Soft-Launching a Scapegoat: Trump’s Fed Fixation

In light of Donald Trump’s recent firing of Fed Governor Lisa Cook, it pays to recall that Trump’s Fed fixation actually began earlier this year, chiefly with Jerome Powell – the Chairman of the Federal Reserve. But Trump does not really care whether Powell is fired or remains in his post. He just needs enough headlines with Powell and The Fed’s name in them. He has thus far succeeded. 

Since his appointment as Chairman of the Federal Reserve by Donald Trump in 2017, Jerome Powell has found himself at a confluence of praise and criticism, the latter chiefly from Trump himself. His reputation for being a steady figure and consensus builder — which has had him dubbed “Wall Street’s Head of State” by Bloomberg and a “very wise man” by Warren Buffet —  is now becoming overshadowed by one for over-caution and acting too late. 

Indeed: “Too Late,” as Trump calls him, has drawn ire from the president for not bringing interest rates down quickly enough. And amid an increasing number of attacks, primarily from April onward, Trump even floated the idea of ousting Powell from his post entirely when he waved a draft of his termination letter at an Oval Office meeting with House Republicans.

The idea of whether a president can actually remove a Fed chair has since drawn a flurry of analysis on both the action’s potential legality, which ultimately comes down to a need for “cause,” and its ramifications, which range from Powell suing and a visit to the Supreme Court to an unintended raise in market rates.

Unsurprisingly, Trump backtracked at a press conference later the same day: “I think it’s highly unlikely,” he said when speaking to Powell’s firing. That is, “unless he has to leave for fraud.” He then adds, “I mean, it’s possible there’s fraud involved with the $2.5 billion renovation.”

And so potential cause was found. Soon arrived the White House probe into the now over-budget building renovations at the Federal Reserve, which resulted in a visit to the Fed on Thursday, 24 July. For Trump, it was your usual bluster and photo op. But Powell took the chance to stand his ground when he fact-checked Trump live on camera about the building costs.

Powell, regardless of his calibre as a central banker, is nothing if not a stable institutional figure who has orientated himself as one of the last holdouts of opposition in an otherwise obsequious administration. Some have rightfully praised him for his conviction, citing an ‘unflinching’ attitude, while those such as Jared Bernstein, the chair of the US Council of Economic Advisors under Biden, have leapt to his defence: “[He] has done nothing wrong.” Even Jamie Dimon, in a rare moment, cautioned against such White House meddling. Wall Street will take stability where they can, and an apolitical Fed is where they will find it.

However, Trump knows all this. Or, at the very least, his administration has considered it. 

Just as he openly backtracked hours after flaunting a letter to Republican lawmakers, he has equally since dialled the temperature down after that Thursday’s meeting. This can easily be ascribed to typical Trump flip-flopping – and to an extent, it might be. He, in everyday fashion, could just be testing what he can get away with. But the result is a success all the same in that it achieves two things: it creates a suitable scapegoat, and it undermines the autonomy of the Federal Reserve, both of which will be hung over the head of whomever replaces Powell. 

The beef Trump claims to have with Jerome Powell appears artificially large. As Trump says himself, “Our economy is so strong now. We’re setting records.” But now, it seems, perhaps in light of mixed economic data, Trump has seen some sense in finding space between himself and the nation’s 4.25% interest rate. “People aren’t able to buy a house,” he said on 22 July, which (by no coincidence) echoes the talking points of Tucker Carlson at the Turning Point USA Summit of around the same time. 

To focus on the minutiae of the Fed fight is to miss the forest for the trees. Trump, for all his bluster, is capable of making the calculation that what is most important is Powell’s name in the press and under enough scrutiny so as to create a suitable distance between Trump’s own stewardship and the state of the economy. Whether or not he’s fired, or whether the Fed renovations are over budget, is secondary to the goal of creating a suitable scapegoat should the economy begin to wobble. These methods of political distancing and inflating problems are Trump Politics 101: Haitian migrants, a deep state conspiracy, claiming rigged elections, the Epstein files – take your pick. And insofar as undermining the Fed, that job is largely done, especially so in light of Cook’s firing on the basis of “mortgage fraud.” 

Whoever succeeds Powell – or in fact any other Fed Board member — will, whether they like it or not, exist as a Trojan for both Trump himself and the media narrative his admin has already created – one defined by some conscious understanding that they – the new appointee  – must, to some extent, behave and stay in line.

Now, Trump’s calculations may not extend this far, but the reality of the situation is as such. As Powell sees out the remainder of his term, Trump will continue to loom over him, the Fed board, but most importantly, the awaiting successors he has carved out.

Illustration: Will Allen/Europinion