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Sean Fieler: President Trump's effort to shake up the Federal Reserve

Section: Daily Dispatches

By Sean Fieler
Daily Caller, Washington, D.C.
Friday, February 21, 2020

There is more to President Donald Trump's monetary policy than political self-interest. If the president simply wanted low rates and to ease the regulatory burden of the Federal Reserve, he could achieve these outcomes without much resistance.

However, Trump also wants to disrupt the Fed's ruling monetary clique. To this end, he has nominated a series of dissidents to the Fed's board. With Judy Shelton's Senate confirmation hanging in the balance, it's time for Trump to explain why this fight with the Fed is worth the effort.

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From his post-election courting of John Allison to 2019's nominations of Herman Cain and Steve Moore, Trump has sought to elevate an array of critics to the Fed's board. Allison was never nominated, and both Moore and Cain withdrew from consideration, making Shelton the first of Trump's dissidents to receive a Senate confirmation hearing. That hearing, which occurred Feb. 13, revealed hardened opposition to Trump's effort to shake up the Fed.

Shelton's 90-minute session with 15 senators had the drama and combativeness befitting a Supreme Court confirmation fight. To quote Senate Banking Committee Chair Mike Crapo, there was an “orchestrated, calculated effort” to defeat Shelton. Democratic Montana Sen. Jon Tester attacked Shelton for everything from wanting to privatize the Post Office to quoting the actual text of the legislation governing the Fed. He was not alone. Led by Democratic Ohio Sen. Sherrod Brown, the well-prepared Democrats on the committee left no doubt of their united opposition to her confirmation.

Shelton's hearing also made clear that at least three Republican senators remain unconvinced of the need to install dissidents on the Fed's board. Republican Alabama Sen. Richard Shelby expressed concern over Shelton's defense of gold's monetary role. Republican Pennsylvania Sen. Patrick Toomey objected to her use of foreign exchange rates in the formulation of monetary policy. Republican Louisiana Sen. John Kennedy spent the entirety of his allotted five minutes asking Shelton to convince him that she would cut rates to zero and support quantitative easing if need be.

With unified Democratic opposition and Republican equivocation, the time has come for Trump make clear why he does not want to populate the Fed board solely with predictable technocrats. If the president wants to disrupt the dangerous groupthink at the Fed, he needs to explain why this is important. If Trump is unwilling to publicly advocate for the qualified and collegial Shelton, it is hard to imagine he could find another equally qualified dissident nominee to endure the Senate confirmation process.

The reasons underlying Trump's concern about the Fed became much easier to articulate following the publication of former Fed governor Bill Dudley's op-ed in Bloomberg in August 2019. Dudley, who served as vice-chair of the Federal Reserve Open Market Committee under Bernanke, Yellen and Powell, wrote that “Trump's reelection arguably presents a threat to the U.S. and global economy” and that in this context “Fed officials should consider how their decisions will affect the political outcome in 2020.” Dudley's comments were so shocking that Republican North Carolina Sen. Thom Tillis publicly called for hearings on the Fed's potential electoral interference.

Congress never held these hearings, but it will share the blame if the Fed throws its weight around politically as Dudley advised. Not only has Congress permitted the Fed an unlimited budget to advocate for its point of view, but Congress has obstinately refused to prohibit the Fed from lobbying. In 2015, Republican Kentucky Sen. Rand Paul introduced legislation to stop the Fed from lobbying Congress and asked the Fed to disclose how much it had spent on such lobbying in the past. Paul's legislation went nowhere and his letter to the Fed's inspector general received no substantive response. As a result, the Fed remains legally free to manipulate both markets and politicians as long as it deems such manipulation necessary to achieve its objectives.

The existence of a self-perpetuating, unaccountable elite busily working against the interests of the American people is exactly why Trump was elected. It's time the American people heard directly from Trump about the real problem he sees at the Fed as they did from him on the campaign trail in 2016.


Sean Fieler is president of Equinox Partners LP, a New York-based hedge fund, and chairman of the American Principles Project, a Washington advocacy group.

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