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The Latest On Trump's Plans To Appoint Political Allies To The Federal Reserve Board

Apr 5, 2019
Originally published on April 5, 2019 5:45 pm
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U.S. employers added nearly 200,000 jobs last month. Boarding a helicopter outside the White House this morning, President Trump took credit for the pickup in hiring. But in almost the same breath, Trump complained that the economy would be growing faster had the Federal Reserve not raised interest rates last year.

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PRESIDENT DONALD TRUMP: Well, I personally think the Fed should drop rates. I think they really slowed us down.

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For months now, Trump has been lobbying the central bank to make credit more widely available in hopes of pumping up the economy. While the Fed has slowly moved in the president's direction, Trump wants it to go further. And he has announced plans to install two political allies on the Fed's governing board. NPR's Scott Horsley reports.

SCOTT HORSLEY, BYLINE: Like so much of the president's agenda, Trump's treatment of the Federal Reserve is a throwback to the middle of the last century, when presidents routinely leaned on the central bank to carry out their wishes. Sarah Binder co-authored a history of the Federal Reserve, titled "The Myth Of Independence." She says Harry Truman and Lyndon Johnson didn't hesitate to weigh in on monetary policy. And Richard Nixon held considerable sway over Fed Chairman Arthur Burns.

SARAH BINDER: The danger of looking backwards or drawing lessons from that is landmark inflations in the 1970s.

HORSLEY: It was Bill Clinton who pioneered the modern hands-off approach to the Fed, and he was rewarded with a long economic boom. George W. Bush and Barack Obama also left the central bank alone through two painful recessions. Then came Trump, who's been outspoken in criticizing the Fed, even though by most measures, the U.S. economy is doing well - with rising wages, low inflation and steady job growth.

BINDER: That's the part which is so unusual, if not abnormal about President Trump weighing in and pushing the Fed to lower rates.

HORSLEY: While the Fed has not lowered interest rates, it has stopped raising them. And the central bank's taken other steps to cushion an economic slowdown. Still, Trump's not satisfied. And now, he's trying to put his own stamp on the Fed. Yesterday, Trump announced plans to nominate former pizza executive and GOP presidential candidate Herman Cain to the Fed's governing board.

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TRUMP: He's a highly respected man. He's a friend of mine. He's somebody that gets it. And I hope everything goes well. But Herman Cain is a very good guy.

HORSLEY: Two weeks ago, Trump floated another potential Fed nominee, conservative commentator Stephen Moore of The Heritage Foundation. Both men have some baggage. Cain ended his 2012 White House bid amid allegations of sexual harassment. Moore was held in contempt of court for failing to pay child support and alimony. And the IRS is trying to collect more than $75,000 in back taxes that the agency says Moore owes.

Still, Trump says he's confident Cain will pass a background check. And White House adviser Larry Kudlow said this week the Moore nomination is all systems go.

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LARRY KUDLOW: We are fully behind him, fully behind him. He's a smart guy. And I think he would be a breath of fresh air in the Fed.

HORSLEY: At a breakfast organized by The Christian Science Monitor, Kudlow insisted the White House is not trying to meddle in Fed policy.

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KUDLOW: My comments, the president's comments were not meant to, quote, "pressure the Fed" or interfere with their independence. That's not our intent. It's just - it's our point of view.

HORSLEY: Still, critics say Cain and Moore would inject an unwelcome note of partisanship at the central bank, paying less attention to the Fed's dual mandate of stable prices and maximum employment and more to whatever policy might help the Republican Party. Ultimately, Bender warns that could be damaging to the Fed's credibility with the public.

BINDER: The public and markets have to trust that the Fed's going to do the right thing. And that's very hard to do when the president is trying to put his finger on the scale when the economy is otherwise doing well.

HORSLEY: So far, financial markets seem to be taking a wait-and-see attitude towards Cain and Moore. Despite the president's tweets and public comments, neither man has officially been nominated for the Fed board. Scott Horsley, NPR News Washington.

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