Fed Chairman Powell tells Congress he would ignore Trump if fired
Federal Reserve Chairman Jerome Powell told Congress on Wednesday that he wouldn’t leave his post as the nation’s top central banker even if President Donald Trump fired him.
Mortgage investors closely watch the words and actions of all the members of the Federal Open Market Committee, especially Powell, when deciding what coupon rates they’ll accept – effectively, what mortgage rates people pay for their homes. Any whiff of instability at the top of the nation’s banking system could cause rates to rise as mortgage-bond investors seek additional compensation for perceived risk.
“The law clearly gives me a four-year term and I fully intend to serve that,” Powell said in response to questions from House Financial Services Committee Chairwoman Maxine Waters, D-CA.
Trump regularly lashes out at Powell, his appointee to the top post at the Fed, and has pondered publicly whether he has the power to fire him. Trump was irked by the Fed’s decision last year to raise rates because of the cooling effect it might have on the economy. The Fed’s mandate is to promote full employment and keep inflation in check – goals that sometimes run counter to presidents who want to see the economy firing at full steam.
U.S. presidents traditionally refrain from out-loud criticism of the Fed to avoid spooking markets and eroding the Fed’s credibility, which might influence its ability to set monetary policy. Trump hasn’t shown the slightest compunction about publicly dressing down Powell and even mocking him. Two weeks ago on Fox Business News the president compared Powell to a “stubborn child,” and added: “Nobody ever heard of him before, and now, I made him, and he wants to show how tough he is.”
During testimony in Congress, Waters asked Powell: “Mr. Chairman, if you got a call from the president today or tomorrow and he said, ‘I’m firing you, pack up, it’s time to go,’ what would you do?”
Powell said: “Well, of course, I would not do that.”
Waters said: “I can’t hear you.”
Powell said, louder: “My answer would be no.”
Waters said: “And you would not pack up and you would not leave?
Powell said: “No, ma’am.”
Waters ended her line of questioning by saying, “I hope everyone heard that.” As there was no problem with the audio in the committee room, the implication was that she was speaking about everyone at the White House, about a mile down Pennsylvania Avenue from the U.S. Capitol Building.
During another part of the hearing, Waters said: “Let’s be clear: It is essential that the Federal Reserve maintains its independence from the executive branch.” Without citing whether she thought the Fed should raise or lower rates, or take any specific actions, she encouraged Powell “not to submit to the high-pressure tactics” of the president’s public criticisms.
Published at Wed, 10 Jul 2019 20:31:00 +0000