President Trump Donald John TrumpBipartisan lawyer urges top defense position air force secretary Austin couple places baby Jesus in "ICE cage" to protest against Trump immigration policy Female White House correspondent: "I have never seen so many moms" in briefing room as during the Trump Presidency MORE intensifying attacks on the Federal Reserve chairman Jerome Powell has a destabilizing effect on the financial markets and furious Republican legislators.
Trump's criticism of the central bank's chief politicians kicked into high gear Monday, not long after the state secretary Steven Mnuchin Steven Terner MnuchinMnuchin is trying to insure the markets after shutdown solutions Washington Mnuchin: Trump thinks he has no authority to fire the Fed boss Speaking for Human Rights in Debate on Saudi Relations MORE tried to calm the markets by insisting Trump has no intention of shooting Powell.
Trump has underestimated the cl aimed at blaming the Fed for market volatility and economic turmoil.
The Dow Jones Industrial Average killed 653 points on Monday in the worst day before the Christmas edition in history when Trump renewed his attack on the Fed to raise interest rates last week. S & P entered a bear market and is now down to 20 percent from its peak in August.
Economic experts say that Trump has a destabilizing effect on the markets, and GOP legislators have publicly urged him to emphasize more carefully in his public comments on the Fed, an independent institution.
Vin Weber, a former financial advisor to Mitt Romney Willard Mitt RomneyFive possible successor to Mattis Hills morning report – Congress readies spend punt to 2019 Ryan focuses on legacy talking about suspension dominating capital MORE s 2012 presidential campaign, warned against drastic action, saying that firing Powell would provoke a "very bad" reaction.
"People, regardless of their views on monetary policy, would regard it as an attack on the Fed's independence and that would shake confidence significantly," he said Monday.
Trump's attempt to influence monetary policy, Weber says, is likely to backfire because they will only make the Fed's job more difficult as it seeks to maintain its credibility and independence.
"The president creates an impossible situation for the Fed, because someone appointed to the Fed board must have among their priorities preserving the Fed's independence," he said. "Everyone would really be rattled if they thought the Fed was not an independent institution."
"So when the president is so vocal in criticizing the Fed, he almost forces them to prove their independence by going against him or making a very general display of not doing what he wants," Weber says.
Axel Note, President and Chief Investment Officer of Merk Investments, a company based in Palo Alto, California, said that Trump wants to blame the Fed for what Goldman Sachs and the JPMorgan Chase project is a financial slowdown in 2019, just before his re-election.
" There is no way for the Fed to "win" this, Note. "The Fed will be blamed for a downturn in the market or for a recession. Trump needs a downfall, and Powell at the Fed is perfect for that."
Trump often ran over stock markets' rising performance in 2017 but has mentioned markets less often this year , because they have missed the high expectations set by Republicans passed tax reform a year ago.
Mnuchin tried to calm the markets over the weekend by tweeting that Trump admits he has no authority to fire Powell, but the lack of a similar statement by the president left that insurance business hollow.
Trump then went on the attack Monday, tweeting "the only problem our economy has is the Fed."
"They have no market feelings, they do not understand the necessary Trade Wars or Strong Dollars or even Democrat Shutdowns across borders. The Fed is like a powerful golfer who cannot score because he has no mess – he cannot putts! ", Chairman tweeted.
Mark Zandi, chief economist at Moody's Analytics, warned last year that Trump's war with the Fed is shaking the stock market.
"Investors are increasingly haunted by the president's erroneous attacks on the Fed and the Minister of Finance's ham-strained efforts to convince everyone. Trump doesn't mean it and everything is fine," he told The Hill.
"Trump's trade war, his cavalry's willingness to shut down the government and his breadth toward the Fed's independence is too much for investors to carry," Zandi said. "Trump's misplaced economic policies already had stockholders looking for the door, but given the political chaos he is creating, they are now going through it."
Republican lawmakers want Trump to ease his criticism of the Fed.
Sen. Pat Toomey Patrick (Pat) Joseph Toomey Overnight Defense: Choose for Korean Envoy Records with Trump on Nuclear Struggle | McCain blaster moves to interrupt Korean military exercises | White House defends Trump's salute by North Korean general WH backpedals on Trump's "fair process" comment on weapons Top GOP candidate drops from the Ohio Senate race MORE (R-Pa.) On Sunday, Trump's comments called "unhappy" and he defended Powell, confirmed by the Senate in January in a 84-13 vote, one of the broadest margins of a Trump nominee.
"President Powell will not let politics interfere with his decision-making process. I think we are grateful for him," he says, promising the Fed president to put monetary policy on the path to normality. "
Former Senate Bank Chairman Richard Shelby Richard Craig ShelbyMnuchin tries to assure markets after shutdown roils Washington Lawmakers shrug of shutdown drama GOP discord on the wall prolongs shutdown battle MORE (R-Ala.) On Saturday warned to withdraw Powell.
"I would be very careful about it," he said. "The Federal Reserve is set up to be independent."
Legislators are cautious about Trump making another unexpected, high-profile staff decision after he forfeited the outcome of outgoing defense secretary James Mattis James Norman MattisBipartisan legislator urges the Air Force Secretary for top defense position The Ministry of Defense signs executive order to take back troops from Syria Bloomberg Blastar Trump as "ruthlessly emotional and meaningless chaotic" MORE to the end of the year, instead of late February as Mattis originally announced.
On Wednesday, Powell made it a point to say that Trump's pressure has had no effect on Fed policy making.
"Political considerations have not played a role at all in our discussion or decision on monetary policy," he told reporters after the Fed announced a quarterly increase, the central bank's fourth rate increase during the year. "We have the independence, which we think is crucial to being able to do our jobs in a non-political way."
"We at the Fed are absolutely committed to that mission and nothing will deter us from doing what we think is the right thing to do," he added.
These remarks prompted Trump to privately discuss firing Powell, according to Bloomberg and CNN, although experts are blending whether he has the power to dismiss a Fed chairman.
Matt Stoller, a colleague at the Open Markets Institute, tweeted on Saturday that Trump could fire members of the Fed Board to hold bank stocks in index funds under Section 10 of the Federal Reserve Act.
Other finance experts have argued that the law allows a president to remove a Fed president "for cause".
Mnuchin tried to throw away that speculation over the weekend by tweeting that Trump told him that while he disagreed with the Fed policy admitted he was not entitled to remove him.
That insurance failed to ward off a stock market box on Monday, giving the Democrats ammunition in their fight against border financing, which has left some federal departments and agencies shuttered through Christmas.
"It's Christmas Eve and President Trump kills the country in chaos," Senate Democratic Leader Charles Schumer Charles (Chuck) Ellis SchumerWhite House, legislature signals closing will pull on Shutdown is bad for Republicans, an opportunity for Democrats disappear without clear path to discourage suspension MER (NY) and House Democratic Leader Nancy Pelosi Nancy Patricia D & # 39; Republicans, an opportunity for Democrats Mulvaney: "Very possible" suspension will enter the new congress MORE (Calif.) in a joint statement. "The stock market is thinking and the president is waging a personal war against the Federal Reserve – after he just dismissed the defense minister."