STAFF NEWS & ANALYSIS
Republicans Reeling in Fed?
By Daily Bell Staff - February 06, 2017

Republican attack on Fed casts doubt over global bank rules Trump-era co-operation uncertain as congressman criticises deals with ‘foreign lands’ … The future of cross-border co-operation on bank regulation in the Trump era has been thrown into doubt, with domestic pressure mounting on the US Federal Reserve and a senior member of the House of Representatives calling on the central bank not to negotiate new rules at “secretive” international bodies. -Financial Times

There seems to be some question as to whether Trump will move ahead with auditing the Fed. This would be too bad, as those who control a government’s money supply basically control the country.

But it certainly seems clear as this article points out, that Trump wants more control over the Fed. The Fed is committing to international agreements that are not signed off on by any formal authority in the US other than the Fed itself.

And the Fed is not a formal part of the US government. It takes order from the US government in some ways but that is not the same thing.

More:

Ralph Hamers, chief executive of Dutch bank ING, told the Financial Times that he feared the US could pull back from a global agreement on banking regulation, which has been delayed because of divisions on the Basel Committee on Banking Supervision.

“We don’t know the position of the Americans any more,” Mr Hamers said. “That does mean further uncertainty and uncertainty is never good, it holds back investment and restricts economic growth.”  Mr Hamers was speaking after the emergence of a letter to Janet Yellen, the Fed chair, from Patrick McHenry, one of the top five Republicans in the House of Representatives.

The letter, dated January 31, warned that the US’s “continued participation” in international forums such as Basel, the Financial Stability Board and the International Association of Insurance Supervisors would depend on meeting the Trump administration’s objectives.

We can see from this that Trump wants to sign off on Fed moves. This would constitute a huge change in the way the Fed works. Currently the Fed listens to the President and tries to accommodate him. But when it comes to the nuts and bolts of monetary policy, the Fed has a lot of latitude. At least it did.

The letter asks for, “a comprehensive review of past agreements that unfairly penalised the American financial system in areas as varied as bank capital, insurance, derivatives, systemic risk and asset management.” They also want the Fed generally to cease moving forward aggressively without checking with the administration – and others – first.

According to the letter, “Despite the clear message delivered by President Donald Trump in prioritising America’s interest in international negotiations, it appears that the Federal Reserve continues negotiating international regulatory standards for financial institutions among global bureaucrats in foreign lands.

“The Federal Reserve must cease all attempts to negotiate binding standards burdening American business until President Trump has an opportunity to nominate and appoint officials that prioritise America’s best interests.”

The Fed operated “without transparency, accountability, or the authority to do so.” The letter was signed by Patrick McHenry who has clout as the vice-chairman of the House financial services committee.

For this reason it is probable that Trump did not disagree with the letter though it did not come from the White House. The Financial Times points out that probable Treasury Secretary Steve Mnuchin does not agree with trammeling the Fed. He believes the Fed’s independence is of paramount importance.

But actually the Fed doesn’t have as much independence in fact as it does on paper. It tends to support the President’s view on rates for the most part, though not always. Trump may be an exception, and he knows this.

Ultimately, Trump is likely to rein the Fed in whether or not he proceeds to an audit. But they are two dissimilar efforts. One effort, makes the Fed more pliable, which is important to Trump’s presidency. The other effort, if taken to extremes may end the Fed entirely.

Conclusion: Trump understands that he needs to end the Fed if he want the nation to truly become healthier. But he may settle for controlling the Fed for his own purposes. That would be too bad.

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  • toddyo1935

    A good place to start is on the Isle of Guernsey to get our value adding infrastructure up and running.
    http://webcommentary.com/php/ShowArticle.php?id=jtodd&date=170115

  • UVN

    Three pillars of sand our economic system is built on:
    1.Federal Reserve Bank
    2.Fiat Currency
    3.Fractional Reserve Banking

    The Federal Reserve tries to regulate the economy. Their mandates are maximum employment, stable prices, and moderate long-term interest rates.

    The Federal Reserve creates money and or makes money inexpensive by manipulating interest rates lower. Rarely manipulating rates higher. This is inflation. Prices go up and real wages go down.

    The Federal Reserve creates bubbles and crashes by pushing interest rates too low or too high for too short or too long of time.

    Who regulates the regulators at the Federal Reserve to keep the people safe from it and its mistakes? The only real regulator possible is the free market.

    With the Federal Reserve in place the market becomes the judge of the Federal Reserve decisions, rather than the regulator.

    The Federal Reserve in essence aids debtors and punishes savers. A depreciating dollar aids debtors and harms savers. An appreciating dollar aids savers and harms debtors.

    If you start giving an economy fish (easing Federal Reserve monetary policy, excessive federal government spending; deficit, national debt), the economy starts fishing less and starts dining more. Temporary misallocated (Keynesian stimulated) employment increases and growth of sustainable production employment decreases.

    Abolish the Federal Reserve, the FDIC and all bank regulations except one; require full disclosure on full or fractional reserve backing of deposits. Treat gold, silver and cryptocurrencies as legal tender (not as an asset) for tax purposes.

    If you are concerned about the growing income inequality gap, if you are against war, against the military–industrial complex, against mega-mergers of companies and against invisible taxation, then you are against the Federal Reserve.

    The Fed is a like a shepherd and investors are the sheep. The Fed tends their flock of investors, fattens them up and then slaughters them.

    • kenvandoren

      Moreover, the FED’s dual purpose of regulation and as a bank are at odds with each other. As a bank, it has certain predispositions, biases and self-interests that taint its role as regulator.

  • kenvandoren

    There is no getting out of the current state of affairs without pain. Let us make sure this time though, that the banksters do not escape their fair share (which is most of it. The pain that is.) They created the mess, they should suffer along with the rest of us.

    MOst likely, the avoidance of pain will kick the proverbial can down the road, and we can again expect a longer, deeper more painful correction when it finally comes.

  • Bruce C.

    Again, I caution everyone from “thinking” like the MSM et al.

    I hate to be so explicit so as to tip off the a-holes of the world, but one of Trump’s strategies is to let others hang themselves. Let an idiot talk enough and he’ll prove his own idiocy, sort of thing.

    “Kenvandoren” is right that there will be pain at this point to fix things no matter what is done. Trump is probably willing to take the publicity hit for doing what is best and necessary. After all, at least half the country hates him no matter what, and I actually think his supporters will understand – or at least accept – even more pain if they think that will preserve the American ideal as expressed in the Declaration and Constitution.

    Trump has to maintain clear and consistent communication for that to happen, and I think he will do that. No Trump supporter is confused by the MSM generated confusion about immigration and refugees, for example. That has to continue.

  • esqualido

    “Conclusion: Trump understands that he needs to end the Fed if he want the nation to truly become healthier*. But he may settle for controlling the Fed for his own purposes. That would be too bad.” Really. He appoints a Goldman Sachs dream team and we are supposed to believe he is going to dismantle the Fed. The author is also under the delusion that they go out of their way to accommodate the Presidents. Tell that to Jimmy Carter.
    *Ron Paul would also laugh at that if it did not hurt so much.

  • Brabantian

    There is a greatness in the ‘Trump revolution’ that will survive without Trump if necessary, even if Trump turns out to be enitrely a Deep State etc sell-out & fraud

    Unlike the merely ‘reformist’ false hopes of Obama, Trump gave the just-about-full truth bomb re the USA – that the 2 big political parties & the big media are a fraud, the system is rigged by globalists against common people, etc … Trump fired up the imagination of millions, & that will not go away now, that genie is out of the bottle, even if Trump himself is or always was a sell-out

    Trump, one of the greatest political salesmen of US history, in that brilliant moment in his 2nd debate with Hillary Clinton when Trump retorted, “Because you’d be in jail”, to her remark that it was good he was not President – I think that moment was a turning point in USA history, & not only because it led to Trump winning the election

    In his best moments, Trump gave a living, breathing model of what an anti-corruption fighting hero president would look like. That is emblazoned into people’s brains & will not go away even if in the end ‘Real Donald Trump’ is a fraud who betrays the myth.

    People are already starting to say Trump has been blackmailed … some might soon opine that a body double took Trump’s place after the inauguration … Some hope Trump is still ‘playing the fox’ to not be killed by the US Deep State, this even including Trump’s war-mongering & his orders that led to savage mass killings of Muslim women & children as in Yemen … that Trump is not in his heart Deep State, is ever more dubious by the day … but the Trump myth is now bigger than Trump himself

    • Brabantian

      Hilariously, ‘anti-Trump’ George Soros has apparently now given a quarter billion dollars to the Donald Trump family

      Jewish ‘Forward’ & ‘Real Deal’ websites, tell of US $ 250 million ‘investment’ by George Soros with Donald Trump’s son-in-law & top White House advisor, Jared Kushner, who converted Trump’s daughter to Judaism & Jewish family life, along with Joshua Kushner, for a company called ‘Cadre’

      Amusing given the Soros association with funding & promoting Obama, Hillary, anti-Trump protests, pro-migrants etc … and Trump even using Soros’ image as a ‘face of evil’ in Trump’s ‘anti-globalist’ campaign commercial … all just kabuki perhaps

  • Danny B

    Dear Bell, this may come across as heresy but, the FED has outlived it’s purpose. PREVIOUSLY, capital was raised from savings and used for capital projects. Since the FED has bypassed this mechanism by printing everything deemed necessary, it has hyper-inflated the upper loop of the economy. America had a long run of prosperity after 1870 without a central bank. 1913 came and 16 years later, the FED had crashed the system.
    In the current configuration of our economy, the FED serves just one purpose. It only supports the war-mongers, Marxists and speculators. The lower loop of the economy has no use for a central bank.
    1971 came and the restraints were removed. 16 years later, the market crashed. The FED is strictly in the business of inflating to support the speculator class.
    Each crash gets bigger and closer, 2000 and 2008. 2008 was the penultimate crash. The credit markets will NEVER get up off the floor after the next one.

    The 1907 crash occurred when several banks pulled out liquidity. This created a reason to create the FED. 1913 came and within a few years, Benjamin Strong was illegally selling Treasury bonds on the secondary market. The FED has only one mission in life; INFLATE. The FED removes all moral hazard and consequently, all moral restraint and/or caution. Debt is rising faster than exponentially because every bit of mal-investment was rescued.
    Originally, the bank was there to serve the productive economy. No longer.

    Andrew Jackson railed against the central bank. Martin Armstrong rails against Andrew Jackson. This is where Armstrong is wrong. If moral restraint is not present, no amount of regulation can control the banks. An immortal corporation with no accountability to prosecution can never have any kind of morality.

  • rahrog

    The federal government does not control The Federal Reserve.

    The Federal Reserve controls the federal government.

    • WolfEmperor

      It shouldn’t be this way, though. To operate on American soil, an organization should have to abide by American laws. Moreover, the Fed is essentially unconstitutional anyway.

      • rahrog

        It is time for a new constitution. New societies.

  • ICFubar

    There are two ways of looking at this. First that Trump wants to sign off on Fed moves as some sort of keeping up appearances and honoring election rhetoric or a second reason that he wants to unleash the Fed to to achieve and commit actions which are in the interests of America. Those national interests long being the interests of the Fed and its corporate entourage. Either way despite the subtle nuances the Fed is still master and the American nation and its people still the Federal Reserves debt slaves. My bet would be on the second scenario.

  • Greenspan made it very clear, The Fed takes orders from no one, least of all our government.

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