How Jerome Powell can save the Fed from Trump

Donald Trump and Jerome Powell are pictured here. | Getty Images

Jerome Powell (left), President Donald Trump’s nominee to chair the Federal Reserve, is both a Republican and an Obama appointee. | NIcholas Kamm/Getty Images

Powell is expected to remain a firm advocate for Fed independence, though Mnuchin backed him as a pick over whom he hoped he could exert some influence.

Jerome Powell, President Donald Trump’s nominee to chair the Federal Reserve, faces multiple risks as he prepares to take stewardship of the economy. Among the biggest: the threat of being publicly criticized by the president himself.

The Fed zealously guards its ability to make monetary policy decisions free from short-term political pressures, a key feature of its structure. But the president has already proven willing to buck tradition by targeting the central bank, and its chair, in the bluntest terms on the campaign trail.

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“She’s very political, and to a certain extent, I think she should be ashamed of herself,” Trump said of Fed Chair Janet Yellen in a CNBC interview in September 2016. During a presidential debate that same month, he accused Yellen of artificially propping up the economy with low rates.

Now, with the economy showing new strength and stocks hitting record highs, if a Powell-led Fed responds by accelerating interest rate hikes, the president could be provoked to speak up again. And Powell will have to rely on his relationships on Capitol Hill, as well as with Treasury Secretary Steven Mnuchin, to help ward off any such attacks.

Since Trump’s election a year ago, the Fed has grappled with the possibility that the president could publicly criticize the central bank, plunging it into an uncomfortable political spotlight.

“The Fed needs a good reputation, and its credibility matters,” said Sarah Binder, a political science professor at George Washington University.

“If you have criticism coming in from Trump and coming in from Congress, … there will always be questions about whether the Fed will succumb in any type of way or be diverted from its policy prescriptions,” she added. “That makes it harder for monetary policy to work.”

Certainly, the central bank’s best defense against attacks is to keep the economy on an even keel. But if conditions turn sour over the next few years — a real possibility given that the current expansion is already the third-longest in U.S. history — the Fed would be an easy target. And the president hasn’t shied away from criticizing even his own appointees, as Attorney General Jeff Sessions and others have discovered.

If the president is unhappy with the Fed’s performance, he could also use additional appointments to shake up the central bank.

As a result, the Fed spends considerable energy figuring out how to stay out of politics and preserve its independence.
Its ability to do so will soon sit squarely on the shoulders of Powell, who will not only have to guide decisions that affect the economy but also defend them to Congress and the public. His confirmation hearing before the Senate Banking Committee is set for Tuesday.

While Trump criticized the Fed more stridently than any major presidential contender in modern history, congressional Republicans have taken aim at the central bank for years. One GOP lawmaker says the key is for the chair to convey his intentions effectively.

“The better the Fed communicates its policy trajectory, both to the public and to Congress, the more it is going to be able to achieve that independence that many Fed officials want,” Rep. Andy Barr (R-Ky.), who chairs the House Financial Services subcommittee on monetary policy, said in an interview.

Powell is both a Republican and an Obama appointee, providing him with bipartisan support that might help fend off threats to the central bank. A member of the Fed board since 2012, he’s more sympathetic to Republican calls for a simpler rulebook for banks yet also more in line with Yellen on interest rate policy.
He also comes into the job with a fair amount of relationships on the Hill already; between January and September, he met with 13 different senators and multiple House members. And since his nomination as chair, he has had a flurry of additional conversations.
“I think very highly of Jay,” Barr said. “He and I have gotten a chance to know each other through an informal breakfast meeting and other meetings in my office.”

Still, while criticism from the president could undermine public support for the institution, the bigger worry for the Fed is the potential for those criticisms to carry over to congressional action.
The central bank is perpetually involved in a delicate dance with Congress. It has the freedom to set interest rate policy as it sees fit to achieve the dual goals that Congress has given it: price stability and maximum employment.
But the Fed was created by Congress, meaning some of its powers could theoretically be taken away by the legislators. So the chairman must remain on good terms with congressional leaders while not paying heed to whatever short-term policy action the lawmakers would like to see.
House Republicans in particular have sought to have a greater window — and, the Fed worries, more influence — on monetary policy decision-making. The Financial Services Committee this month approved three bills along those lines, including one requiring the central bank to explain whenever it deviates from a strategy.
Barr says this type of clarity will actually protect the central bank from attack because it will help Congress understand where the Fed is going.
“In the last year, there has been a very noticeable effort to respond to some of the concerns that members of Congress have had in asking for greater clarity and communications” as the Fed begins to pull back some of its extraordinary support for the economy, he said.

But the more power the Fed aims to use, particularly on the regulatory side, the more it should expect Congress to weigh in, he said.

Yet concrete Fed reform would be hard to achieve. That’s because while most lawmakers would like to make changes to the central bank, there’s no consensus as to what those changes should be.
Powell could help keep it that way in a Republican-majority Congress.
“I do think that you’re going to see — and you already have seen this — fewer calls for more congressional oversight over the Fed, and fewer complaints about Fed governance, and fewer complaints about the Fed, broadly speaking, at least as long as the economy is okay, than you did when Yellen was there,” said Ian Katz, an analyst with Capital Alpha Partners.

The Fed’s relationship with Congress and the administration could also change simply because Powell has a different personality than Yellen. His low-key style is perhaps more suited to the type of political schmoozing that she politely engaged in only when necessary.

He also got to know members of Congress in 2011, when he was a fellow at the Bipartisan Policy Center and met with numerous Republicans to convince them of the dire consequences of not raising the debt ceiling.
Powell is expected to remain a firm advocate for Fed independence, though Mnuchin backed him as a safe pick over whom he hoped he could exert some influence.
“I think Mnuchin or anyone in the administration that thinks they’re going to have influence over Powell is going to be disappointed,” Katz said.
And if the president does decide to go on a public campaign against a Powell Fed?

“That would obviously be awkward and uncomfortable,” Katz said. “The Fed wouldn’t be happy with it, but I think they would just keep on doing what they’re planning on doing.”

Ivanka for U.N. Ambassador? Why Not?

The United Nations is used to surprises. The organization regularly grapples with wars, pandemics and disasters it did not foresee. But is it ready for Ivanka Trump?

This weekend, The New York Times reported that the president’s daughter and her husband Jared Kushner recently considered a scenario “in which Ms. Trump could replace Nikki R. Haley as ambassador to the United Nations if Ms. Haley replaced Secretary of State Rex W. Tillerson.” This would allegedly have been a face-saving way to ease the couple out of the White House, where they have lost influence.

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While the Times adds that the idea went nowhere—and White House aides deny it was ever discussed—the mere notion of Ambassador Ivanka gave the U.N.’s fans conniptions.

“Egad,” observed one multilateral expert on Twitter. “E-freaking-gad.”

That’s not an unreasonable response. There’s a long history of Third World despots finding jobs around the U.N. for their family members and political chums. But U.S. presidents have previously not parachuted their kids into Turtle Bay in this way.

Still, we’ve already passed the nepotism Rubicon, with Ivanka and Jared serving in amorphous White House roles in a manner that would have been unthinkable as recently as two years ago. So why not install Ivanka as U.N. ambassador? Would she really be so bad? It is just possible that she has the right mix of connections, charm and steel to ace the job.

The easy answer is that the Trump administration faces some pretty daunting tasks at the U.N. at present, from keeping up sanctions on North Korea to bargaining over the future of the Iranian nuclear deal. If the president decided to send his daughter to Turtle Bay at such a sensitive time, domestic and foreign observers would be aghast.

Only one year ago, after all, U.N. insiders were grousing heartily about Trump’s selection of Nikki Haley as U.N. ambassador. The South Carolina governor had no real foreign policy experience and had never said anything notable about U.N. affairs.

Haley certainly stood in contrast to her two immediate predecessors from the Obama administration, Susan E. Rice and Samantha Power, both long-standing experts on the organization. Diplomats and U.N. officials speculated that a novice like Haley would fail to stand up to the Chinese and Russians in the Security Council.

As I argued then, there was misplaced snobbery at work here. People who work at the U.N. like to think it is the center of the world, and that political bargaining there is on a higher plain than anywhere else. This is simply not true. Negotiations over Security Council resolutions can certainly be painful, but they are probably no more or less tricky than budget talks in the average statehouse, let alone Congress.

Haley quickly proved perfectly capable of navigating the U.N. when she started work in January. She initially seemed to neither know nor care a great deal about a lot of issues on the organization’s agenda, such as peacekeeping in Africa. But she soon got to grips with the Russians over Syria, and scored significant diplomatic wins by securing two serious packages of U.N. sanctions against North Korea this summer.

U.N. officials were quietly impressed by Haley’s performance on a recent trip to Africa, where she held tough private talks with President Salva Kiir of South Sudan and his Congolese counterpart, Joseph Kabila. Foreign diplomats say that, despite constant speculation that she will replace Tillerson at State, Haley appears to have a growing grip on and interest in the files on her desk at the U.N. Her political stock in Washington remains high. Haley has shown a novice can play the U.N. game and win.

Could Ivanka Trump pull off the same feat? The president’s daughter has already shown some aptitude for multilateral diplomacy, striking up a warm relationship with the president of the World Bank, Jim Yong Kim. Together they have set up a special bank fund for women’s empowerment. Ivanka also sat down for lunch with U.N. Secretary-General Antonio Guterres this summer to discuss gender equality.

One lunch does not turn you into Madeleine Albright. But Ivanka arguably has three qualities that would make her a good ambassador. The first is, obviously enough, her parentage. One reason Haley has been able to play the U.N. effectively is that other diplomats believe she has good access to the president. Power and Rice were both able to use the fact that they had personal ties to President Obama to their advantage in negotiations. But Ivanka’s hand would be infinitely stronger.

In every U.N. bargaining session and appearance before the Security Council, foreign diplomats would be aware that they were dealing with the first daughter. Every Russian or Chinese veto of a U.S. resolution would look like a personal affront to the president. Moscow’s diplomats in particular enjoy haranguing their Western counterparts with a bit of Cold War rhetoric in the Security Council, just to show that they can. Russian Foreign Minister Sergei Lavrov recently accused Haley of “fake diplomacy” over Syria. Using such language about Ivanka might seem a bit too risky.

Ivanka’s second strength at the U.N. would be more personal: She has the social skills to handle the retail diplomacy that takes up a lot of time in Turtle Bay. Multilateralism involves a lot of receptions and glad-handing, and the Trump-Kushner power couple should have no problem dazzling their foreign counterparts.

Lastly, behind all the diplomatic flummery, U.S. ambassadors to the U.N. need to deploy brute force now and again to get what they want out of other powers. Rice was famous for profane outbursts at other ambassadors opposing her positions. We do not know if Ivanka Trump would let foul language fly behind closed doors. But as a veteran of one of the harshest electoral campaigns in U.S. history, we must assume that she has the steel to handle the nasty side of diplomacy.

It is an assumption that is never likely to be tested in reality. Even if the idea of deploying Ivanka to the U.N. was ever more than an idle whim in the White House, which is probably all it ever was, the administration would surely blanche at the prospect of guiding her nomination through the Senate. The Democrats would not believe their luck. Haley sailed through the Senate, and has close allies on the Foreign Relations Committee, a fact that other U.N. ambassador respect. Even if Ivanka was confirmed, the inevitable uproar of her selection would follow her up to New York.

The Times reports that the prospect of Ambassador Ivanka has passed anyway, and that Haley will stay at the U.N. for a while. This will be a relief for Haley’s foreign counterparts, who see her as someone they can continue to do business with. But if and when the current U.S. permanent representative to the U.N. moves on to greater things, perhaps Ivanka should put in an application to replace her, just for the fun of it.

Richard Gowan is a New York-based fellow with the European Council on Foreign Relations, and teaches at Columbia University’s School of International and Public Affairs.

Trump’s White House is decked out for the holidays

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As the first family prepares to spend their inaugural Christmas in the White House, first lady Melania Trump unveiled the White House Christmas decorations on Monday. This year’s theme, “time-honored traditions,” pays tribute to more than 200 years of holiday traditions at the White House. “As with many families across the country, holiday traditions are very important to us,” the first lady said in a statement. “I hope when visiting the People’s House this year, visitors will get a sense of being home for the holidays.” Throughout December, the White House will host more than 25,000 visitors touring the holiday decorations.

Trump calls Warren ‘Pocahontas’ at event honoring Native American veterans

President Trump on Monday referred to Sen. Elizabeth WarrenElizabeth Ann WarrenWarren fundraises off of Trump’s ‘Pocahontas’ jab 25 Dem lawmakers file court brief backing English over Trump consumer bureau pick Overnight Finance: Directors battle over consumer agency | Second GOP senator opposes current tax plan | Trump wants changes to bill | Fed nominee heads to Tuesday hearing | Retailers expect record Cyber Monday | Congress returns to nightmare December MORE (D-Mass.) as “Pocahontas” at an event honoring Native American Code Talkers who served in World War II.

“You were here long before any of us were here,” Trump said, standing beneath a portrait of former President Andrew Jackson. “Although we have a representative in Congress who they say was here a long time ago. They call her Pocahontas.”

Turning to the veterans, Trump said “but do you know what? I like you.”

The president made the remark in the Oval Office standing beside three Navajos who helped the U.S. Marine Corps develop a secret code during WWII.


The three Code Talkers did not react to Trump’s remark.

Trump has repeatedly used the derisive nickname to refer to Warren, poking fun at her claim of Native American heritage.

“This was supposed to be an event to honor heroes, people who put it all on the line for our country,” Warren said later on MSNBC. “It is deeply unfortunate that the president of the United States can’t even make it through a ceremony honoring these heroes without throwing out a racial slur.”

But Trump’s top spokeswoman defended his comment, saying “Pocahontas” is not a racial slur. 

“I think what most people find offensive is Sen. Warren lying about her heritage to advance her career,” White House press secretary Sarah Huckabee Sanders told reporters.

Trump during the event also referred to White House chief of staff John KellyJohn Francis KellyMORE as “chief.”

“He’s the general and the chief,” the president said. “I said, how good were these code talkers? He said, ‘Sir, you have no idea. You have no idea how great they were.’ ”

– This report was updated at 3:37 p.m.