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Senate needs to stand up to Trump's Nixonian view of the Fed
President Trump's effort to nominate two political partisans to the Federal Reserve Board underscores his disdain for that institution, as well as any other.
The only credential Herman Cain and Stephen Moore offer the Fed is political allegiance to Donald Trump.
Cain has no chance of winning Senate confirmation, and Moore's prospects are slim. But this president's eagerness to taint a supposedly independent, respected Federal Reserve Board is much more serious than two bad nominees. His purpose was to get two sycophants on board to help blame the Fed next year for any economic shortcomings.
He could care less about tarnishing the standing of this important institution. Policy integrity is anathema to Trump; the puzzle is that his previous appointments, especially Fed Chairman Jerome Powell, were good.
All presidents want an accommodating Fed; some try subtle pressures, usually without success. The last time there was anything like what Trump is doing was in 1971; I know, because I was involved. It left an ugly stain.
Richard Nixon was president at the time and Arthur Burns, an eminent economist, was chairman of the Federal Reserve. America was fighting the Vietnam War without paying for it, and there were concerns about creeping inflation.
A worried Burns put aside his conservative ideology and publicly called on the White House to adopt a more aggressive anti-inflation policy, pressuring companies and unions to hold down prices and wages. This infuriated Nixon and his cronies.
I was a young, green Wall Street Journal reporter back then, the perfect fish for a scheme by Nixon hatchet-man Chuck Colson. One of his aides summoned me to the Old Executive Office Building and, on a deep-background basis (meaning that it couldn't be traced to the White House), gave me what he said was an exclusive blockbuster: Burns, while parading as an inflation-fighter, privately was lobbying for a pay raise. This so offended the president that he was considering increasing, or packing, the board to dilute the chairman's clout.
We did some reporting and didn't play their game. With the guidance of the Journal's great Washington bureau chief, Alan Otten, we crafted a story that, while abiding by the ground rules, said the White House was escalating a war of nerves with Burns.
A short time later - remember, they were complaining about Burns calling for jawboning - Nixon launched America's first peacetime wage-and-price controls affecting every element of the economy, an extraordinarily pervasive government intrusion.
Yet the attempted hatchet job on Burns may have been effective; over the next year, he adopted a more White House-conciliatory monetary policy that helped Nixon's reelection. It also helped fuel the subsequent economic dislocations in the years ahead. It tarnished forever Burns' reputation; the Fed didn't recover for almost a decade, until Chairman Paul Volcker courageously squeezed inflation out of the economy.
There are some legitimate complaints, from the political left and right, about the central bank. It still needs to be more transparent, although significant strides have been made. Some regional banks are too dominated by financial interests and Wall Street; a little more diversity would be good. But the Federal Reserve staff is unsurpassed in quality, dedication and integrity.
And for 40 years the central bank has been led by chairs of exceptional intelligence and integrity: Volcker, Alan Greenspan, Ben Bernanke, Janet Yellen and Jay Powell. Bernanke and the then-New York Fed head Tim Geithner, with the George W. Bush and Barack Obama administrations, saved America - and the global economy - from a 1930s-type cataclysm. I wish they had been tougher on some of the financial villains but, in uncharted and extraordinary circumstances, they got it right.
Thank goodness that neither Herman Cain nor Steve Moore - nor Donald Trump - were there.
The responsibility now lies with often-spineless Republican senators like Banking Committee chairman Mike Crapo of Idaho, Pennsylvania's Pat Toomey and self-styled "independent conservative" Ben Sasse of Nebraska to send a message to 1600 Pennsylvania Avenue: On the Fed, don't send up any more political hacks.
Albert R. Hunt is the former executive editor of Bloomberg News. He previously served as reporter, bureau chief and Washington editor for the Wall Street Journal. For almost a quarter century he wrote a column on politics for The Wall Street Journal, then the International New York Times and Bloomberg View. Follow him on Twitter @alhuntdc.