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Uh, I want to ask uh your thoughts on the news that we've seen this week regarding Fed Chair Powell. Are you concerned about the independence of the the Fed and and what do you think needs to happen from here? Yeah, I I'm very worried about the independence of the Fed and I'm going to say something that I know many people are going to say, "What?
Uh, this sounds crazy, but I actually think given the pressures and and they're not over the Trump is going to launch in again uh that are on POW that the long-term independence of the Fed very way may very well be enhanced if he steps down. Um, and I know that that sounds shocking, but let me tell you my reasoning.
Um, if the economy goes south, let's say in the second half of the year, and I'm not saying I'm expecting this at all, and I certainly hope it doesn't, but let's face it, Trump has the perfect scapegoat in JPO. He's going to lambast him. He said he didn't lower the interest rates. That's why we're in trouble.
He's, you know, not going to blame anything else. And a lot of people can say, yeah, this is his second big mistake after not taking care of inflation. Too slow there, too slow now. He'll fire him. And what I worry about is he could get to Congress uh and say, "Listen, you got to give me more powers over the Fed.
We've got to reduce the power of the Fed. I got to pick the chairman when I want, how I want, how long I want." That is a threat. Don't forget our Federal Reserve is is not at all a part of our Constitution. Um it's a creature of the US Congress uh created by the Federal Reserve Act 1913. all its powers the vow from Congress.
Congress has amended it the Federal Reserve Act many times. It could do it again. It could give powers. It can take away powers. Um given the current Republican Congress, uh you know, um pretty and thrilled to the president. If he wants changes and the economy goes down and it's blamed on Chairman Powell, he'll get them.
But then um Professor Seagull, doesn't it matter who then fills that void and whether the market trusts that they will be acting independently? Uh if if Fed Chair Powell were to step down, um doesn't it matter more for the sanctity of this kind of independence notion for the Fed? Who who who takes his place?
Well, but it's his independence already has been uh you know, greatly diminished. he's only going to be chairman at most 10 more months and it's going to be less than that especially if Trump you know announces a shadow chairman. Furthermore, um you know there's two good candidates. Kevin Worsh uh Kevin Hasset.
Kevin Hass I know extremely well. U Kevin Wars I listened closely to his uh it was on Squawkbox yesterday morning. I was very impressed with his analysis. Um I think he would be an excellent chairman. By the way, both of them have actually far more monetary training uh than does J Pal. Um so I think we're not handing this to to a hack.
Yeah. Would interest rates go down a little bit faster? Probably yes. Is that a disaster? Really? No. I mean there's many many economists. I'm I'm one of them. But uh you know we heard from Waller there are several others and probably the most famous one the Taylor rule which uh John Taylor who almost became Fed chairman uh has been the most followed and and talked about rule for setting rates says the Fed funds rate should be in the 3% range.
Now I know Trump is said 2 one and all that and that's not going to happen. Um, but there is a case I and right now I think it's it's so politically compromised he's going to go into the meeting and anyone who supports lower rates is going to be considered a Trump lackey. Listen, I I want Trump to own this economy.
No scapegoat. If he gets to pick someone and the economy goes south, he really doesn't have anyone to blame. Oh, he'll probably try try to blame Pal for something in the past. uh you know he's still blaming Biden for things in the past but that won't have the credibility that if Pal does make a mistake here um it would be very bad for the Fed and if things go well let's assume the economy booms do you think Powell is going to get any credit you think the Fed is going to get any credit no it's going to be the you know the big beautiful bill it's going to be you know Trump's tax uh cuts Trump's tariffs Trump's deregulation.
Uh, no one is going to remember uh, Chairman Powell. No one's going to say he's the one that caused it. So, there's no upside. Um, this is a difficult situation. I mean, I'm not giving good choices here. I'm just saying perhaps the least bad choice. You still serve at the pleasure. I know. Every four years, the president chooses you.
He chooses every member of the board. He chooses the chair. He chooses the vice chair. So how much independence really is there? You want to maintain, you know, the ability not to be able to just say, "Okay, you're the reason this economy didn't well." Nothing to do with my policies. And I'm afraid that if the economy goes south, there will be more and more people that will believe that explanation.
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