President Donald J. Trump is correct to criticize the Federal Reserve for being “crazy” with recent monetary policy that will further slow the economy. The stock market has taken some hits recently and one reason is Fed policies to tighten the money supply in a way that will make it harder for business access to capital that will help the economy grow.
The president nominated Nellie Liang to fill the final open seat on the Fed in the middle of last month, yet he might want to rethink that nomination, because under further scrutiny, Ms. Liang may be yet another problematic bureaucrat at the Fed who will promote anti-growth policies.
Mr. Trump is rightfully upset with Fed Chairman Jerome Powell for his harmful leadership on monetary policy that has led to a stock market sell-off. Bloomberg reported on Oct. 11, 2018, “President Donald Trump said he won’t fire Federal Reserve Chairman Jerome Powell but blamed an ‘out of control’ U.S. central bank for the worst stock market sell-off since February.” Ms. Liang is on board with policies that Chairman Powell promotes and a good way to send a strong message to the Fed would be to withdraw the nomination of this left-wing economist.
Nellie Liang is a lifelong bureaucrat who has embraced the economy killing Dodd-Frank regulatory scheme that conservatives have complained are strangling economic growth. Ms. Liang is currently a senior fellow with the liberal think tank The Brookings Institution and has advocated for “strong regulatory and supervisory structure” in order to “reduce the cost of a crisis on the real economy.”
While Mr. Trump is deregulating in order to free up the private sector from regulations that impose hidden taxes and limited choice on consumers and banks, Ms. Liang is advocating that the government get more involved in managing the economy. The Fed needs to dial back policies that seek to manage growth as opposed to Ms. Liang’s anti-Trump ideas that will go in the other direction.
Ms. Liang loves regulation. Politico reported on Sept. 26, 2018 “Liang, an economist, spent 30 years at the Fed and played an important role in financial regulation in the wake of the 2008 Wall Street meltdown. She helped lead the effort to examine whether banks had sufficient capital to withstand another crisis and became director of the Office of Financial Stability Policy and Research, which addresses financial system weaknesses.”
According to the same report, “Federal Reserve Chairman Jerome Powell has been calling Senate Republicans and vouching for President Donald Trump’s latest central bank nominee, Nellie Liang, whom some in the GOP are viewing with skepticism.” Skepticism is warranted because Ms. Liang is more in the mold of Sen. Elizabeth Warren, Massachusetts Democrat, with regard to monetary policy and heavy regulatory ideas than President Trump’s policies of reducing unnecessary and economy-killing regulations.
Mr. Trump needs to hammer the staffer who advocated for this nomination, because the conservative movement recognizes that Ms. Liang is not going to make the Fed great again (as if it ever was). Jared Whitley asked the question at the Washington Examiner, “Is Trump’s Fed Pick, Nellie Liang, the first nomination of the Elizabeth Warren administration?” This question is spot on because the president in nominating a Warren-type regulator to the Fed when he is mad as hell that the Fed has sabotaged his economic growth makes zero sense.
The Fed already has far too much power over the economy. They have manipulated interest rates to slow the economy because they see the current explosion of economic growth as an “overheating” of the economy. Bloomberg reported on Oct. 10, 2018, “Federal Reserve Chairman Jerome Powell is pinning his hopes of stopping the U.S. economy from overheating on a variable that a former colleague called ‘the most significant unobservable of all:’ inflation expectations. Powell has made the case that “the Fed can countenance a fall in joblessness to an almost 50-year low without triggering an inflationary surge in large part because Americans believe the central bank will keep prices under wraps.”
The problem is that the Fed should not be playing with economic growth because they think they are above the president and somehow, they are the kings to manage the expectations of interest rates continuing to rise. The fed has hiked interest rates three times and are expected to do it again later this year — that is causing the stock market to crash.
With the nomination of Ms. Liang to the Fed, President Trump has empowered Fed Chairman Jerome Powell’s harmful monetary policies. This nominee would embrace the regulatory mess that ideas like Dodd-Frank and Sarbanes-Oxley have imposed on the economy. While the economy is booming thanks to tax cuts and regulatory reform, it would be a terrible idea to allow a left-wing economist to sabotage the Trump recovery by allowing Nellie Liang to serve on the board of the Federal Reserve.
• Edward Woodson is a lawyer and host of “The Edward Woodson Show,” which airs weekdays on WZAB Miami, streaming online at EdwardWoodson.com.