How Trump’s Feud With the Fed Is Rooted in Presidential History

How Trump’s Feud With the Fed Is Rooted in Presidential History

December 2018

“I think he put out a tweet last night specifically saying he now realizes he does not have the authority to fire.” — Mick Mulvaney, who had recently been named the acting White House chief of staff, on ABC

That fourth rate increase fueled Mr. Trump’s ire and the president privately talked about firing Mr. Powell, telling advisers that the Fed chair would “turn me into Hoover,” a reference to the Great Depression-era president.

Spring 2019

“China will be pumping money into their system and probably reducing interest rates, as always, in order to make up for the business they are, and will be, losing. If the Federal Reserve ever did a ‘match,’ it would be game over, we win!” — Mr. Trump, on Twitter

With his re-election campaign looming, Mr. Trump has increasingly focused on the strength of the economy and portrayed the Fed as the skunk at a garden party. Mr. Trump has repeatedly said that the economy would take off like a “rocket ship” if not for Mr. Powell and that the stock market could be 5,000 to 10,000 points higher if the Fed had done its job “properly.” He has urged the Fed to start cutting rates, saying it is putting America at a disadvantage relative to its trading partners, like China and Europe.

June 2019

“We’ll see what happens; they’re going to be making an announcement pretty soon, so we’ll see what happens.”— Mr. Trump, speaking to reporters about whether he would try to demote Mr. Powell

On the eve of a major Fed meeting, Bloomberg reported that the White House had looked into the legality of stripping Mr. Powell of his chair title and demoting him to a governor. The president himself seemed to imply that it was a possibility while talking with reporters on June 18. After the Fed’s June 19 meeting, at which the central bank signaled that rate cuts could be coming soon, Mr. Trump repeated in a television interview that he was unhappy with the Fed but said he had never suggested demoting Mr. Powell — though he said he believes he has the authority to do so.

The Past

“I was stunned. Not only was the president clearly overstepping his authority by giving an order to the Fed, but also it was disconcerting because I wasn’t planning tighter monetary policy at the time.” — Paul A. Volcker, former Fed chair, in his memoir “Keeping at It”

Other presidents have also seen the Fed as their nemesis.

By lifting rates, the central bank restrains economic growth in hopes of making it more sustainable into the future. Politicians, focused on their legacies and re-elections, do not like it when that happens on their watch.

Lyndon B. Johnson famously warred with his Fed chair, William McChesney Martin Jr. By some accounts, he pushed Mr. Martin against a wall at his Texas ranch and dressed him down over monetary policy at one contentious meeting in 1965.

Richard M. Nixon also pressured Mr. Martin’s successor, Arthur Burns, to keep rates low. The White House had its way, and many economists partly blame the Fed’s capitulation for the runaway inflation of the 1970s.

Mr. Volcker, who was the Fed chair from 1979 to 1987, said in his recent memoir that during a 1984 White House meeting with Ronald Reagan and James A. Baker III, then the chief of staff, Mr. Baker declared that “the president is ordering you not to raise interest rates before the election.” Mr. Volcker, who had not planned on raising rates and found the attack to be an overstep, walked out without replying.

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