Is Janet Yellen Helping the Democrats Win the Presidency?

TND Guest Contributor: Paul-Martin Foss |

Presidential candidate Donald Trump last week claimed that the Federal Reserve was keeping interest rates low to help President Obama, since Obama didn’t want to leave office during a recession. Is there any truth to that? Well, maybe. Remember that Arthur Burns was once asked why, after helping Richard Nixon win re-election in 1972 by keeping interest rates low, he didn’t help Gerald Ford in 1976. The answer: Ford didn’t ask. So has Obama asked Janet Yellen to keep interest rates low so that he doesn’t leave office under a cloud?

That is certainly within the realm of possibility. Remember that Chairman Yellen meets with Treasury Secretary Jack Lew on a weekly basis, and Lew was the former White House Chief of Staff, the President’s right hand man. It is not inconceivable to think that Lew has leaned on the Fed to keep interest rates low and stave off a recession before Obama leaves office. Not only would that leave Obama’s legacy tarnished, it would also hurt the Democrats in the Presidential election. Were the US economy to fall into recession or worse before the election, the Republicans would pin it on Obama and his policies, asking the American people if they really wanted four more years of recessionary economic policies.

While the Fed more than likely will not raise interest rates at next week’s FOMC meeting, as you read discussions of the Fed’s possible rate rise always keep in the back of your mind the political ramifications of such a decision as well as the economic ramifications. The Fed is as political an institution as any other in Washington, so you can bet that if a couple of days of weakness in the stock market is a strong enough economic justification to hold off on raising rates, pressure from the Democratic establishment to stave off a recession until after the Presidential election will be even more of an incentive to maintain the monetary policy status quo.

# # # #

About  Paul-Martin Foss:

Paul-Martin Foss is the founder, President, and Executive Director of the Carl Menger Center for the Study of Money and Banking, an Arlington, VA-based think tank dedicated to educating the American people on the importance of sound money and sound banking.

Prior to founding the Menger Center, Mr. Foss worked in the U.S. House of Representatives for seven years, including six years as Congressman Ron Paul’s legislative assistant for monetary policy and financial services, and one year as Deputy Legislative Director for Congressman Thomas Massie.

As Congressman Paul’s legislative assistant, he assisted the Congressman in his duties as Chairman of the Subcommittee on Domestic Monetary Policy by helping to develop hearing topics, agendas, and briefing Congressmen and their staffs on monetary policy topics. Mr. Foss also was responsible for the management of Dr. Paul’s monetary policy and financial services legislation, including the “Audit the Fed” and “End the Fed” bills, and was co-editor of Ron Paul’s Monetary Policy Anthology, a multi-thousand page compilation of hearing transcripts, lecture transcripts, and other documents related to Dr. Paul’s chairmanship.

Mr. Foss received his Bachelor’s degree from The University of the South (Sewanee), and Master’s degrees from the London School of Economics and Georgetown University’s Edmund A. Walsh School of Foreign Service.

This article appeared on the Carl Menger Center for the Study of Money and Banking and is reprinted with permission, “Creative Commons 4.0.”