“Warsh has been critical of the Fed in recent months but is seen as a conventional choice for the role. Warsh has a background in the Bush administration, and he was appointed by former President George W. Bush as Fed governor, serving in that role during the financial crisis from 2006 until 2011.
Although he is considered a relatively safe pick, Warsh faces an uncertain path ahead in the Senate due to potential Republican opposition. North Carolina Sen. Thom Tillis, whose vote is needed to advance the nomination out of the Senate Banking Committee, reiterated that he would oppose any Fed chair pick until the Department of Justice’s investigation into Fed Chair Powell is resolved.”
Trump called his Department of Justice lawyers weak and told them they needed to get on his retribution campaign. After this meeting, the lawyers went after the Fed chairman, Jerome Powell.
Unusually, some Republican Congressmen are breaking with Trump and criticizing this move.
“In an economy, prices are signals. Interest rates are the price of money, and they give the authorities a clue about how to manage the federal budget. If interest rates are too high, the market is telling the government it is spending too much. If interest rates are too low (like they were a few years ago), the markets are telling the government that it is spending too little (if such a thing is possible).
Right now, the government is spending too much. If the central bank were to cap the interest rate, its usefulness as a price signal would disappear. The government can borrow an unlimited amount of money with no immediate consequences but with one big long-term consequence: inflation.”
Long term bond yields rose after the Fed cut. This is the bond market signaling to the Fed that the interest rate cut was not needed and that they have less confidence that the U.S. will remain solvent in the long term. We should watch and see if this signal maintains over the weeks to come.
“Inflation, as measured by the Fed’s preferred price index, remained at 2.6 percent in July, the most recent month in which data are available. The Fed’s target is 2 percent. Moreover, in August, the consumer price index, which the Bureau of Labor Statistics uses to measure inflation, increased by 0.4 percent—the greatest monthly increase in inflation since January…
The FOMC acknowledged in its own announcement that “inflation has moved up and remains somewhat elevated” while the unemployment rate “remains low.” Increasing the fed funds rate is one of the Fed’s primary tools to combat inflationary pressures; lowering it is the opposite of what the Fed should do if it’s seriously concerned about inflation. Apparently, it’s not.”
“”Does ‘for cause’ require something more substantial than a mere allegation of wrongdoing, such as a formal charge, or a conviction, or even something else?” asks Reason’s Damon Root in a great piece on the precedent the Supreme Court might lean on (Namely Humphrey’s Executor v. United States (1935) and Seila Law v. Consumer Financial Protection Bureau (2020)). “Here’s another question to ask: Is the mortgage fraud allegation that’s been leveled against Cook merely a pretext designed to cover the fact that Trump is actually firing Cook for illegal political reasons?””
“Senate Republicans have already said they plan to move quickly to confirm Trump’s Council of Economic Advisers Chair Stephen Miran to fill one current vacancy. If Cook loses a pending legal challenge and is dismissed — and her replacement is confirmed by the GOP-controlled Senate —Trump-appointed Fed governors would hold four of the seven seats on the central bank’s board.
That majority, in turn, would be enough to control the reappointment of the 12 regional bank presidents throughout the country who also have a say on rates and whose five-year terms are scheduled to expire in February.
And that, in effect, could give Trump control of the Fed’s policy-making Federal Open Market Committee, whose refusal to lower interest rates throughout his second term has put the president on the warpath with Fed Chair Jerome Powell. Any exertion of White House control over the reappointment process for regional bank presidents would represent an extraordinary break in precedent.”
“Trump can’t influence the Federal Reserve much — for right now.
When it comes to interest rates, which are basically how much it costs to borrow money, Trump can complain they are too high (or too low) like any other American, but the Fed’s leaders are the only government officials with the power to adjust those rates. The Fed has lowered interest rates this year as inflation has declined, but it kept rates fairly high for the last few years, in part to fight pandemic-era inflation. Even with the lower rates, however, many Americans are still finding it too expensive to borrow money so they can make big purchases like a home.
Forcing or pressuring the Fed to lower interest rates won’t necessarily fix high borrowing costs for Americans; the interest rates set by the Fed are actually short-term costs that banks pay to each other to borrow money. The Fed’s decisions influence the cost of borrowing, but there are a lot of other factors that go into consumer credit.”
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“Trump might try to meddle in the Fed’s affairs is by trying to fire Federal Reserve Chair Jerome Powell. Trump appointed Powell, but was highly critical of Powell’s decision-making during his first term, and reportedly looked into whether he could fire the Fed chair.
Powell has said he will serve through the rest of his term, which doesn’t end until 2026, but has declined to say whether he would stay on for a third term.
Legally, Trump cannot force Powell to resign or fire him. Members of the Fed’s Board of Governors, which Powell is part of as the Fed chair, can only be fired for wrongdoing or job performance reasons, not differences in policy. Trump could try to fire Powell claiming he’s performing his job poorly, but that decision would probably embroil the president-elect in a drawn-out legal battle”
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“Because the Federal Reserve was created by an act of Congress, it would take congressional action to make any changes to how it works. Congress has made some changes over the decades, but there’s no signal right now that most lawmakers are willing to challenge the independence of the institution.”
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“come May 2026, Trump will be able to have some congressionally authorized say in Fed policy. That’s when he’ll be required to appoint a Fed chair for a new four-year term, who’ll then have to undergo Senate confirmation. That may be Powell, or it could be someone more compliant with Trump’s idea of what the Fed should be.”