Let's talk about Trump's Fed moves potentially backfiring in the most hilarious of ways.... - Belle of the Ranch

[TexasTowelie]

Well, howdy there Internet people. It's Belle again. So, today we're going to talk about Trump's Fed moves potentially backfiring in the most hilarious of ways.

Trump has had a contentious relationship with the Federal Reserve since before he even took office when he wanted them to keep interest rates high because he apparently believed it would hurt Americans who would then blame Biden, but then wanting them lowered once he got into office. He blames Jerome Powell for interest rates not being dropped. Trump has applied a lot of pressure to drop interest rates in spite of economic data. Despite that, the Fed has been basically ignoring him and protecting Trump from his own misunderstanding of economic policy. But now all of that pressure is converging and the outcome may be the funniest thing to occur in Federal Reserve history.

So, let's lay out some facts that are important to understanding a potential chain of events that was always possible, but wasn't likely until recently. Trump wants interest rates lowered. Trump wants the Federal Reserve to lower those rates. Trump also wants an overhaul of the Fed in general, which would reduce its independence.

Jerome Powell's term as chair of the Federal Reserve Board of Governors ends in May. Everybody knows that, but what many don't know is that his term as a Federal Reserve Governor doesn't end until 2028. Generally, exiting chairs leave, but they aren't required to.

Trump has nominated Kevin Warsh to become the new Fed chair, but the Fed Chair has to be on the Board of Governors. Warsh is currently not, which means Trump may have to give Warsh the seat of Trump ally Stephen Miran to get Warsh where he wants him. Trump has pushed for legal actions against Fed governors Cook and Powell. Because of that, Democrats on the Senate Banking Committee have basically said they aren't moving on anything until those are resolved. Warsh would have to get through those committees. Gridlock.

Now for the twist and the piece of information Trump may not have known or maybe knew but didn't really process. Interest rates aren't actually controlled by the Federal Reserve Board of Governors. They're controlled by a different committee within the Fed called the Federal Open Market Committee. Guess who the current chair of the committee is? Jerome Powell.

Traditionally, the Chair of the Board of Governors is also the Chair of the FOMC, but that's not required. Trump's pressure campaign may have ended up putting Powell in a situation where he stays on as a governor after his term as Chair of the Board of Governors ends to protect the independence of the Fed, which he can do and he might end up still being the Chair of the FOMC, which is the committee that controls interest rates because of Trump's pressure campaign and resulting gridlock.

This isn't set in stone, but the likelihood of this outcome is high enough now that you should know about it because if this comes to pass, you're probably going to need to be able to explain to people how this absolutely hilarious outcome occurred. And it really boils down to two things. Trump trying to exert influence over an independent Fed and Trump apparently not fully understanding which committee actually controlled the interest rates while confusing tradition for regulation.

Anyway, it's just a thought. Y'all have a good day.