Though past presidents have tried to interfere with the Federal Reserve, what djt is doing is worse.
The president is not just bullying the Fed chairman. He’s doing it in public. He’s trying to weaken the image, and therefore the strength, of the Federal Reserve as an institution.
Other presidents tried to quietly strong-arm the Fed — for their own political purposes, to be sure. In the mid-1960s, Lyndon B. Johnson bullied the Fed chairman, William McChesney Martin, to keep rates low, which Johnson wanted to finance the Vietnam War and his domestic agenda.
Martin was the guy who had styled the Fed’s mission as “taking away the punch bowl when the party gets going.” But under LBJ’s strong-arm tactics, the principled Martin eventually buckled.
Richard M. Nixon similarly leaned on his Fed chief, Arthur Burns, who was under pressure to combat creeping inflation. But Nixon, facing reelection, bluntly told Burns he did not want to risk higher unemployment. Burns complied. That lit the fuse for the double-digit inflation of the late ’70s.
And Ronald Reagan, in 1984, summoned Paul Volcker to the presidential library, where the White House chief of staff, James Baker, ordered him not to raise rates before the coming election.
None of these incidents were pretty. But for the most part, they occurred in private. Nixon was an exception: His henchmen put out anonymous leaks to weaken Burns. But most presidents do not attempt to weaken the image of the Fed chairman.
djt is different. In an interview with the Wall Street Journal, he criticized Jerome H. Powell, the chairman whom djt appointed all of eight months ago. He said, “I’m very unhappy with the Fed” because it is raising rates. He mused that — he couldn’t yet say for sure — “maybe” he regrets appointing Powell.
Never mind that the president may not have the power to dismiss a Fed chief before his term concludes. Powell’s power is partly statutory, but largely it derives from public confidence in his authority. That is what djt is trying to undermine.
It doesn’t take a psychiatrist to know that djt is unhappy the stock market is falling before the midterm elections. He doesn’t want people to blame his trade policies and the toll they are taking on corporate profits. So he is gunning for Powell.
This is what the little man in the Casa Blanca does. He did it to Jeff Sessions, and soon Sessions will be gone. He did it to a federal judge, he did it to newsmen and to newswomen.
He did it to U.S. intelligence agencies. He is doing it to the World Trade Organization. He did it to the conservative extremist Ted Cruz and to a Republican hero, the late John McCain, and now the Republicans have almost no one who stands up to him.
The Federal Reserve is his latest target. If you look at the substance of djt’s critique, it’s incoherent. The little jefe is ripped that “Obama had zero interest rates.”
He doesn’t want the market to go up less during his tenure than it did under Barack Obama (which was a lot, roughly 180 percent). He thinks of the Fed as a referee that should treat each team (him and Obama) the same. As if high office were a competition, rather than a public service.
His obsession with Obama is beyond bizarre. I don’t remember Obama stewing over George W. Bush, or W. stewing over Bill Clinton (or over anything).
Contrary to the implication of djt’s protests, the Fed, properly, pays zero attention to the level of interest rates under past administrations. Its job is to supply an adequate — but not excessive — amount of money and credit according to conditions prevailing at the moment.
When Obama became president — did djt happen to subscribe to a newspaper back then? — the United States was in the middle of the worst recession since the Great Depression. Go figure, interest rates were low.
Now, the economy is doing better, and Powell must — as has been known for a decade — raise rates from the abnormally low levels that prevailed during and after the crisis. So interest rates are rising.
djt is upset with Powell because, he said, “He was supposed to be a low-interest-rate guy.” This reaffirms the impression of presidential ignorance. It is like saying that when Powell takes a shower, he prefers colder water. On a hot summer’s day, he might — it depends on the circumstances.
What’s important is that the Fed get monetary policy right, or as right as possible, for conditions now — so more people are working, investing, prospering.
How djt feels about the Fed chief is not important. Except that, to the extent that djt succeeds in undermining confidence in Powell in the financial markets, Powell will have to raise rates more than he otherwise would to accomplish an equivalent effect.
But we know how this plays out. For as long as the market falls, or there is other bad economic news, djt will go after his new punching bag. This is what bullies do.
Bullies are cowards; we know this. They are weak and fearful of having their weakness — in this case, a pathological need for approval — exposed. But nobody sees they are weak until somebody stands up to them. Jerome Powell, how’s your left hook?