The Trump team wasted no time in telling Fed Chair Janet Yellen what is and is not acceptable.
Patrick McHenry, the vice chairman of the House financial services committee, sent Yellen a letter of admonishment regarding international negotiations the Fed conducts in secret, with no oversight.
One line stands out: “This is unacceptable”. The preceding paragraph tears into the Fed’s secret negotiations with foreign bureaucrats, “without transparency, accountability, or the authority to do so.”
McHenry Warns Yellen – Letter Excerpts
“I am writing regarding the Federal Reserve’s continued participation in international forums on financial regulation. Despite the clear message delivered by President Donald Trump in prioritizing America’s interest in international negotiations, it appears that the Federal Reserve continues negotiating international regulatory standards for financial institutions among global bureaucrats in foreign lands without transparency, accountability, or the authority to do so.”
Moreover, the letter seeks a comprehensive review of past agreements with the Financial Stability Board, Basel, and the International Association of Insurance Supervisors that “unfairly penalized the American financial system”.
The letter blasts “secretive structures” and “opaque decision-making” processes of the Fed. The letter then finishes with a final warning:
“It is incumbent upon all regulators to support the US economy, and scrutinize, international agreements that are killing American jobs. Accordingly, the Federal Reserve must cease all attempts to negotiate binding standards burdening American business until President Trump has had an opportunity to nominate and appoint officials that prioritize America’s best interests.”
Fed Independence is Over
The Fed’s ability to conduct secret deals just ended. An “audit the Fed” initiative is likely on deck. I confidently predict Janet Yellen will not last four years.
Will Trump pressure the IMF or attack the World Bank? Recall this Tweet from 2012:
Things can get rather interesting in a hurry, especially with Trump threatening to label Germany, China, and Japan “currency manipulators”.