David Haggith, "What in the World is Going on with Banks this Week? Emergency meetings, banker summits, crashing European banks, and the worst bank reports since the Great Recession", The Great Recession Blog (12 April 2016)
Just about every major banker and finance minister in the world is meeting in Washington, DC, this week, following two rushed, secretive meetings of the Federal Reserve and another instantaneous and rare meeting between the Fed Chair and the president of the United States. These and other emergency bank meetings around the world cause one to wonder what is going down. Let’s start with a bullet list of the week’s big-bank events:
President Obama’s meeting with Fed Chair Yellen
It is rare for presidents to meet with the chair of the Federal Reserve. The last time President Obama met with Janet Yellen was in November of 2014, a year and a half ago. It is even more rare for the vice president of the United States to join them. In fact, I’ve heard but haven’t verified that it has never happened in a suddenly called meeting with the Fed before.
For security reasons, the president and vice president don’t regularly attend the same events. There are, of course, many planning sessions or emergency meetings where they do get together, but not with the head of the Federal Reserve. Emergency meetings where the VP is included in the planning session would include situations related to dire national security in case the VP winds up having to take over.
(George Bush and Dick Cheney were exceptional to the point that everyone commented on how often the VP was included in meetings with the president, but I always figured that was because George Bush couldn’t think and speak without Cheney acting as the ventriloquist.)
In fact the meeting with the prez and vice prez is so rare that the White House is bending over backwards to assure the entire nation that the president is not meeting with Yellen to try to influence the Fed, which is required to act independently of politics (so they claim).
According to the White House, President Obama is meeting with the Fed chair and Biden to discuss the nation’s “longer-term economic outlook,” even though Yellen just told the entire nation that the economy was strong and had arrived nearly back at “full health.” The president says they will be “comparing notes.” Do their notes about the nation’s outlook disagree? “Compare notes” sounds sufficiently vague to cover everything imaginable.
White House spokesman Josh Earnest said both Obama and Yellen are focused on ways to expand economic opportunities for the U.S. middle class. He called the meeting an opportunity for the two to "trade notes" while emphasizing that Yellen makes decisions about monetary policy independently. (SFGate)
Either such meetings are, indeed, extremely rare, or the White House doth protest to much because they spent more time this week emphasizing what the president was not going to do than what he was going to do in assuring us all that the president will not try to influence Yellen.
"The president has been pleased with the way that she has fulfilled what is a critically important job," Earnest said. He added that Obama has "the utmost respect for the independent nature of her role."
Earnest also said that, “even in a confidential setting” Obama would not “have a conversation that would undermine” the Fed’s ability to make “critical financial decisions independently.” I’m waiting to here the next words — “trust us!”
If such meetings with the Fed are so rare they require careful defensive explanation, why the sudden call of the meeting, oddly timed between two specially called, emergency meetings of the Fed — or, at least, “expedited” meetings of the Fed. It can’t just be that the president wants to plan what he will be saying at this week’s G-20 conference, if he’s to speak there. That kind of planning would happen in advance because one knows the conference is coming. One striking peculiarity of the president’s meeting with the Fed is that it appeared to have been called immediately after the Fed announced Monday’s “expedited” meeting of the Board of Governors.
We are in an election cycle, and I already speculated in my last article that, with the anti-establishment, Fed-hating candidates Sanders and Trump doing so well in their bids for the presidency, we could be sure the Administration would be doing all it can with the Fed to put some accelerant on this economy and forestall the recession that I believe we have already begun.
A recession would prove Trump and Sanders right in their statements about a coming recession or about the failed recovery actions of the Fed and Wall Street. So, the Fed and the President have every reason to work together to make sure an announcement of recession never happens. That could be what “comparing notes” on the economy’s future means — how do we assure the economy doesn’t fall apart in the next few months before the election since we have that common interest?
(In that case, the president is right that he will not be influencing the Fed — not in the sense of telling it what to do. He will be brainstorming with the Fed what they can both do in their own self-interest. No need for presidential persuasion or coercion because the Fed’s head is in the noose with the presidents if this economy fails.)
That would explanation why the White House is saying, in advance of any accusations, that the president isn’t trying to influence the Fed. They want to get ahead of the story. (Of course, it could just be that they recognize such rare meetings will lead to the kind of speculation I’m now brattishly doing.)
Tuesday’s specially called meeting of the Board of Governors under “expedited procedures”
Here is the announcement the Fed posted at the end of last week for Monday’s meeting (italics mine):
The above article (excerpt) is Copyright © 2016 The Great Recession Blog by David Haggith. It appears here with kind permission.
Image: "Eccles Building 10/20/1937" via Wikimedia Commons [Public Domain]