The Washington Post - 01.08.2019

THURSDAY, AUGUST 1 , 2019. THE WASHINGTON POST EZ RE A

Former Fed leaders say that

Powell and his colleagues are

making good calls and that

Trump’s tweets and criticism are

not swaying anyone on the com-

mittee.

“I know Jay Powell very well,”

said former Fed chair Alan Green-

span. “The chance he would

buckle to what the president of

the United States said about pol-

icy above his knowledge of how it

works just seems inconceivable.”

[email protected]

Thomas Heath and Damian Paletta

contributed to this report.

nominated several candidates to

the Fed’s board who share his

low-rate views, although the Sen-

ate has not confirmed any of

them.

Some White House officials

had hoped that a series of interest

rate cuts by the Fed in the second

half of this year would lead to a

rebound in growth, boosting the

economy before next year’s No-

vember elections. But Powell’s

remarks Tuesday, combined with

cloudy outlooks for a number of

trade fights, could give business-

es pause before they resume in-

vestments.

political pressure. Scholars and

business leaders say Fed inde-

pendence is a bedrock foundation

for the economy and financial

markets, and there is some con-

cern the institution might be

caving to Trump’s demands.

“I think Powell did this to push

back on the White House and

signal the Fed’s independence,”

said Kristina Hooper, chief global

market strategist at Invesco. “I

believe that in Powell’s mind, a

short-term sell-off was a small

price to pay to assert the Fed’s

right to self-determination.”

The president has recently

The last time the Fed cut rates,

in December 2008, the U.S. econ-

omy was deep into a financial

crisis. The stock market had shed

a third of its value in a matter of

weeks, and unemployment was

over 7 percent. Today, the econo-

my is widely viewed as healthy,

with unemployment at a

half-century low, stocks at record

highs and inflation remaining

modest.

Fed leaders have characterized

this rate reduction as an “insur-

ance” cut to enhance the econo-

my’s strength in the face of grow-

ing problems abroad that could

spill over into the United States.

The Fed pointed to “soft” busi-

ness investment and declining

manufacturing output as areas of

particular concern.

In addition to the rate reduc-

tion, the Fed announced that it

would stop selling off its $3.8 tril-

lion in assets in August, two

months earlier than expected, in

another easing move. Trump ap-

plauded that action on Twitter.

Those assets are a legacy of the

financial crisis. In the aftermath

of the Great Recession, the Fed

bought a large amount of Treas-

ury bonds and mortgage-backed

securities to keep interest rates

low. The central bank started to

sell some of its holdings in recent

months because it thought the

extra stimulus was no longer nec-

essary. Now the Fed is putting

those sales on hold.

The Fed is supposed to make

the best decisions for the econo-

my’s long-term health and ignore

growth overseas and Trump’s

trade war.

“So far, financial markets clear-

ly believe the Fed hasn’t done

enough to alleviate concerns,”

said Guy LeBas, chief fixed-in-

come strategist at the Janney

financial firm.

Powell, while affirming the U.S.

economy is “healthy,” acknowl-

edged three problems on the hori-

zon: “weak global growth, trade

policy uncertainty and muted in-

flation.”

But the Fed chair’s attempts to

dance around questions about

whether the Fed would cut rates

again in September at times came

across as confused or ill at ease to

some.

“I lost count of how many

times he said ‘uncertain’ or he

‘didn’t know,’ which is very dis-

concerting,” said Diane Swonk,

chief economist at Grant Thorn-

ton.

Powell specifically mentioned

trouble in Europe and China as

reasons for Wednesday’s cut, and

while he didn’t mention Trump

by name, Powell gave some of his

most critical comments to date

about the economic impacts of

escalating trade tensions.

“Trade is unusual. We don’t,

you know, the thing is, there isn’t

a lot of experience in responding

to global trade tensions. So it is

something that we haven’t faced

before and that we are learning

by doing,” Powell said. “Trade

policy tensions nearly boiled over

in May and June but now appear

to have returned to a simmer.”

aggressive rate-cutting cycle
which would keep pace with Chi-
na, The European Union and
other countries around the world.
As usual, Powell let us down,”
Trump said on Twitter.
The strong reactions — from
the president and the markets —
underlined the pressure on Pow-
ell as he tries to navigate between
their demands for further reduc-
tions and the warnings from a
number of economists and Fed
leaders who do not think the
central bank should be cutting
rates to stimulate growth when
the economy looks solid, if not
strong.
Two out of 10 members of the
Fed’s rate-setting committee dis-
sented Wednesday, the largest
revolt since Powell took over as
chair. Boston Fed President Eric
Rosengren and Kansas City Fed
President Esther George said
rates should be left unchanged.
“I would not cut interest rates,”
said Steven Ricchiuto, chief U.S.
economist at Mizuho Securities
USA. “Cutting interest rates at
this juncture will do only one
thing: It will add to additional
financial market inflation, which
is the last thing in the world the
Fed should be doing.”
Trump has been critical of the
Fed since last summer, even
though he appointed the vast
majority of its board, including
Powell. Investors appear to agree
with Trump that the Fed should
do more to counteract slowing

FED FROM A

Powell laments trade tension

ANDREW HARRER/BLOOMBERG NEWS

Fed Chair Jerome H. Powell expressed frustration about the economic impacts of global trade disputes.

“It is something that we haven’t faced before and that we are learning by doing,” he said.

BY TOM HAMBURGER AND

ANU NARAYANSWAMY

The super PAC backing Presi-
dent Trump collected nearly
$9 million in the first half of the
year, with the vast majority of its
funds coming from just 10
wealthy donors who gave six-
and seven-figure sums, accord-
ing to information released by
the group Wednesday.
The huge contributions to
America First Action highlight
how Trump has reversed his
stance on big money since the

2016 campaign, when he at-

tacked his rivals for leaning on

super PACs financed by large

contributions.

This time, his campaign has

officially endorsed America

First Action as its “approved”

super PAC, which along with the

affiliated nonprofit America

First Policies raised $17.8 million

in the first half of 2019, the

organizations said.

Meanwhile, Priorities USA, a

Democratic effort focused on

defeating Trump in 2020, raised

$23.4 million through the first

half of the year, the group an-

nounced Monday.

Unlike candidate campaign

committees, which cannot ac-

cept donations of more than

$2,800 per donor per election,

super PACs can accept unlimited

sums, including from corpora-

tions. They are prohibited from

coordinating directly with cam-

paigns and political parties, but

in practice have increasingly

come to serve as extensions of

political candidates’ operations.

The biggest donor to America

First Action so far this year was

Los Angeles developer Geoffrey

Palmer, who gave $2 million.

Linda McMahon, who until

recently served as administrator

of the Small Business Adminis-

tration and now chairs the super

PAC, contributed $1 million.

McMahon said in a statement

that her goal is to “ensure we

have every dollar we need to

crush President Trump’s en-

emies.’’

Other million-dollar donors

to the pro-Trump super PAC this

year include the casino execu-

tive Cherna Moskowitz and Dick

and Liz Uihlein, who founded

the shipping supplies company

Uline.

In the last race, Trump repeat-

edly complained about the role

of big-money donors, suggesting

his opponents were beholden to

their largest contributors.

“They’re in total cahoots with

their [super] PACs, which

they’re not allowed to be,”

Trump told The Washington

Post in October 2015. “They’re all

in total cahoots. They put their

friends in there. One good thing

about me: I’m not.”

The America First operation

raised $10 million less in the

first half of this year than in the

previous six months, when the

super PAC and the nonprofit

together pulled in $27.7 million,

an official said. At the time, the

group was active in the 2018

midterm-election campaigns.

Officials said the pro-Trump

groups are on track this year to

exceed their fundraising goals,

noting contributions from more

than 11,000 donors.

[email protected]

[email protected]

Big donors lift pro-Trump groups’ intake to nearly $18 million in 6 months

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