Senator Calls For Probe Into Fed Independence After Bill Dudley Urges Fed To Overthrow Trump
In the aftermath of the shocking Bill Dudley op-ed, which has "opened a staggering can of worms", and prompted many to call the former NY Fed central banker "rogue"...
Dudley is now officially a rogue central banker.
— Kyle Bass (@Jkylebass) August 28, 2019
... it was only a matter of time before someone called for an official inquiry into the "independence" of the Federal Reserve: the world's most important central bank, the same one which Bernanke's former advisor Andrew Levin said 3 years ago, "a lot of people would be stunned to know” the extent to which the Federal Reserve is privately owned."
And sure enough, on Wednesday afternoon, Republican Senator Thom Tillis called for the Senate Banking Committee to probe the Federal Reserve’s independence after Bill Dudley infamously suggested the upcoming presidential election "falls within the Fed’s purview", hinting that it is ultimately the Fed - through its monetary policy - that picks the US president.
Tillis, who is up for reelection next fall in swing state North Carolina, said he plans to ask the Banking Committee’s chairman, Sen. Mike Crapo (R-Idaho), about convening a hearing “regarding Fed independence and the danger of this institution taking unprecedented and inappropriate steps to meddle in the presidential election."
Quoted by Politico, Tillis said "I am very disappointed that former Fed monetary Vice Chairman Bill Dudley is lobbying the Fed to use its authority as a political weapon against President Trump. The President is standing up for America against China after 30 years of our country and our workers being ripped off and there is now an effort to get the Fed to try to sabotage the President’s efforts.”
Unreal: the fmr Fed Chair is lobbying the Fed to use its authority to meddle in the election to defeat @realDonaldTrump. POTUS is standing up for America against China after 30 years of our country & workers being ripped off and now some are trying anything to stop his efforts.
— Senator Thom Tillis (@SenThomTillis) August 28, 2019
Dudley's op-ed was supposedly the result of an increasingly hostile relationship between the US president and the world's top central banker, which has culminated in a barrage of angry tweets by Trump slamming both Powell and the Fed for not easing more.
More recently, Trump slammed Powell saying “The only problem we have is Jay Powell and the Fed. He’s like a golfer who can’t putt, has no touch. Big U.S. growth if he does the right thing, BIG CUT — but don’t count on him! So far he has called it wrong, and only let us down.”
Of course, none of this tension between the president and Fed chair is new or unique, and for a far more colorful example of just how laughable the concept of Fed "independence" is, we go to the NYT with this brief but highly memorable anecdote from a meeting between President Lyndon B Johnson and Fed president William McChesney Martin
... in 1965, President Lyndon B. Johnson, who wanted cheap credit to finance the Vietnam War and his Great Society, summoned Fed chairman William McChesney Martin to his Texas ranch. There, after asking other officials to leave the room, Johnson reportedly shoved Martin against the wall as he demanding that the Fed once again hold down interest rates.
“I hope you have examined your conscience and you’re convinced you’re on the right track.” Lady Bird Johnson said to William McChesney Martin, on his arrival at the LBJ ranch.
Martin caved, the Fed printed money, and inflation kept climbing until the early 1980s.
Finally, while we doubt that anything will come out of the hearing on Fed "independence" as any actual discovery would reveal that the Fed was never actually independent (nor the ECB for that matter, which singlehandedly overthrew Sylvio Berlusconi in 2011 when it sent Italian bond yields soaring after it briefly stopped buying Italian debt), but an integral part of the US political apparatus (and privately owned to boot), we would like to repost this reaction to the original Dudley op-ed as it capture both the zeitgeist and what is coming next, perfectly:
This is so arrogant, cynical, ironic and completely disingenuous that it can’t pass without comment.
A $500B trade war does not tank the global economy. But a 10-year campaign to publicly bail out reckless private banks and insurance companies while blowing the largest most comprehensive debt bubble in history and then raising interest rates on $250T in global debt surely the hell will.
I don’t care who is, has been or will be President, the Federal Reserve and ONLY the Federal Reserve should be blamed for the tepid economy of the last 10 years. A world full of zombie companies, mountains of productivity-crushing debt and disconnected stock markets that reward a tiny minority of the citizenry with bloated “gains.” All this while regular people live hand-to-mouth saddled with stagnant wages and, dare I say it, daily inflation eating at their incomes.
For a Fed official to blame a paltry trade war for its own foolishness and THEN recommend the Fed purposely crush the economy with a deep recession in order to punish His Orangeness, is terrifying and nearly Soviet in its punitive childishness. Like all good technocrats, Mr. Dudley believes only his class of Brahmins may decide for you unwashed masses what is best. The Road to Hell and all that...
What is coming should be pinned forever on the hubris, blindness and arrogance of the Fed. Naturally, regular people will be hurt the most.
via Zero Hedge https://ift.tt/2ZASnH7