At some point soon, it may be easier to tally the bad economic news that President Trump hasn’t blamed on Jay Powell.
For now, though, add another discouraging development to the list the president is laying at the feet of his handpicked Federal Reserve chairman.
Trump heaped fresh scorn on Powell in a wide-ranging interview with The Washington Post's Phil Rucker and Josh Dawsey on Tuesday, suggesting he bears the fault for General Motors’s decision to close five plants and cut more than 14,000 jobs. (Read the transcript here.)
Asked about the closures, Trump said, “The fact is I think — I disagree with the Fed. I’ve been open about that. I think the Fed is a much bigger problem than China.” The president denied he was seeking to pass the buck. “But I will tell you, at this moment in time I am not at all happy with the Fed. I am not at all happy with my choice.”
(Trump appears to be alone in this view. GM executives chalked up the decision to slowing demand for its sedans; a desire to focus production in other, underutilized plants; and a need to free up cash to invest in new tech — explanations analysts accept. And Trump elsewhere on Tuesday took aim at GM executives, suggesting they are betraying U.S. taxpayers a decade after the company's bailout.)
Trump said unlike Europe, which is “being accommodative,” he’s getting no such help from the central bank. “So I’m doing deals and I’m not being accommodated by the Fed. I’m not happy with the Fed. They’re making a mistake because I have a gut, and my gut tells me more sometimes than anybody else’s brain can ever tell me.”
Say what you will about the Fed’s hiking schedule. Fed policymakers themselves are divided about how aggressive they should be raising short-term interest rates to keep a lid on inflation without kneecapping the expansion. But their debate suggests they are relying on their brains rather than their intestines.
Trump’s gut-level processing, on the other hand, produces answers like this:
“I’m not playing by the same rules as Obama. Obama had zero interest to worry about; we’re paying interest, a lot of interest. He wasn’t paying down — we’re talking about $50 billion lots of different times, paying down and knocking out liquidity. Well, Obama didn’t do that. And just so you understand, I’m playing a normalization economy whereas he’s playing a free economy. It’s easy to make money when you’re paying no interest. It’s easy to make money when you’re not doing any pay-downs, so you can’t — and despite that, the numbers we have are phenomenal numbers.”
That word salad touched off a group effort on Twitter to decode the president’s meaning when The Post’s Karen Tumulty highlighted it:
Serious question: Does anybody know what this means? pic.twitter.com/g1dzdRadp7— Karen Tumulty (@ktumulty) November 28, 2018
Here was a good-faith attempt from DC Examiner's Colin Wilhelm:
He’s mainly talking about the fact that the Fed kept interest rates at an extraordinarily low level for an unusual amount of time post-crisis, which was under Obama. But they’re normalizing now that the economy’s recovered, to keep inflation on target and give flexibility to cut.— Colin Wilhelm (@colinwilhelm) November 28, 2018
Indeed, the $50 billion that Trump invokes appears to refer to the monthly pace at which the Fed is continuing to unwind its $4.1 trillion balance sheet. Some observers say that process, known as quantitative tightening, is fueling turbulence in global markets by draining the liquidity the Fed pumped in post-crisis through its purchases of government bonds and mortgage-backed securities. Treasury Secretary Steven Mnuchin last month privately quizzed investors and bond dealers about whether they’d rather the Fed pursue restrictive monetary policy by raising interest rates or selling off its portfolio faster, if they had to choose one or the other, per Bloomberg. That could indicate Mnuchin is looking for a way for the Fed to pursue its goals without triggering Trump, though Mnuchin himself has avoided any public comments on the issue.
The president was clearer with The Post in repeatedly spelling out his view that any softness in the economy's performance owes to Powell. “I’m just saying, I’m not happy with the Fed,” he said. “So far, I’m not even a little bit happy with my selection of Jay. Not even a little bit.”
It’s evident at this point, four months after Trump first launched an attack on Powell that has hardened into a refrain, the president sees the Fed chair as a useful foil. He may be right. Trump has a demonstrated talent for scapegoating. And Powell — gray-maned, bespectacled, and patrician — looks the part of a rarefied financier. That without a doubt weighed in Powell’s favor last year with a president who treats key appointments in part as casting calls. (Trump considered reappointing Janet Yellen to the post but was hung up on her height, per Rucker and Dawsey: “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.") Now, Powell's qualities suit the president’s need for a populist tackling dummy as the economic outlook starts to look iffy. And Powell’s concern for keeping the Fed out of the fray means he’s loath to punch back.
In the central banker’s favor, however, Powell has worked to make the notoriously opaque institution he oversees more transparent, even approachable. Starting next year, he will hold a news conference after each Federal Open Market Committee meeting, a first, meaning he will meet the press at least eight times a year. Anticipating Trump’s broadside before it came, he launched a charm offensive on Capitol Hill, too, and has earned praise from key Republican lawmakers even as the president escalates his attacks.
And Powell has demonstrated an unusual humility in explaining how the Fed is managing a transition into uncertain policymaking terrain. As The Wall Street Journal’s Nick Timiraos writes, Powell “recently compared the task to walking through a room full of furniture when the lights go out. ‘What do you do? You slow down. You stop, probably, and feel your way,’ he said at an event earlier this month. ‘It’s not different with policy.’”
Asked earlier this month about Trump’s attacks, Powell responded indirectly by taking some credit for the economy’s strength and noting, twice, that Congress is the Fed's overseer. “We have a very important job that Congress has assigned us and we have the tools to do it,” he said at an event in Dallas. “We’re just trying to do our jobs and we’re doing fine.”
Powell could address the matter again today when he gives a highly-anticipated speech at the Economic Club of New York. His focus, however, is likely to be striking the right balance about the Fed's plans amid new signs of shakiness from the stock market and beyond.
Sign Up! Our newest 202 newsletter is launching Tuesday, Dec. 4: The Technology 202 by Cat Zakrzewski. Cat worked at the Wall Street Journal covering venture capital in Silicon Valley before joining The Post to launch this new venture. She’ll be covering the dynamic and evolving relationship between Washington and technology companies, delving into everything from proposed privacy regulations to artificial intelligence and quantum computing. Get your copy here.
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— Fed officials remain upbeat. Bloomberg's Christopher Condon and Jeanna Smialek: "Federal Reserve officials on Tuesday sprinkled small doses of concern into otherwise upbeat assessments of the U.S. economy. Chicago Fed President Charles Evans, appearing on a panel discussion with two other regional bank chiefs, pointed to growing skilled-labor shortages. Kansas City’s Esther George said pain in the agriculture sector has been exacerbated by the trade dispute with China. Atlanta Fed President Raphael Bostic called his district a 'microcosm of the U.S. economy,' with many cities booming, but with many other 'pockets of distress' being left behind by the economic expansion.
"None signaled a desire to halt gradual interest-rate increases and Evans repeated his desire to see monetary policy return to 'something that’s more neutral.' Earlier Tuesday at the same event, Fed Vice Chairman Richard Clarida restated his support for continued gradual interest-rate increases as U.S. monetary policy gets closer to its optimal longer-run setting."
Bullard: Fed will look for “cracks” in economy. Reuters's Howard Schneider: “For nearly two years the U.S. Federal Reserve has pushed ahead with steady rate increases in an economy that has done better than expected, boosted by government spending, tax cuts, and global growth that made the Fed’s policy choices seem almost a footnote. The easy part may be over, St. Louis Federal Reserve President James Bullard said in an interview here, as possible ‘cracks’ in the U.S. recovery begin to shape the central bank’s debate over where the Fed stands in a rate-rise cycle that began in December 2015, and how much further it should go . . . ‘Whether there are cracks in the U.S. economy’s performance is one of the main challenges for the Fed going forward,’ said Bullard. ‘I don’t have any reason to doubt the economy will slow in 2019 and 2020. It would be much tougher for the Fed to continue to raise at this pace in a slowing economy relative to where we have been.’ ”
Rising alarm over leveraged credit. Reuters's Jonathan Spicer and Howard Schneider: “Bankers, executives and investors are warning Federal Reserve officials behind closed doors that record leveraged lending to companies from lightly-regulated corners of Wall Street could make any economic downturn harder to manage. With the second-longest U.S. expansion in its advanced stages, the worry is that a key part of the credit market could be particularly vulnerable to a slowdown, as highly-indebted companies face a greater risk of default. Some of those involved in the debate who spoke to Reuters expressed frustration that the Fed is not taking the risk seriously enough. ‘There is a sense at the Fed that it needs to watch this area, leveraged credit, but it’s still in the infancy and it’s unclear how far will it go,’ said an economist familiar with the Fed’s efforts.”
— Global stocks climb on hopes of trade peace. Reuters's Sujata Rao: "Hopes for a thaw in U.S.-China trade relations at the upcoming G20 summit helped world shares inch to a one-week high on Wednesday, though fears of a no-deal outcome weighed on European bourses and kept the dollar firm for the fourth day in a row. While [Trump] talked tough on the trade tariffs issue ahead of a meeting with Chinese President Xi Jinping on Saturday, markets focused on comments by White House economic adviser Larry Kudlow, who held open the possibility that the two countries would reach a trade deal. Kudlow’s comments helped Wall Street close higher and allowed Chinese and Japanese shares to rally 1 percent. MSCI’s index of Asian shares outside Japan gained 0.7 percent. But the mood fizzled somewhat into the European session."
— Kudlow: Beijing's stance is “disappointing.” The Washington Post's David J. Lynch: “White House economic adviser Larry Kudlow cast doubt Tuesday that [Trump] will agree to a cease-fire in the U.S.-China trade war when he meets [Xi] later this week, calling Beijing’s response to Trump’s demands ‘disappointing’ and ‘unsatisfactory.’ But Kudlow, the director of the National Economic Council, said the presidents’ meeting offered a rare chance to break a deepening deadlock between the world’s two largest economies, which account for roughly 40 percent of global output. ‘President Xi has an opportunity to change the tone and the substance of these talks. It’s a big opportunity,’ Kudlow said. He later added: ‘They have to do more.’ . . . ‘This is a big deal, this meeting, and the stakes are very high,’ Kudlow told reporters at the White House. ‘President Trump has a terrific track record as a negotiator, and he will know through facts and instincts how to handle this. And my suspicion is that President Xi, likewise.’ ”
But a deal with China isn't impossible. The New York Times's Mark Landler, Glenn Thrush and Keith Bradsher: “Trump is projecting a steely facade as he prepares for a critical meeting on trade this weekend with President Xi Jinping of China. But behind his tough talk and threats of higher tariffs is a creeping anxiety about the costs of a prolonged trade war on the financial markets and the broader economy. That could set the stage for a truce between the United States and China, several American officials said, in the form of an agreement that would delay new tariffs for several months while the world’s two largest economies try to work out the issues dividing them. Such an outcome is not certain. ... But Mr. Trump has signaled a new willingness to make a deal with Mr. Xi, a leader he has treated solicitously and will meet over dinner on Saturday in Buenos Aires, after a summit meeting of leaders of the Group of 20 industrialized nations.”
— U.S., Canada still haggling over dairy. Reuters's Chris Prentice and David Ljunggren: “Dairy remains a sticking point between the United States and Canada as the countries prepare to sign a new North American trade pact this week, according to four sources familiar with the matter. . . . U.S., Canadian and Mexican leaders are on track to sign the agreement on the sidelines of a Group of 20 summit in Buenos Aires, officials said. But days ahead of the Nov. 30-Dec. 1 event, there are still disagreements. . . . The sources said Ottawa was pushing back against U.S. demands for more information about Canada’s supply management system, a complex arrangement of production quotas and import tariffs designed to protect the domestic industry. . . . Ottawa is uneasy over the amount of information Washington is seeking.”
- “Trump calls Mueller a ‘conflicted prosecutor gone rogue.’” The Washington Post's John Wagner.
- “Losing cooperators is a blow, but not a fatal one, for Mueller, analysts say.” The Post' s Matt Zapotosky.
- “Corsi provided early alert to Stone about WikiLeaks release, according to draft special counsel document.” The Post's Carol D. Leonnig, Rosalind S. Helderman and Manuel Roig-Franzia.
- “Robert Mueller's endgame may be in sight.” Wired’s Garrett Graff.
- “Timeline: What it would mean if Manafort and Assange met in 2016.” The Post's Philip Bump.
- “Mueller protection bill could get Senate vote.” Politico's Burgess Everett.
— Trump threatens General Motors. The Post’s Damian Paletta and Andrew Van Dam: “Trump on Tuesday rebuked and threatened General Motors, intensifying his attacks on an automaker whose planned layoffs run counter to the president’s promise to bring back U.S. manufacturing jobs. Trump urged GM to reconsider its plans to lay off 15,000 workers and close five plants, writing on Twitter that he would evaluate cutting off federal subsidies to the automaker if it went forward. ‘Very disappointed with General Motors and their CEO, Mary Barra, for closing plants in Ohio, Michigan and Maryland,’ Trump wrote over the course of two posts. ‘Nothing being closed in Mexico & China. The U.S. saved General Motors, and this is the THANKS we get! We are now looking at cutting all @GM subsidies, including . . . for electric cars.’”
....for electric cars. General Motors made a big China bet years ago when they built plants there (and in Mexico) - don’t think that bet is going to pay off. I am here to protect America’s Workers!— Donald J. Trump (@realDonaldTrump) November 27, 2018
— Microsoft becomes the world's most valuable company. Bloomberg's Jeran Wittenstein and Dina Bass: "Microsoft Corp. surpassed Apple Inc. to become the world’s most valuable publicly traded company. All it took was a $300 billion rout. After briefly claiming the top spot on Monday, Microsoft shares rose 0.6 percent Tuesday, pushing the company’s market value to $828.1 billion at the close. That exceeded by more than $1 billion the value of Apple, which has tumbled this month on concern about iPhone unit sales. The last time Microsoft’s market capitalization was bigger than Apple was in 2010, according to data compiled by Bloomberg.
— Retailers should think twice about opening on Thanksgiving Day. Reuters's Nandita Bose and Melissa Fares: “As store sales fall and purchases shift online over the Thanksgiving weekend, many U.S. retailers still open their doors on Thanksgiving itself, Thursday evening — to their detriment. It is widely understood that heavy discounting early in the holiday season — both online and in stores — along with retailers opening on Thursday evening cuts into early morning Black Friday traffic and sales. For example, the snaking lines for ‘doorbuster’ deals at 4 a.m. on Black Friday are a rare sight these days. But the early openings are now increasingly hurting store sales not just on Black Friday but even on Saturday and Sunday, according to retail industry experts. . . . The results for Thanksgiving and Black Friday showed net sales at brick-and-mortar stores fell 4 to 7 percent, while traffic fell 5 to 9 percent, according to analytics firm RetailNext.”
— Papa John's future is unclear. WSJ's Julie Jargon and Cara Lombardo: “A major potential bidder for Papa John’s International Inc. has taken itself out of the running, putting pressure on the pizza maker to figure out its future. Trian Fund Management LP, which was evaluating a bid, has decided not to pursue it . . . Papa John’s is in the midst of a sale process that began in August. While some bidders remain interested in potentially taking a stake, none is currently considering buying the whole company . . . Binding offers are due next week.”
— Dems poised to revisit tax law. AP's Bob Salsberg: "The Democrat poised to take the reins of the powerful House Ways and Means Committee said Tuesday the panel would revisit elements of the tax law approved by the Republican-led Congress, and raised hopes for bipartisan agreement on an infrastructure bill. Rep. Richard Neal, D-Massachusetts, is all but certain to assume the chairmanship when the Democrats take over control of the House in the new Congress next month... Outlining his priorities before a gathering of New England business leaders in Boston, Neal said while there is 'no shortage of outrage' in Washington, Democrats on Capitol Hill should 'check their emotions at the door and try to build some kind of consensus on a path forward.'
"Neal largely avoided direct criticism of [Trump] and cautioned Democrats against any unnecessary escalation of investigations. Following the speech, however, he reiterated his previously-stated intention to have the committee seek release of Trump’s tax returns, which the president refused to make public during his campaign and since taking office."
— Brown: Tax bill must address GM. Politico’s Brian Faler: “Sen. Sherrod Brown (D-Ohio) is demanding that any year-end tax legislation address General Motors’ announcement that it is laying off thousands of workers. Brown, a tax writer and potential 2020 presidential candidate whose state is home to some of those workers, blamed GM’s decision on provisions in the new tax law, allowing companies to pay a lower tax rate on their overseas earnings than they are charged on their domestic profits. He wants to end that as part of any tax legislation lawmakers move before the end of the year — a likely impossible demand given time constraints and the complexities of the issue.”
The stock market has felt plenty choppy in recent weeks. But per GOP lobbyist Bruce Mehlman, it's seen relatively few wild swings this year. "Apparently neither political campaigns nor trade wars nor social media company stumbles caused investors to jump as often as in prior years," Mehlman writes in an email. His chart:
- Federal Reserve Chair Jerome H. Powell delivers a speech at an Economic Club of New York luncheon.
- The Clearing House and Bank Policy Institute’s 2018 Annual Conference in New York.
- Federal Reserve Chair Jerome H. Powell appears before the Joint Economic Committee on Dec. 5.
- Senate Banking Committee hearing on “Oversight of pilot programs at Fannie Mae and Freddie Mac” on Dec. 5.
— From the New Yorker's Pat Byrnes:
Bolton: “Why do you think I should” listen to Khashoggi tape?
Video shows gender reveal stunt that caused Arizona wildfire:
— “The Daily Show” on General Motors: