It Begins: Barney Frank Tells Yellen Not To Hike Before The Election, "It Risks Destabilizing Markets"

Tyler Durden's picture

Even as speculation had built up that the "apolitical" Fed would not dare to hike rates ahead of the election to avoid a market swoon, one which would significantly boost Trump's presidential odds, so far nobody - either on the left or the right - had suggested to Yellen not to hike rates before November 8, for one simple reason: it would immediately crush the scripted narrative of an independent Fed (something which Fed governor Lael Brainard apparently was unaware of when she donated repeatedly to the Hillary Clinton campaign), a narrative which benefits both republicans and democrats who can pretend they are busy in Congress simply by pointing at the all time high in the S&P500, which alas is simply a function of global asset bubbles.

However, that changed earlier today when, just one day after Janet Yellen's closely watched Jackson Hole speech which may or may not have opened the door to a September rate hike, Barney Frank - one of the architects of the 2010 Dodd-Frank "Wall Street Reform" act - and a staunch supporter of Hillary Clinton, told The Hill it would be a mistake for the Federal Reserve to raise interest rates before the election.

Frank advised the Fed board not to risk destabilizing markets and perhaps the broader economy a few weeks before Election Day.“I think it would be a mistake to do it this close to the election,” Frank told The Hill. “It will be interpreted, over interpreted."

What he really meant is that a crash taking place within 3 months of the election would boost Trump's victory chances to 86%.  As we reported in January,  the market performance in the three months leading up to a Presidential election has displayed an uncanny ability to forecast who will win the White House… the incumbent party or the challenger. Since 1928, there have been 22 Presidential Elections. In 14 of them, the S&P 500 climbed during the three months preceding election day. The incumbent President or party won in 12 of those 14 instances. However, in 7 of the 8 elections where the S&P 500 fell over that three month period, the incumbent party lost.  There are only three exceptions to this correlation: 1956, 1968, and 1980. Statistically, the market has an 86.4% success rate in forecasting the election.

As we asked at the start of the year, a "reflexive question emerges: does the market predict the election outcome, or does the move in the market - whether by design or by chance - predetermine the election outcome?"

Frank would rather not take a chance that the answer is the latter, and so said that "what the Fed should do this close to the election is make no waves" adding that “unless there was some totally off-the-charts jobs number, doing something this close to the election I think roils the waters unnecessarily.” Frank was envisioning a "blockbuster jobs report showing the creation of something on the order of 400,000 new jobs" as justifying action "but anything in line with recent job gains would argue in favor of keeping rates level."

What was shocking about Frank's statement is not that he expressed what he thought - most political and market watchers know that to be the case - but that he made it so clear that, just as Trump had previously noted, and was promptly called a conspiracy theorist for it, the Fed is aligned against him. 

To be sure, even The Hill gets the impact of the lack of a rate hike into the election: "It is generally thought that a rate hike before the election could be risky for Clinton, who is seeking a third term for Democrats in the White House. A rate hike could make it more expensive to borrow money and could slow the economy and cause stocks to fall."

As such, involving the Fed, an organization that is at least superficially expected to be apolitical, in the presidential race is a shocker. However, since the suggestion came from the left, it will get absolutely not media coverage as usual.

Meanwhile, even Wall Street admits politics should stay out of it and Yellen shouldn’t let political considerations interfere with her decision-making. (she will ): 

Jacob Frenkel, the chairman of JP Morgan Chase International and a former Bank of Israel governor, told CNBC Thursday that Yellen would risk politicizing the Fed by waiting until December to hike rates only because of the potential impact on the presidential and congressional races. “I think it will be a mistake to take into account the political process not because it is irrelevant to the economy but because this will actually be the politicization of monetary policy,” he told CNBC’s Steve Liesman while attending the Fed’s Jackson Hole summit.

Other observers think the Fed will wait because board governors are leery of wading into a political controversy. “If you want to take politics into account, you probably want to wait until after the election,” said Axel Merk, the president and chief investment officer of Merk Investments. “Fed officials, especially former ones more than current ones, will tell you that you don’t want to hike just before an election because it’s kind of political,” he added.

It certainly is, and the reality is that both a rate hike or lack thereof would now be perceived as a political move, in the former case it would imply support for Trump; in the latter, the Fed would be accused of aiding Hillary. 

Merk added that the Fed “has been looking for every excuse in the book not to raise rates and this may be one of them.”

That may be so, but last night, Citi's William Lee brought up an interesting point: "in the unlikely event of a surprise Trump win, it is unlikely that a December rate hike would occur, and focus will shift toward easing options."

Which prompts an interesting question: while it is clear that if the Fed wants Hillary to win, it will not hike in September, the flipside is what if the Fed wants to have justification to begin an easing (oe QEasing) cycle, in the medium-term? In that case, hiking now just to cut and launch more QE, would be precisely the way to do it; and best of all, it will have "president Trump" to blame for unleashing another $4 trillion in wealth transfer from the middle class to the 1%.

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jm's picture

Have no fear, boston queer. Bubbles yellen isn't going to move rates.

J S Bach's picture

Good tribal networking between the pole-smoker and the androgynous dwarf.

Handful of Dust's picture

Barney was also the main sponsor of subprime related shit. I thought some broken home owner would have hung him by now. He pressured the banks to hand out basically worthless loans to people they knew could never pay the mortgage, "cause it's everyone's right to live in a house."

knukles's picture

Tweemendoes wisk!  Wooobe howwibo!

I am more equal than others's picture

 

 

Barney butt-o-fuck-o from the great state of Massoftwoshits. 

Can we give the state back to the indians yet?

Proctologist's picture

I don't think the Indians would take it. Make it Canadian?

Pure Evil's picture

I thought fer sure Bwaney had died from AIDS or being fist fucked to death.

JRobby's picture

Frank!?!? (Laugh Track Deafening!!)

Hasn't he been exposed as a bankster tool box masquerading as a "bank reformer"??? HE SHOULD SHUT HIS DRUNK ASS FACE!!

wee-weed up's picture

Hey, Bwarney... go chew on your fwrank! You fat miserable fuck!

KickIce's picture

I figured we would here from this rump rider sooner or later, next we'll hear from his tbtf partner Reid.

Stainless Steel Rat's picture
Stainless Steel Rat (not verified) KickIce Aug 27, 2016 5:57 PM

One of the main lies used to promote the Federal Reserve System was that by not being under the control of the government, it would not be used to affect the economy in a way that affected the outcome of elections.

The Saint's picture

One thing I know about Barney Fuck is that he should be taken out back behind the barn and put down.  He is a totally worthless piece of shit.

NoVa's picture

B'wawarney was a primary individual who was a cuase of the housing crisis.  His support for "Affordable Housing" for minorities through the GSEs was a MAJOR cause of the crisis.  add in the "Housing Goals" imposed upon the GSEs.

I was at FNMA when this shit hit the fan.  They were buying incredibly bad loans simply to hit housing goal impose by HUD - (hello - POLITICIAL!!!)    GSEs boughts loans with down payment assistance of up to 3%, 5% to 10% 2nds that were ZERO interest rates and FORGIVEABLE if the residents live in the for more than 5 years.  In salinaas valley

GSEs bought these loans to earn HUD Housing Goals points.  and all at year end.

 

NoVa

 

 

tuetenueggel's picture

One can easily hear ther bones rattling:

They are terribly afraid, that Joe Sixpack could finally see wht they intend to do to him , his wife and kids.

War.

kill switch's picture

That’s the problem with smoking dick you do it once and you can never shake the sigma..

GUS100CORRINA's picture

I don't know about everyone else, but when I read things like this story, I get really discouraged! Politically manipulated markets to achieve an elitist desired outcome is maddening, simply maddening!!!!!!

jm's picture

Whatevs. Has always been thus.

manofthenorth's picture

But.....but.....but the FED is not a politically motivated organization right ????

PLEASE GOD.... send some avenging angels to smote these dirty motherfuckers now !!

P.S. you can sort out the good ones( probably damn few of those anyway ) later.

lasvegaspersona's picture

'smite'...you want them smit right? Smoted would mean they was done did already...

max2205's picture

Remember Barry and Joe met personally with Janet before Brexit?    New highs..... I think we all know how this plays out.  

Kirk2NCC1701's picture

Great, a queer Zionist coming out and telling the truth about the interests of his fellow Tribesmen.  Wow, never would have guessed it.

It's 11:55 pm.  Do you know where your children are?  

Pure Evil's picture

Well, hopefully not being molested by Bwaney Fwanks and friends, ahem Bill Clinton, much less passed around the pedophile circles in Congress.

Cursive's picture

Ha. Ha. Ha.  The Fed is not political?  Barney Frank is unstable.  Is he still dreaming of nights with Steve Gobie?  Herb Moses?

Jayda1850's picture

The most political organization in the US isn't the DNC or the RNC, but the FED. The RNC and DNC all want money for pet projects that can only come from begging the FED. Until they are abolished, both parties will continue to offer their constituencies the illusion of hope and change while both must answer to the same master.

otschelnik's picture

Federal Reserve Mandate:

1) ensure stable prices

2) moderate interest rates

3) provide for full employment

4) elect SHILLARY in '16

Chupacabra-322's picture

All the Rats are coming out into the open now. Its all Fraud. Everyone sees it but them.

coast's picture

ok that was friggin good zarbo....xlnt

Pure Evil's picture

Google?

 

 

(OK, for all you born yesterday, yes Barney Google was this before it was a search engine)

tuetenueggel's picture

Osama Hussein from Kenia

PleasedToMeatYou's picture

I'm sure the Open Market Committee was waiting to hear from Barndoor Frank like in all those old E. F. Hutton commercials.  Finally, He has spoken. 

Pure Evil's picture

Personally, I would prefer that when he speaks he stop pulling down his underware and bending over to talk out his ass.

VWAndy's picture

  Barny Frank one look at him and I think he would make about 10 maybe 15 gallons of biodiesel. Eco friendly and all that.

brushhog's picture

Frank doesnt have to tell Yellen, she's been given her marching orders along with the media.

Chris Dakota's picture
Chris Dakota (not verified) brushhog Aug 28, 2016 9:10 AM

Rate hike is saved for after Trump takes office, crash blamed on him.

I remember how happy Obama was when the market was crashing just before the election in 08

blindman's picture

frank plays for the other team, yellen won't listen.
no?

Bill of Rights's picture

Next up Paulson and the Martial law shtick... Bankers need to go as does 95% of the current congress on both sides.

Yen Cross's picture

  If Barney had his way the $100 bill would be made out of rainbow colored latex and have a Gerbil on the front of it, and 'Big Gay Al' on the back.

  ~Delusional~ Barney[was] retired for a reason.

 

Rainman's picture

gerbil ... that made me laff

Infield_Fly's picture
Infield_Fly (not verified) Aug 27, 2016 3:24 PM

Bawnee Fwank - LMFAO!!!

 

The central banks have $25 TRILLION in assets - they own the markets.

 

If rates hike, CBs will just buy more.

thefinn's picture

This is one thing I don't actually get.

 

Even if we did a complete reset of markets, changed the dollar, everything.... What happens to the paper that the fed is holding on to?

 

lasvegaspersona's picture

The current paper might as well burn (though I'd hold some for future collectablity.

Because the Fed has no gold they will just let the dollar die. In its place I think they willl have a new dollar which holds gold as its reserve. Whether they let the Fed use their gold this time I don't know. They were smart enough not to let the Fed near it last time. All the fed has are some gold certificates on its books.

The new monetary system surely will not have just one country's paper as the reserve. More likely it will use gold as the reserve. I think that's why all the CBs are getting at least some. Canada of course can just dig it up if needed. Venezuela looks to be perpetually screwed.

tuetenueggel's picture

not to be forgotten, us´s 52 nd state Ukraine.

Gold in this times even gets wings.......

Pure Evil's picture

You fail to understand their privilege. What on God's little green acre gives them the power to create fiat out of thin air?

The same power that will allow them to price their holdings in whatever new fiat they desire.

Yen Cross's picture

  It would be revalued like the Mexican Peso, or old Civil War confederate currency.  ;-D