Federal Reserve Authority: Congress and Congress can get rid of

While President Donald Trump retracted previous suggestions that he will shoot at the Federal Reserve Chairman Jerome Powell, he continues to request low interest rates.

The sudden announcement on Friday Governor Adriana Kogler will step down next weekBefore her expected departure in January when her mandate ends at the Conservative Board of Directors, Trump gives an early start in choosing a substitute Powell.

The president has already said that he would nominate a new chair that reduces prices. This is despite the ongoing resistance from Powell and most of the other policy makers to maintain the rates of fixed rates, as Trump’s tariffs are stagnating the economy and ascending ascending on inflation.

In the midst of the confrontation between the White House and the Kink, Congress has the power to amend the authority and mission of the central bank.

The most prominent professor of Mali and Erton Jeremy will record this capabilities last month, when He told cnbc Powell may need to resign in order to maintain the independence of the Federal Reserve in the long run.

Its area: If the economy stumbles, Trump can refer to Powell as a “perfect scapegoat” and asks Congress to give him more strength on the federal reserve.

“This is a threat. Our federal reserves are not part of our constitution. It is a creature of the American Congress, which was established by the Federal Reserve Law of 1913. All its powers are transferred from Congress,” he said. “Congress has amended the Federal Reserve Act several times. He can do it again. It can give powers. Palmet may take off.”

In fact, the fears of the Cyle may be fulfilled. The economy has sang signs of sudden warning, the most prominent of which is Summary job report on Friday Which showed the gains of salary statements is much weaker than previously thought.

Even the economists in Jpmorgan warned against the report The stagnation alerted It also indicates a sharp decrease in the demand for employment from companies.

Modify the double federal reserve mandate

Representatives of Congress on the Federal Reserve on legislators are not lost. in Intuition It happened Last week, Senator Bernie Moreno, R-OHIO, was asked whether the Federal Reserve Law needed to change or update.

He replied, “There are a lot of things that we should talk about.” “For example, does the federal reserve should pay interest rates for banks in exchange for their deposits overnight? I think this is a legitimate question that we need a little more study.”

In addition to paying the benefit of American banks on their reserves, the Federal Reserve is pushing foreign banks to keep money in America, adding, “I don’t know this is a good plan. Maybe it should be reduced.”

Moreno also reported the double mandate of the federal reserve of full labor and price stability, which was created in 1977 when Congress amended the Federal Reserve Law.

He said that Congress should take another look at the federal reserve bank mission, indicating that the mandate should be modified to target the maximum employment “with the highest possible wages.”

For the other piece of double mandate, Moreno also said, “We need to make sure we understand what they are looking for when it comes to inflation.”

For example, he pointed out that Powell’s failure to raise price rates sooner during the epidemic, when there was a shock of supply and high demand from all incentives. He also pointed to the current Powell’s reluctance of low rates, although there are no indications so far that the customs tariff caused a significant increase in inflation and the taxes decreased.

“So,” How do you analyze this? “Moreno explained.” I think he looks at a very political lens. It should be seen from a very non -political lens. ”

For his part, he also said Intuition Earlier in the conversation that “absolutely” believes in the independence of the central bank, but added that Powell can be legally expelled because it is “unusually qualified.”

Independence feeding

Of course, the Federal Reserve is not completely free of any political impact. The president nominates and the Conservative Senate confirms the Council of Governor, including the President and Vice President. The Federal Reserve Chairman must also witness Congress regularly and get participating by legislators.

At the same time, the Federal Reserve was organized to be somewhat isolated from political pressure. Conservatives have a period of 14 years, which is valid for schedule, which prevents one president from renewing the entire council once.

Conservatives cannot also be removed due to political differences and they can only be expelled “for the reason”, which has been explained as a serious neglect of the duty or bad violations.

Also, the presidents of the regional federal reserves are not appointed, and Her money was fed with her own operations Without credits from legislators.

For this reason, Fed Independence is a difficult concept. Wales VargoHe said luckIt is largely derived from a mixture of laws, rules, agreements and informal traditions.

“It is not as if there was an independence item,” he said. “It is more than that the structure itself is slightly independently built from the political system.”

PUGLIESE believes that Congress is unlikely to amend the Federal Reserve Law to allow a more clear effect than the White House.

This is because the Democrats will not be in line with it, and the Republicans may not get rid of the base of Filibuster in the Senate to erode the federal reserve independence immediately.

“It is possible that the disposal of Filibuster will open the door to tons, tons and tons of other policy discussions on many different issues, not only the Federal Reserve Law.” Pugliese explained. “Filibuster has grabbed as long as this is because both sides have reasons and cause it not changed. This may change one day, but I will be very surprised if the thing that changed is the federal reserve.”