A Terrified Thom Tillis Worries Jerome Powell May ‘Meddle In The Election’, Wants Senate Hearing

Bill Dudley took a number of risks in publishing a Bloomberg Opinion piece on Tuesday imploring the Fed not to enable Donald Trump’s trade war.

To be sure, Dudley’s reasoning was entirely sound, and he’s hardly the first person to suggest that cutting rates in order to ameliorate the uncertainty created by incessant trade escalations could be extraordinarily dangerous, in that it risks emboldening still more tariff escalations, in a self-feeding loop.

“What if the Fed’s accommodation encourages the president to escalate the trade war further, increasing the risk of a recession?”, Dudley asked. “The central bank’s efforts to cushion the blow might not be merely ineffectual, they might actually make things worse”.

Read more: Bill Dudley Has Some Advice For The Fed: Tell President Trump He’s On His Own

To be clear, the President’s supporters would have been inclined to read Dudley’s Op-Ed through the lens of a “deep state” plot anyway, but Bill made things pretty explicit when he said the following at the end of his piece:

There’s even an argument that the election itself falls within the Fed’s purview. After all, Trump’s reelection arguably presents a threat to the U.S. and global economy, to the Fed’s independence and its ability to achieve its employment and inflation objectives.

As we noted in a separate post dedicated to that passage, that was as close to calling on the Fed to engineer the overthrow of the man in the Oval Office as it gets.

One of the risks Dudley took with publishing that piece is validating (in Trump’s mind and in the minds of his supporters) the otherwise ridiculous theory that there’s an ongoing conspiracy in Washington involving unelected bureaucrats, law enforcement officials and, now, technocrats, working night and day to usurp the king.

Trump is already predisposed to scapegoating the Fed when it comes to a prospective economic downturn, and although Dudley’s exhortation was for the central bank to strip him of that luxury by making it clear that he owns the consequences of his own trade decisions, the Op-Ed might well serve the opposite purpose. That is, Trump will just point to it as evidence of the Fed’s complicity in a hypothetical recession scenario.

Well, sure enough, Republican Sen. Thom Tillis is out calling for the Senate Banking Committee to schedule a hearing dedicated to the prospect of the Powell Fed trying to oust Trump.

And yes, I’m serious.

“The President is standing up for America against China after 30 years of our country and our workers being ripped off and there is now an effort to get the Fed to try to sabotage the President’s efforts”, Tillis said, in a statement.

Note that Tillis is spinning Trump’s trade war and then treating his spin as fact in order to claim sabotage, in the exact same way that Dudley expressed his opinion on the trade war (that it’s a clear and present danger to everyone) and then used that in order to claim that the Fed should push back. That is, Tillis is employing the exact same strategy as Dudley, only Dudley has economics and an interpretation of how the Fed should go about defending its mandate to back up his argument, while Tillis is leaning on what amounts to an emotional appeal and a colloquial summary of historical injustices perpetrated by China.

“I’ll be talking to Chairman Crapo about holding a hearing in the Senate Banking Committee regarding Fed independence and the danger of this institution taking unprecedented and inappropriate steps to meddle in the presidential election”, he went on to say.

Hopefully, Thom’s hearing “regarding Fed independence” will also include a discussion of the extent to which the president is attempting to strip the institution of its autonomy and co-opt it in a foreign policy strategy that economists almost universally say is a disaster in the making.

While we would generally agree that Dudley would have been better off leaving out the paragraph about the election, one wonders what it is Tillis plans to do – is there going to be a push to tell private citizens what they can and can’t say about Fed policy?

More importantly, is the only kind of politicization that’s acceptable to Republicans the kind that involves the president bullying the central bank into rate cuts and calling public servants mentally incapacitated traitors on Twitter? (And that’s just what Trump has intimated about the Fed this week.)

Perhaps Thom will address those concerns, but somehow, we doubt it.