Paul Ryan, are afraid of him and fear him.
Trump seems obsessed with how people look. It seems to be one of his primary criteria in selecting someone to a position. Just how often he refers to “central casting”. It took me a while to realize that Trump thinks that he himself is a good looking man. At his best moment, Trump was not particularly bad looking. Today he is a grossly obese man with a ridiculous hairpiece (and one he lies about at that). In addition to being embarrassed by his incompetence, I’m ashamed to admit that I am almost as embarrassed by his ludicrous self delusion.
@Sleeping Dog: I wish people would stop talking about impeachment as though it would happen in a Congress with 53 Republican Senators. We are not living in 1972; we’re living in Bizarro World.
@Just nutha ignint cracker: My honest guess is that pressure will likely get to a point that impeachment in the House may well be quite likely. Leadership won’t like it, but may be forced into action.
Removal in the Senate, however, is a pipe dream.
@Just nutha ignint cracker: @Steven L. Taylor:
There won’t be 67 votes for impeachment in the Senate, but by late 2019 there maybe 63-65 which would be damning for Trump.
@Sleeping Dog: To be knowingl pedantic, but also to make sure we are clear: the House impeaches, the Senate convicts and removes.
Impeachment is not outside the realm of the possible. It will take a major shift in public opinion for removal to actually be possible.
@Steven L. Taylor: Yes, but impeachment without removal–and removal is probably what 99.9% of people think of regarding impeachment–is pointless.
I know you agree, and I’m not arguing with you, just clarifying my point.
@Just nutha ignint cracker:
This is the reason I clarified, just to make sure all who are reading understand which page we are on.