Among the various governmental departments, which most definitely should not be politicized in any way, the Federal Reserve Board is among the most important! Recently, political influences may have influenced Donald Trump’s attacks on Federal Judge Robert, and the Judiciary in general, as well as the disastrous raid in Yemen, which might have been carried-out, before the plans were set, due to a sense of false bravado.

I am not aware of one foreign democratic government, in which the head-of-state is able to influence their respective central bank’s monetary policy—interest rates and the supply of money in circulation.  On the other hand, governments do have direct control over their Treasury (or Exchequer), which are part of the government, and the President or Prime Minister implements fiscal policy—taxes and spending—through them.

Oftentimes, one political party or the other does try to suggest changes in Fed Policy, which are generally in that party’s best interest.  In 1972, President Richard Nixon made some dumb changes in fiscal policy, which caused the devastating “Stagflation”—high inflation in a recessionary involvement—which lasted through most of the decade. The tools that would normally be applied to correct for a recession, unfortunately, are opposite to what is needed to fight inflation.

The Fed is mostly staffed by economists, or other financial professionals, who can work with the Board in implementing monetary policy.   For instance, last week’s Jobs Report, which the Department of Labor released on Friday, was very strong.  If it had reflected a significant decline in employment, and high unemployment: however, an over-reaching President might have tried to urge the fed to cut interest rates.

Such pressure might be even stronger, if—like in 1972—a re-election was approaching.  But as I suggested in a recent post, employment statistics can be flukey, due to a number of factors, and they are more reliable when reviewed in, perhaps, several quarters at a time.

Donald Trump will be able to fill an open seat on the Board, and has signaled that he would nominate someone to be the vice Chairman; however, that doesn’t give that nominee much power.  Additionally, the Vice-Chairman of the FOMC is traditionally the President of the Fed-New York.  The President of the Federal Reserve Bank of New York has a permanent seat on the FOMC is because His or Her bank carries-out Federal Reserve Monetary Policy.

Over the years, members of the Republican Party have called for such asinine changes to the Fed, as its:  Elimination; Auditing; Control, etc.  The Fed is already the most transparent department in the Federal Government.  The Chairman testifies twice a year to both the Senate Finance Committee and the House Banking Committee.  It holds a press conference immediately after each of the eight annual FOMC meetings, and the minutes are released ten days afterward.

The Fed Board, as well as each of the twelve regional, independent and shareholder-owned, banks release volumes of reports and studies throughout the year.  With the GOP controlling all three branches of government, and given its past on-going aspirations to control the Fed, I’m concerned that there isn’t a strong group of Republicans to band with the Democrats, and control Donald Trump.


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