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For the third day in a row, President Donald Trump slammed the Federal Reserve for raising interest rates. After saying that the Fed has “gone crazy” with its rate hike path, Trump told “Fox & Friends” Thursday that the sharp market dip on Wednesday was the result of the Fed “getting a little bit too cute” with monetary policy.
Although the last three presidents were largely silent on the Fed, the White House has had a history of blaming the independent central bank for political reasons over the past 60 years. In Trump’s case, the administration is trying to tout a strong economy ahead of a critical mid-term election. Trump hopes to attribute any market sell-off to the Fed’s monetary policy.
Aaron Klein, a fellow at the Washington, D.C.-based Brookings Institution, said that presidents going back to Lyndon Johnson have publicly attacked the Fed, noting that Trump’s personality makes it even more appropriate that he would be targeting Fed Chair Jerome Powell.
“Part of Trumpism is its never his fault,” Klein said.
“Those marble tower boys.”
The Fed saw its greatest political pressure in the 1960s, when administrations eager to advance their economic agendas attempted to directly influence the Fed.
In 1965, President Lyndon Johnson was worried that higher rates would dampen the effect of his “Great Society” welfare programs and tax cuts. Knowing that the Fed Chair and the Treasury Secretary regularly chat — a tradition that still exists — Johnson instructed then-Secretary Joe Fowler to advise Fed Chair William McChesney Martin Jr. to delay a rate hike.
Martin hiked rates anyway, after which Johnson fumed to Fowler.
“Those marble tower boys. Joe, you find a tough guy to head the Reserve,” Johnson said, as chronicled in Robert Bremmer’s book, “Chairman of the Fed.” “If Martin resigns, it won’t wreck the country.”
Martin did not resign, and remained chair through the end of his term in 1970.
President Richard Nixon was more forthright in its intentions with the Fed. Days after Nixon announced that White House adviser Arthur Burns was his pick to head the Fed, Nixon told Burns that their relationship would “be different than they were with Bill Martin there.”
The Nixon tapes revealed that the president had direct lines of communication with Burns; days before the December 1971 Federal Open Market Committee meeting, Burns spoke with Nixon over the phone and informed him that the central bank would be lowering the discount rate.
Nixon was able to get Burns to engineer an expansionary monetary policy leading up to the 1972 election, when Nixon won a second term.