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Trump Allies Draw Up Plans to Blunt Fed’s Independence
Some Trump advisers argue that the president should be consulted on interest-rate decisions


WSJ
WASHINGTON—Donald Trump’s allies are quietly drafting proposals that would attempt to erode the Federal Reserve’s independence if the former president wins a second term, in the midst of a deepening divide among his advisers over how aggressively to challenge the central bank’s authority.

Former Trump administration officials and other supporters of the presumptive GOP nominee have in recent months discussed a range of proposals, from incremental policy changes to a long-shot assertion that the president himself should play a role in setting interest rates. A small group of the former president’s allies—whose work is so secretive that even some prominent former Trump economic aides weren’t aware of it—has produced a roughly 10-page document outlining a policy vision for the central bank, according to people familiar with the matter.

The group of Trump allies argues that he should be consulted on interest-rate decisions, and the draft document recommends subjecting Fed regulations to White House review and more forcefully using the Treasury Department as a check on the central bank. The group also contends that Trump, if he returns to the White House, would have the authority to oust Jerome Powell as Fed chair before his four-year term ends in 2026, the people familiar with the matter said, though Powell would likely remain on the Fed’s board of governors.

It couldn’t be determined whether Trump is aware of or signed off on the effort, but some people close to the discussions believe the work has received the blessing of the former president.

“Let us be very specific here: unless a message is coming directly from President Trump or an authorized member of his campaign team, no aspect of future presidential staffing or policy announcements should be deemed official,” Trump senior advisers Susie Wiles and Chris LaCivita said in a statement.

Trump, who often tells advisers that he loves low interest rates and expressed frustration that he couldn’t influence them as president, hasn’t yet decided exactly how he would approach the Fed in a second term, people close to him said. He is focused foremost on the coming election, his continuing legal troubles and his search for a running mate. But he has had informal discussions with advisers about possible candidates to lead the central bank, and he has asked associates whether they would be interested in the job, the people said. Trump has repeatedly complained—in public and in private—about Powell, continuing a yearslong campaign to discredit the man he picked to lead the Fed.

Several people who have spoken with Trump about the Fed said he appears to want someone in charge of the institution who will, in effect, treat the president as an ex officio member of the central bank’s rate-setting committee. Under such an approach, the chair would regularly seek Trump’s views on interest-rate policy and then negotiate with the committee to steer policy on the president’s behalf. Some of the former president’s advisers have discussed requiring that candidates for Fed chair privately agree to consult informally with Trump on the central bank’s decisions, the people familiar with the matter said. Others have made the case that Trump himself could sit on the Fed’s board of governors on an acting basis, an option that several people close to the former president described as far-fetched.

The discussions have alarmed some Trump advisers with more-traditional views of the role of the Fed, as well as Republican lawmakers. They worry that chiseling away at unwritten norms around keeping politics at arm’s length from Fed decisions could backfire, particularly if political interference leads investors to conclude that the central bank is willing to tolerate higher inflation. That could raise long-term interest rates, including rates on mortgages, credit cards and auto debt, when the U.S. government has to roll over trillions of dollars in debt annually. One former Trump administration official described the prospect of Trump’s influencing interest rates as a “horrifying thought.”

“Given their charge, their independence is critical to doing it in an unbiased, nonpolitical way,” said Sen. Kevin Cramer (R., N.D.), who said he would oppose efforts by any president to challenge the Fed’s autonomy. “There’s a reason that there’s not just one decision maker—that there are safeguards built into a board of governors.”

Sen. Thom Tillis (R., N.C.) said he, too, wouldn’t condone efforts by a president, including Trump, to interfere with monetary policy. “I have to think about the Fed for the next 50 years, not the next four, and independence is important,” he said.

Any effort by Trump to exert control over the Fed would face significant institutional hurdles. Even if a court upheld an effort to demote Powell as chair, Trump would likely need to elevate one of the Fed’s other six governors to the position because there are no vacancies on the central bank’s board. Two of those governors were installed by Trump.

A Fed appointment is akin to putting a jurist on the Supreme Court: Once someone is installed, it is difficult to force him or her out. Supreme Court justices have a lifetime appointment, and Fed governors have 14-year terms to provide a degree of independence from politics.

Lawyers who have studied the issue believe the president lacks the power to fire Fed governors over a policy dispute. Whether the president has the authority to demote the chair and replace him or her with a sitting governor isn’t clear. When he was in office, Trump privately contemplated dismissing Powell but never did so, in part because his advisers told him he didn’t have the authority.

After the publication of this article online, analysts said they thought several of the boldest proposals were legally dubious but could still roil bond and currency markets if the White House attempted them. “The market would react very badly to any effort to tame the Fed, and we think this would cause the administration to back off,” said Krishna Guha, vice chairman at Evercore ISI, in a note to clients Friday.

In a second term, Trump would face two differences from his first term on Fed policy.

First, the central bank’s seven-person board isn’t scheduled to have any vacancies until January 2026. In his first year as president, Trump had the opportunity to fill four vacancies on the Fed’s board, plus a fifth when Chairwoman Janet Yellen departed in 2018.

Second, inflation is a more serious concern. In 2017, Fed officials were gently raising interest rates from very low levels. Inflation only briefly edged up to the Fed’s 2% target, and inflation-adjusted interest rates were above zero for only a few months. By contrast, the Fed lifted rates last year to the highest level since 2001 and has held them there to combat inflation that soared to a four-decade high in 2022 and is still running above the Fed’s target.

The Fed has a mandate to keep inflation low and labor markets healthy. Presidents have the ability to influence the Fed through their appointments, but that authority can be limited because of the checks and balances built into the central-bank system.

Interest-rate policy is decided by the Federal Open Market Committee, which includes seven members of the Washington-based board of governors, who are appointed by the president and confirmed by the Senate, and 12 presidents of regional Fed banks, who are appointed by those banks’ private boards. The governors and the New York Fed president have a permanent vote, and four reserve bank presidents rotate onto the committee for one year at a time.

Some Trump advisers want the president to make a sustained effort to remake the central bank by encouraging closer ties between the administration and the Fed’s board. They think the central bank and its backers in Washington and on Wall Street have made a fetish of the Fed’s operational autonomy, sometimes referred to as its independence, to a degree that isn’t supported by constitutional law and isn’t good for the economy.

The draft document written by the group of Trump advisers would, among other matters, roll back some of the Fed’s autonomy in regulatory policy by subjecting the agency to the review process applied to other executive-branch agencies within the Office of Management and Budget when issuing new regulations or rules. It would also call for a more muscular role for the Treasury Department in overseeing any emergency lending programs that are done jointly with the Fed.

Installing a loyalist at the Fed could be difficult because the central bank’s leaders have been haunted by the example of Arthur Burns, who headed the central bank from 1970 to 1978. Burns was a highly credentialed economist, but he is remembered for failing to corral the runaway inflation that ended only after Paul Volcker put the economy through two painful recessions in the early 1980s.

Presidential nominee Richard Nixon in 1968 with a team of economic advisers including Arthur Burns, in wire-frame glasses, who later headed the central bank. PHOTO: ASSOCIATED PRESS
In addition to other missteps, Burns was regarded by historians (and some former colleagues) as being overly preoccupied with currying favor with the president. Since then, central bankers have fought to preserve their political autonomy.

In 2017, Trump’s advisers persuaded him to elevate Powell, at the time a Fed governor, to lead the central bank, in part because they feared Trump would retain Yellen, a Democrat who is currently the Treasury secretary. The silver-haired Powell, who was a private-equity investor after serving in the administration of President George H.W. Bush, had publicly supported Yellen’s policy of keeping interest rates at very low levels.

Whatever illusions Trump enjoyed about Powell’s pliability were dashed in 2018, when the Fed continued to lift interest rates. Trump began an unusual campaign of publicly browbeating Powell, first for raising rates and later for not lowering them enough.

Powell publicly resisted such pressure. “We’re human. We’ll make mistakes—I hope not frequently,” Powell said in 2019. “But we won’t make mistakes of integrity or character.”

NOTE to Trump advisors:

END THE FED

^

You always want to hear what people think but rarely say what you think.

You even told me that a couple days ago in the Western Democracy thread, "As to "ask Fenster" you do not know much of my opinions."

Why do you always ask questions but rarely answer them?

Please synthesize all that information from your first two copy and paste posts into a paragraph, and then tell me what you think the about the Federal Reserve.

If you don't have time I understand, I'll probably end up reading these articles later, but, at the very least, do you agree with all the articles that you copy and paste, or are you just posting them for discussion purposes?

^

Well said, Jeebs. I pretty much agree with that.

This is the only part that I question. Who is going to regulate the FED since the FED is a creature of Congress that operates under secrecy?
You can't even get Congress to audit the FED. The FED is run by central planning banksters from an ivory tower.
The FED is allegedly an independent and nonpolitical entity but the FED in reality is run by political appointees and does the bidding of whatever regime is in power.

The FED's track record is an unblemished record of failure. You'll have ask Robert to defend the status quo.

In 1996 the Mises Institute produced a documentary, Money, Banking, and the Federal Reserve
It offers a good historical background

https://youtu.be/iYZM58dulPE?si=_6Z2XD5dYXQ8UZdd

He was right. Also he had to add parts or take out parts of the original intent of the constitution to appease all original states. He was all about the federal government have very narrow scope of powers.

The Constitution doesn't.

LEFTIES say the Constitution is irrelevant. The Democrats long ago threw Jefferson out the window and adopted Karl Marx.

Anthony says we live in more complicated times, whatever that means. I don't know about throwing out all those old time-tested principles of sound monetary policy, human action, and market economics because the new progressive stuff hasn't worked out too well.

The original framework prohibited the FED from buying debt from the US Treasury. Then they figured out they could go around that law and purchase on the open market. What a scam.

Sure it does. How many amendments are we up to now?

That's not the issue Anthony and you are trying to read those words in the Constitution very broadly which is where the political mischief and corruption comes from.

The FED just like the previous failed 1st and 2nd central banks of the United States is not a government agency, it is a monopoly charter given by Congress that functions like a banking cartel.

Short and sweet here:

How the Federal Reserve is a Scam - G. Edward Griffin

https://youtu.be/EZZ7nDpXamc?si=Hsq2xn3EjvOzQMrM

For more in-depth understanding read G. Edward Griffin's The Creature From Jekyll Island
It's a classic.

Free eBook version here:
https://archive.org/details/TheCreatureFromJekyllIslandByG.EdwardGriffin

BookTV: G. Edward Griffin, "The Creature from Jekyll Island"

https://youtu.be/pqhxzN0PMeg?si=ZFby5ON2HmhAjQp2

Obviously there is room for improvement. Not really sure what those improvements would be entail though. At present it seems much like the FDA in that the fox is guarding the hen house.

For those who would advocate for it’s abolishment what do you suggest as its replacement?

Currently all interbank checks are cleared through the Fed. How would this be facilitated in its absence? In its absence would each bank then have to set up a system to clear every other bank in the United States? What about overseas transactions? How would those be cleared?

How would individual banks be monitored? At present the Fed monitors every bank in the United States. This is but one way liquidity is maintained. They are responsible for shutting down banks before customers funds are lost do to mismanagement. Absent the Fed what agency do we create to do this?

Of course the Fed also sets interest rates. In its absence how would rates be set? Certainly not by Congress. They can’t even pass a budget. Does anyone seriously think they could agree on interest rates? Article One clearly states “ but all Duties, Imposts and Excises shall be uniform throughout the United States;”. What about the President as Trump has advocated? Do we have want someone who is fiscally irresponsible to set a corresponding interest rate to mitigate the effects of bad policy decisions?

Those are but three functions the Fed performs. What about the many more? What inefficient bureaucracies would we create to replace the Fed?

I’ll be the first to admit the Federal Reserve system is flawed. But it makes much more sense to fix what can be fixed than to throw the baby out with the bath water and bring great instability to the economy.

What to replace it with? When you have cancer removed, what do you replace it with?

Immediate proposals for improvement
The FED should be audited by independent auditors
The FED should abolish closed door secret meetings and video every meeting and release transcript to media and public

The FED should sell off all government debt and close the discount window which would force banks to compete in the market for interest rates. This would be the “true” cost of money that more realistically indicates risk environment. That’s where and how the interest rate would be set. The government doesn’t need to artificially set the rate. This is private enterprise and not the purview of duties, excise, etc..

The FED should sell off its balance sheet. Why does the government own mortgages and corporate paper? This trifling interferes with the natural modulation of free markets and contributes to boom / bust redistribution of money and it favors the wealthy

The FED didn’t insure the largest banks in our country which produced “too big to fail “ crises Lehman, etc, this is a structural hazard to our economy while at the same time the FED insurance that now covers the largest institutions encourages unlimited risk taking by large banks who otherwise would guard against insolvency, restrict loans to qualified consumers, increase deposits and create efficient and self-regulating banks because they don’t want to face the consequences of bank failures. They’d have more skin in the game. This is an example of how the government tried to fix something but unintentionally increased the risk. This is one reason the FED should be abolished. Banks that fail will be bought by other banks. Deposits up to a nominal amount, $250K or $500K or whatever can be easily figured out by requiring banks to have insurance on domestic and household accounts.

- these are just a few thoughts on the criticisms I have for the FED. Difficult to fully express ideas on a cigar forum but I think you get some of my ideas from this. These aren’t all the answers and I don’t have all the answers, and be sure of that! lol. Just offering discussion.

I don't know if you've been paying attention to the FED's "effective, efficient. systems to avoid international financial disaster" but their track record isn't so good, more like repeated horrible inflationary and boom and bust cycles.
You are right in in thinking that "it is just too late in the game to prevent a financial crisis, possibly the likes of which, we have never seen" but that won't happen by burning down the FED, that will happen by keeping the FED alive.


As Rothbard wrote in The Case Against the Fed
https://mises.org/library/book/case-against-fed

My take on the Federal Reserve is what Ron Paul warned us all about. They need to be audited. It's a criminal enterprise.

“I believe that banking institutions are more dangerous to our liberties than standing armies,” Jefferson wrote. ” If the American people ever allow private banks to control the issue of their currency, first by inflation, then by deflation, the banks and corporations that will grow up around(these banks) will deprive the people of all property until their children wake up homeless on the continent their fathers conquered.” ~ Thomas Jefferson


He was correct however he offered no alternative. In reality at this point in time it’s literally impossible to make the decisions required consistent with his quote since Congress acts as proxy for the people and they can’t agree on hardly anything.

That said every single document and dealings of the Fed should be open to the public at all times and audited by the GAO on a regular basis as is all Federal agencies.

Fraud, of course. They have cheated middle class Americans out of their savings and retirement plans for the purpose of the political gain of the government. These changes they make to the monetary system are not approved by representation but by political appointees. This is fraud.

Nonsense

The Fed was chartered by Congress and is governed by numerous laws since passed by Congress and signed into law by what ever President was in office at the time. Last I checked Congress acts as the representatives of the people so as long as their actions are consistent with those mandates then in fact their actions by extension are approved by the people. Everything the Fed does is by direction of Congress. The idea that they make up their own rules as the go along is preposterous.

Perhaps a Civics refresher course is needed. Congress passes laws that specifies broad mandates which act as a framework. In most cases it simply specifies what agency is tasked with making up the rules and providing oversight. However, Congress doesn’t specify exactly every little nuance about what the agency does. Sorry but I don’t think Congress specifies the toilet paper color or the air freshener. They leave that up to the agency tasked with the framework. Then Congress performs oversight to ensure the agency is functioning as directed. The Fed is simply another agency that happens to be quasi-public.

As far as the fraud of mismanagement of monetary policy which has robbed people of their savings and pensions is concerned that’s equally preposterous. I’ve taken a few college level economics classes which fought me that macroeconomics is most unpredictable. It is beyond foolish to think that anything better than an educated guess is possible. There are simply to many variables that depending on how they interact can cause the best laid plans to come unraveled.

I get you have an axe to grind for some reason. Perhaps you’ve watched a few YouTube videos produced by some conspiracy theorist. Maybe you made a few chitty and ill advised investments that went south. Who knows? Regardless Congress desperately needs to perform its oversight function with regards to the Fed.

You could almost call it a conspiracy and stuff

For Fenster #28:

"I ask questions simply to learn from others."

Same here, but I've asked you multiple questions over the years and most of the time I get crickets. Though it is absolutely your perogative if you don't want to answer.

I try to answer questions posed to me most of the time, but not always. Recently, I've gotten the same questions posed to me, even though I've already stated my position and my reasoning. Why answer it again?

"I have no desire to dig myself out of a hole someone has falsely attributed to me based on their exaggerated perception of my views- and what they guess my opinions are."

I know what you mean.

And I agree with that statement for the most part, but if you state your opinion up front it helps to eliminate the possibility of misinterpretation.(most of the time anyway) I thought if you posted an article that meant you agreed with it, at least to some extent, that's why I asked you in post #6 just to make sure.

Over the years I've read a lot, if not most, of your posts, and although a lot of the copy and paste leans liberal, you don't really seem that liberal to me, in the old school liberal sense. Is that accurate? Do you consider yourself a liberal?

I'm a pro freedom, pro free market libertarian for lack of a better term. I am also anti-war, anti-police state, anti-corporatism. Those three positions were all liberal views when I was in my 20's. Now I hear people saying those views are "far right" Lol! Times have changed?

So on your OP, the Federal Reserve, I think fractional reserve banking and the use of fiat money is a Ponzi scheme, destined for failure. I can't change that, but I can hedge against it with tangible commodities, like land, precious metals, growing my own food etc- just overall being more self reliant.

Ultimately, I think a lot of these debates are about if one has trust in our system, our institutions and our government. I see all of the flaws and hypocrisy on both sides and I walk the other way. I try to focus on what I can do as an individual. There are many ways around the system. I'm living proof of that.

If I'm wrong, nothing is lost, but if I'm right I am at least somewhat prepared to deal with the conditions on the ground, like job loss which already happened to us ("Covid"), or a monetary system that has finally collapsed, or an open border, or anything else that may push an already strained system to its breaking point.

I was agreeing with you. I have a copy of "A creature from Jekyll Island" on my bookshelf.

I've hiked that island, walked right past the hotel where it all went down.

I’m not grinding an axe. I’m just joining the discussion. The FED is managed by political appointees and it is not audited by a third party. Congress has zero control over FED decisions. The FED has failed in its mission of controlling inflation and unemployment. As you point out from your study of economics, macroeconomic data is most unpredictable yet the FED is now using a “data driven” model based on short term macroeconomics. Printing money and increasing the money supply definitely decreases the buying power in people’s savings accounts regardless of whatever unsuccessful investments they have risked. That note is completely irrelevant. Agencies ran by political appointees such as the FDA, EPA and DEA make laws that do not go through Congress at all. Many of these laws infringe on the freedoms we have as citizens. Just because an agency or department is commissioned by Congress doesn’t necessarily mean that they are incapable of breaking the law or operating in a manner that is unconstitutional. Toilet paper and air freshener aside, basic libert and freedom is being dismantled. But I agree with one thing, a civics refresher is certainly in order.

We all know there have been periods of growth as well as shrinkage in the economy. As such the Fed’s actions have t been perfect. We could argue all day long about what could have been if this or that happened instead. But at the end of the day we have absolutely no idea what would have happened if say in the first quarter of such and such year interest rates fell by an 1/8 instead of a 1/16 or something else.

My take is there are major issues need to be mitigated in order to do away with the Fed all together. All too often we see someone advocating a scorched earth approach, yet offer no fix for the problems such an action would generate.

In an earlier post you stated that the Fed should sell all of its assets. For the most part the Fed holds short term treasury notes. To sell 100% of those assets they would have to discount them to such a degree that it would wreck havoc on the markets. How far would they have to discount those assets to sell them? This would amount to a major manipulation of interest rates which would further erode the buying power of the dollar. However you’ve stated that they have committed fraud for basically doing just that.

An alternative would be for the treasury to simply print enough money xtra money to buy back those notes. But that would also devalue the dollar.

Then you have the argument that the value of the dollar should be tied to the value of gold. That such a monetary system is more stable than one that is manipulated by a group of bankers. They point to the fact that gold has increased in value some 300% over x number of years while the dollar has decreased. But that’s a non-sequitur argument since we have no way to know if the value of gold would be worth what it is today if it were a currency standard.

This doesn’t even take into account the currencies around the world whose value is tied to the US dollar. As a such a move would lead to a global economic crisis.

As I’ve said before I certainly believe there is room for improvement. I’m not comfortable with a highly secretive group controlling US monetary policy. Perhaps we would be better off had the Fed never been created and we had relied on the natural ebbs and flows. But that’s just wishful thinking. The fact is that we have what we have.

In addition I’ve yet to see any respected economist propose a comprehensive plan to replace or reform what we have. I’ve seen and read all sorts of theses by a variety of people who are trained economists all the way to conspiracy theories hocking ridiculous ideas to make a quick buck off people they can influence. But no one has yet offered any solution that addresses ALL of the functions the Fed performs that would not create havoc.

Show me the money. Show me a comprehensive plan that doesn’t make the economy worse and I’ll jump on board. Until th n this entire argument is meaningless.

It's been over 10 yrs since I've picked it up, other than when we moved.

Didn't take notes and didn't study it like I'm sure you have.

It changed my outlook for sure though.

About that time I started "stackin" the precious metals.