Can Trump be expelled from the Fed chairman?

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Can Trump be expelled from the Fed chairman?

This article from the micro-channel public number: Cats t in Silicon Valley (ID: leo77zheng), Author: cat t in Silicon Valley, title image from the visual China

You're fired!

So, who is the person that Trump wants to open now? Since the departure of Jeff Sessions, the former Attorney General who forced the investigation of the Russian-Russian investigation, Trump’s most wanted candidate is to surpass the Federal Reserve Chairman Jerome Powell. Trump has repeatedly expressed his disappointment with the governor of the US central bank in public; it has hinted or threatened several times that he has the right to dismiss Powell.

Why is Trump so dissatisfied with Powell? The reason is very simple. He believes that the Fed kept raising interest rates last year and undermined its economic achievements. Trump is actively preparing for the re-election next year. Although Trump’s internal and external policies have always been attacked by the mainstream media, as long as the US economy continues to maintain strong growth, it is the most convincing card of Trump’s ability to govern, and he is confident that he will defeat the Democrats again in the next year’s election.

But what annoyed Trump is that the Fed has continuously raised interest rates in the past two years, constantly braking the accelerated growth of the US economy. From January 2017 to the present, the Fed has raised interest rates seven times in a row, and the federal funds rate has been raised from the 0.5% to 0.75% level when Trump took office to 2.25% to 2.5%. However, the Fed’s interest rate hike cycle actually began in 2015, and the past seven interest rate hikes were overwhelming and even passed.

Powell did not succumb to Trump's pressure. After being continuously bombarded by Trump's "very disappointing", Powell also publicly emphasized the independence of the Fed on several occasions, explained the reasons for decision-making based on economic data, and announced that the Fed will not yield to short-term political interests and reiterate that they will be full. The four-year term is also an indirect response to Trump.

All right. Trump wants to start Powell is already known to everyone, then does he have the right to do this?

Resignation and transfer of the chairman of the Federal Reserve

This question is really difficult to answer. Because the president has never done so before. Before Powell, there were 15 Fed chairmen, none of whom were fired by the president. In most cases, if a president is dissatisfied with the chairman of the Federal Reserve, when the latter leaves office on his own, he or she elects a new person to replace him.

However, the Fed chairman also has the initiative to resign. In 1987, former Federal Reserve Chairman Paul Volcker voluntarily resigned after his term was over, and President Reagan nominated Alan Greenspan. Although Volcker’s apparent resignation was to take care of his family, it is undeniable that his relationship with President Reagan was gradually alienated and that Volcker chose to leave early.

In order to curb severe inflation in the early 1980s, Walker adopted a very tough monetary policy, once raising U.S. interest rates to a crazy level of 21.5 percent, directly plunging the U.S. economy into recession, and the unemployment rate was even as high as 10 percent. Although he did bring the United States out of the black hole of inflation, it also paid a considerable price for the American economy, thus freeing his relationship with then-President Reagan.

In addition, the US president can also "tune away" the Fed chairman. In 1978, then President Carter directly appointed the Federal Reserve Chairman William Miller as his own finance minister. Miller has thus become the only person who has served as the finance minister and the Fed chairman. Later, as the chairman of the Federal Reserve, he was the "anti-inflation warrior" Volcker.

The Fed doesn't report to the president.

Strictly speaking, the US central bank - the US Federal Reserve System is not a government agency, but a public-private partnership, including the Federal Reserve Board and the Federal Open Market Committee (FOMC). Although the seven members of the Fed were nominated by the president, the FOMC, which decided on US monetary policy, also included five regional Federal Reserve Bank presidents.

The Federal Reserve’s 1913 Federal Reserve Act stipulated that the Fed’s chairman was nominated by the president and confirmed by the Senate, and there were no re-election restrictions. As the head of the independent central bank, the Fed chairman does not report to the president. It is not a subordinate of the president and is only responsible to the US Congress and the people. In other words, the Fed’s interest rate hike or interest rate cuts do not require presidential approval and do not require the president’s opinion.

In 1977, the Federal Reserve Act was amended to make it more clear that "the purpose of the Federal Reserve is to guarantee full employment and stabilize prices and adjust long-term interest rates." What the president sees is the immediate economic momentum, which is related to his approval rating and election, while the chairman of the Federal Reserve needs to see inflation trends in the coming years, and he has no obligation to cooperate with the president's political interests.

In a sense, the chairman of the Federal Reserve is the helmsman of the American economy, guiding the future of the American economy. During the 1996 election, Fortune magazine even wrote on the cover, "forget the presidential election, Greenspan is the dominant economy of the United States."

Historically, the relationship between the chairman of the Federal Reserve and the president of the United States has always been in an estranged relationship. When the Fed adopts loose monetary policy to help the president bring economic achievements, the relationship between the chairman of the Fed and the president of the United States is in a honeymoon period, and when the president needs to vigorously develop the economy to boost his election or approval rating, the Fed is in the mode of raising interest rates, and the relationship between the two will become colder and even openly hostile.

The president ordered you not to raise interest rates

Perhaps before Trump, no US president publicly and continuously bombarded the Fed chairman, but this does not mean that the US president will not exert pressure or interfere with the Fed’s decision in other ways, nor does it mean that the US president did not consider it. Dismissed the chairman of the Federal Reserve. And the more the election, the stronger the president’s reaction.

U.S. President Johnson in the 1960s had a bad relationship with Federal Reserve Chairman Martin (William Martin) because Johnson, mired in the Vietnam War, wanted the Fed to keep interest rates low to boost economic growth. He even said to Martin, "the soldiers were killed in Vietnam, but you don't care at all." Johnson also considered replacing Martin very seriously, but had no choice but to give up because of the political risks.

President Nixon in the 1970s did the same thing for the then Federal Reserve Chairman Arthur Burns. Prior to the US presidential election in 1972, the then President Nixon met with Republican Boons several times and asked him to adopt a loose monetary policy to promote US economic growth. This is the inside story revealed by Nixon’s White House videotape after the Watergate incident.

It is not known whether Burns succumbed to Nixon's pressure. After all, Nixon nominated Burns in 1969, and they were friends for many years. But the reality is that Burns did adopt expansionary monetary policy, and Nixon won the 1972 election by an overwhelming margin.

In the 1980s, Federal Reserve Chairman Volcker wrote in his memoirs that he was called to the White House by President Reagan before the 1984 election, and met with President Reagan and White House cleric James Baker at the Presidential Library next to the Oval Office. "Reagan didn't say a word, but Baker conveyed what he meant: the president ordered you not to raise interest rates before the election." Volcker wrote, "Although we did not plan to raise interest rates during that time, I was shocked. I later realized that they wanted to see me at the Presidential Library because the president’s oval office had video equipment."

Despite this rough episode, President Reagan has publicly stressed the independence of the Fed system and even declined to comment on Fed policy. President Reagan also spoke highly of Volcker after he resigned, calling him a historic Fed chairman. Reagan is recognized as the top three great president in the United States, as can be seen in this clip.

Old Bush was pitted by Greenspan

President Bush also publicly commented on the Fed before his re-election. From 1990 to 1991, the U.S. economy plunged into a mild recession, and the Bush administration was critical of Greenspan's failure to take measures to cut interest rates as soon as possible. Before the 1992 election, the U.S. economy was just beginning to recover, and President Bush publicly called on the Fed to continue to cut interest rates in an interview with the New York Times.

Although Greenspan did cut interest rates that year, it doesn't seem to help President Bush as much as he wants. The unemployment rate in the United States reached 7.4 percent in 1992, and President Bush lost to Clinton, a young man from Arkansas, in the re-election. President Bush has been hard to let go of Greenspan, arguing that the latter's slow monetary policy decisions have left him unre-elected.

In fact, the relationship between Greenspan and the president of Bush and his son was quite cold. His Fed chairmanship ended in 2006 and was not re-elected by President Bush. In contrast, Greenspan’s relationship with President Clinton is much more harmonious, especially after the US economy began a strong recovery in 1995. President Clinton was able to survive the Lewinsky incident, and it was also the public support rate that benefited from good economic performance.

Greenspan, who served as chairman of the Federal Reserve for 19 years and has experienced four presidents of Reagan, Bush, Clinton and George W. Bush, was once regarded as the "economic tsar" of the United States. Before and after he stepped down, Greenspan was once praised as the biggest contributor to the vigorous growth of the US economy; however, after the outbreak of the economic crisis in 2007, Greenspan's previous years of easing was considered the main bane.

Not long ago, when talking about Trump’s public bombardment of Powell, Greenspan said with a smile that when he was the chairman of the Federal Reserve, he always had to deal with the various opinions expressed by the president on monetary policy. This is normal. "But since you are working at the Fed, the best thing you can do is to put on your earmuffs and don't listen."

To get back to the last question, can the president of the United States remove the chairman of the Federal Reserve?

Forced dismissal will have disaster consequences

However, the fire of Powell will have disastrous consequences for Trump. This has declared to the world that the Trump administration’s naked intervention in the independence of the US central bank has directly shaken the cornerstones of the US currency and banking system, and may even cause the US economy to fall into recession. Moreover, this decision will undoubtedly be subject to intervention and judicial prosecution by the US Congress; the House of Representatives controlled by the Democrats is looking for all the reasons for impeaching Trump. Trump has no reason to find a big problem before the election.

For Trump, who is determined to be re-elected, the dismissal of Powell is undoubtedly lifting his own feet. This is why the US president has never fired the Fed chairman because they dare not face this huge risk. Although Trump seems to be acting without rules, he will never make a joke about his re-election. Although he repeatedly threatened to dismiss Powell, it is not a way of pressure for Trump, who is good at bluffing.

This article from the micro-channel public number: Cats t in Silicon Valley (ID: leo77zheng), Author: cat t in Silicon Valley, title image from the visual China

* The article is the independent view of the author, does not represent the position of the tiger sniffing net. This article was published by Tiger Uncle in Silicon Valley © Authorized by Huwei.com and edited by Tiger Sniff. Reprint this article with the author's consent, and please attach the source (虎 sniffing net) and the link on this page. Original link: https://www.huxiu.com/article/306634.html

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