This Is What Happens Behind Closed Doors When U.S. Presidents Meet With Fed Chairs

Last week, Donald Trump ventured into what until recently was uncharted, for US presidents, territory.

First, during a CNBC interview, the president went so far as to say that the strong dollar "puts us at a disadvantage" then went on to do what so many consider anathema, and said he is "not thrilled" about the Fed rising rates "because we go up and every time you go up they want to raise rates again."

One day later, Trump doubled down, saying in a tweet that "tightening now hurts all that we have done. The U.S. should be allowed to recapture what was lost due to illegal currency manipulation and BAD Trade Deals. Debt coming due & we are raising rates - Really?"

And while Trump made it clear he was displeased with the Fed's tightening - which has been largely a function of the soaring US double deficits and Trump's own late cycle fiscal stimulus (which according to Barclays will push the economy into near overheating territory, with Q2 GDP now pegged at 5.0%) - he also went on to accuse "China, the European Union and others" of "manipulating their currencies and interest rates lower, while the U.S. is raising rates while the dollars gets stronger and stronger with each passing day - taking away our big competitive edge."

So is Trump trying his best to Erdogan-ify the US economy, and is taking a page out of the Turkish dictator's playbook, in a power grab that will end up with Trump controlling the Fed? That remains to be seen: naturally the White House, Steven Mnuchin and countless other officials have vowed that Trump has utmost respect for the Fed's independence. That, however, will likely change the moment the market tumbles and Trump demands a rate cut by the Fed.

For now all Trump has achieved is trapping himself in his escalating trade and now currency, war with China, because as we discussed earlier, the Fed's hands are now tied and Powell may be unable to cut rates even if it has to, should China proceed with an aggressive yuan devaluation, just to indicate the Fed is still an independent institution and not subject to Trump's whims.

* * *

And yet... is what Trump did really "uncharted"?

As it turns out a brief jog through history reveals that none other than Trump's predecessor, Barack Obama got into hot water when in April 2016, the former president had a closed door private meeting with then-Fed Chair Janet Yellen, prompting a sharp market reaction and numerous questions what was said.

As we reported at the time, White House spokesman Josh Earnest apologetically noted that President Obama also "cares deeply about preserving both the appearance of and the fact of the independence of both the Federal Reserve" and added that he wouldn’t anticipate "even in a confidential setting" that Obama "would have a conversation" with Yellen "that would undermine" the ability to make "critical financial decisions independently."

To this day, it is unknown what was said.

But for a far more colorful example of just how laughable the concept of Fed independence is, we go to the NYT with this brief but highly memorable anecdote from a meeting between President Lyndon B Johnson and Fed president William McChesney Martin.

... in 1965, President Lyndon B. Johnson, who wanted cheap credit to finance the Vietnam War and his Great Society, summoned Fed chairman William McChesney Martin to his Texas ranch. There, after asking other officials to leave the room, Johnson reportedly shoved Martin against the wall as he demanding that the Fed once again hold down interest rates.

“I hope you have examined your conscience and you’re convinced you’re on the right track.” Lady Bird Johnson said to William McChesney Martin, on his arrival at the LBJ ranch.

Martin caved, the Fed printed money, and inflation kept climbing until the early 1980s.

* * *

For those with more time, here is a far more detailed fascinating, story of the war that ensued between Martin and LBJ, once again via the NYT:

[In 1965, Martin began speaking publicly about his concerns]. He was afraid the growing cost of the Vietnam War would force a devaluation of the dollar. He saw yet another budget deficit (there had been several in a row) at a time when budget deficits were still looked at askance. In a speech in May, he called it an era of “perpetual deficits and easy money” — red flags among central bankers.

Then in June,  at Columbia University, he laid down the gauntlet in a speech that described “disquieting similarities” between the current economic climate and the years leading to the Great Depression: “Then, as now, government officials, scholars and businessmen are convinced that a new economic era has opened, an era in which business fluctuations have become a thing of the past.”

His words were heard. That afternoon the New York Stock Exchange had one of its sharpest declines since Kennedy’s assassination, and the next day The New York Times reported on Page 1 that “Reserve Board Chief Compares Boom Today With That of 20’s.” Johnson, at his next news conference, went out of his way to dispel “gloom and doom” about the economy.

According to Robert P. Bremner in his book “Chairman of the Fed,” Johnson asked his attorney general, Nicholas Katzenbach, to determine if a president could legally remove a Fed board member from office. (He was advised that disagreeing with administration policies did not constitute “termination for cause.”) 

In late November Martin signaled to Johnson’s Treasury secretary that he thought he would have the votes for a rate increase at the Fed’s Dec. 3 meeting. The secretary,  Henry H. Fowler, relayed this news to Johnson, and they agreed that Martin should delay any action, at least until January, when the administration’s budget estimates would be available.

Martin’s behavior, Fowler said, was giving Americans the impression there were “two quarterbacks” running the economy — Martin and Johnson.

On the morning of Friday, Dec. 3, the day of the Fed’s policy-making meeting, Martin again called Fowler to tell him of the imminent rate increase. Johnson, at his Texas ranch recovering from gallbladder surgery, was livid that his calls for a delay were being ignored. Speaking to Fowler by phone, he made a historical reference going back nearly 150 years: the so-called Bank War when President Andrew Jackson whipped up a populist frenzy against Nicholas Biddle and his Bank of the United States, a predecessor of the Federal Reserve.  

Johnson made sure Fowler passed along his warning: "It’s going to hurt my pride, and it’s going to hurt my leadership, and it’s going to hurt the best champion business has got in this country."

His voice rising, he then told Fowler they needed to replace Martin with a “tough guy” to run the central bank.

Martin resisted the appeals. At the Board of Governors meeting that afternoon, he called for a vote to raise the discount rate a half-percentage point, to 4.5 percent. But before the vote, he conceded that raising the rate would essentially wave a red flag before the critics of an independent Federal Reserve, in Congress and in the White House.  “We should be under no illusions,” he told his colleagues. “A decision to move now can lead to an important revamping of the Federal Reserve System, including its structure and operating methods. This is a real possibility and I have been turning it over in my mind for months.”

The vote was 4 to 3. Martin cast the deciding ballot.

In Texas, Johnson was enraged. Joseph Califano, an aide (later a cabinet secretary under President Jimmy Carter), recalled Johnson’s “burning up the wires to Washington, asking one member of Congress after another, ‘How can I run the country and the government if I have to read on a news-service ticker that Bill Martin is going to run his own economy?’”

Martin was summoned to explain why he had defied the president.

Martin flew down to the Johnson Ranch on Monday, Dec. 6, along with Fowler and other advisers. The president met them at an airstrip behind the wheel of his Lincoln convertible. They piled in and he drove them to the house.

There, Johnson got Martin alone and did not mince words. According to different accounts, the 6-foot-4 Johnson pushed the shorter Martin up against a wall.

“You went ahead and did something that you knew I disapproved of, that can affect my entire term here,” Johnson said, as Martin recalled later in an oral history. “You took advantage of me and I’m not going to forget it, because here I am, a sick man. You’ve got me into a position where you can run a rapier into me and you’ve run it.”

“Martin, my boys are dying in Vietnam, and you won’t print the money I need,” he said.

Martin stood his ground. He pointed out that he had given the president fair warning that a raise was coming. More broadly, he insisted that he and the president had different jobs to do, that the Federal Reserve Act gave the Fed responsibility over interest rates.

“I knew you disapproved of it, but I had to call the shot as I saw it,” he said.

The two eventually stepped outside and tried to assure reporters that any differences had been patched up. Their sour expressions, captured in newspapers the next day, suggested otherwise.

Despite their differences, Johnson renominated Martin to the Fed chairman’s job one year later. Martin would step down in 1970 during the administration of Richard M. Nixon, the fifth president he served under, after having had the longest term of any Fed chief.

The economic expansion that started  in 1961 would continue until nearly 1970 —  the second longest ever, a credit to Martin’s stewardship. But many argue that he was too slow to raise the discount rate.

In fact, the increase in rates approved in December 1965 did little to control inflation, which would creep higher after the mid-1960s and become a defining issue in the next two decades.  A successor, Paul A. Volcker, was forced to push interest rates to nearly 20 percent to bring prices down.

In the end, it appears Martin left the punch bowl out too long.

This time will not be different.


loveyajimbo Sat, 07/21/2018 - 19:33 Permalink

How about we start by a FULL and complete AUDIT of the slimy, corrupt FED???

Let's include a physical, independent audit/verification of our country's gold reserves... and any and all encumbrances on that gold...

Odd how the Fed always fights against an audit tooth and nail, so do the Deep State puppets in congress... WHAT ARE THEY HIDING???  

Hint:  It's REALLY BAD.

powow cheka Sat, 07/21/2018 - 20:17 Permalink


This Is What REALLY Happens Behind Closed Doors:


FED CHAIR: The JEWS who own the Fed want to know how much they can print for you to keep the scam going?

POTUS: How much can you legally print?

FC: Are you serious? We're above the law.

POTUS: Keep printing and get me my cut. Don't want to end up like JFK.

FC: Now that's a good boy. One last thing. The Jews want Jerusalem.

POTUS: Done.


Artist's IMPRESSION of Satanyahoo RIDING Trump


In reply to by cheka

44magnum Justin Case Sun, 07/22/2018 - 09:33 Permalink

On May 23, 1933, Congressman, Louis T. McFadden, brought formal charges against the Board of Governors of the Federal Reserve Bank system, The Comptroller of the Currency and the Secretary of United States Treasury for numerous criminal acts, including but not limited to, CONSPIRACY, FRAUD, UNLAWFUL CONVERSION, AND TREASON.
The petition for Articles of Impeachment was thereafter referred to the Judiciary Committee and has YET TO BE ACTED ON.


"Mr. Chairman, we have in this Country one of the most corrupt institutions the world has ever known. I refer to the Federal Reserve Board and the Federal Reserve Banks, hereinafter called the Fed. The Fed has cheated the Government of these United States and the people of the United States out of enough money to pay the Nation's debt. The depredations and iniquities of the Fed has cost enough money to pay the National debt several times over. "This evil institution has impoverished and ruined the people of these United States, has bankrupted itself, and has practically bankrupted our Government. It has done this through the defects of the law under which it operates, through the maladministration of that law by the Fed and through the corrupt practices of the moneyed vultures who control it. "Some people who think that the Federal Reserve Banks United States Government institutions. They are private monopolies which prey upon the people of these United States for the benefit of themselves and their foreign customers; foreign and domestic speculators and swindlers; and rich and predatory money lender. In that dark crew of financial pirates there are those who would cut a man's throat to get a dollar out of his pocket; there are those who send money into states to buy votes to control our legislatures; there are those who maintain International propaganda for the purpose of deceiving us into granting of new concessions which will permit them to cover up their past misdeeds and set again in motion their gigantic train of crime. "These twelve private credit monopolies were deceitfully and disloyally foisted upon this Country by the bankers who came here from Europe and repaid us our hospitality by undermining our American institutions. Those bankers took money out of this Country to finance Japan in a war against Russia. They created a reign of terror in Russia with our money in order to help that war along. They instigated the separate peace between Germany and Russia, and thus drove a wedge between the allies in World War. They financed Trotsky's passage from New York to Russia so that he might assist in the destruction of the Russian Empire. They fomented and instigated the Russian Revolution, and placed a large fund of American dollars at Trotsky's disposal in one of their branch banks in Sweden so that through him Russian homes might be thoroughly broken up and Russian children flung far and wide from their natural protectors. They have since begun breaking up of American homes and the dispersal of American children. "Mr. Chairman, there should be no partisanship in matters concerning banking and currency affairs in this Country, and I do not speak with any. "In 1912 the National Monetary Association, under the chairmanship of the late Senator Nelson W. Aldrich, made a report and presented a vicious bill called the National Reserve Association bill. This bill is usually spoken of as the Aldrich bill. Senator Aldrich did not write the Aldrich bill. He was the tool, if not the accomplice, of the European bankers who for nearly twenty years had been scheming to set up a central bank in this Country and who in 1912 has spent and were continuing to spend vast sums of money to accomplish their purpose. "We were opposed to the Aldrich plan for a central bank. The men who rule the Democratic Party then promised the people that if they were returned to power there would be no central bank established here while they held the reigns of government. Thirteen months later that promise was broken, and the Wilson administration, under the tutelage of those sinister Wall Street figures who stood behind Colonel House, established here in our free Country the worm-eaten monarchical institution of the "King's Bank" to control us from the top downward, and from the cradle to the grave. "The Federal Reserve Bank destroyed our old and characteristic way of doing business. It discriminated against our 1-name commercial paper, the finest in the world, and it set up the antiquated 2-name paper, which is the present curse of this Country and which wrecked every country which has ever given it scope; it fastened down upon the Country the very tyranny from which the framers of the Constitution sough to save us.



In reply to by Justin Case

HankPaulson ted41776 Sat, 07/21/2018 - 19:58 Permalink

Let's start with what we know: Trump is a pussy grabber. We should also admit that there is no known remedy for the vice of pussy grabbing. Add to this our knowledge that Russia is home to uncontrollable anarchopussies, the only known remedy for which is incarceration (pussy riot).

Now our peril becomes clear: at a critical juncture of international diplomacy, Trump may become distracted by a passing anarchopussy, loosing his grip on the reins of empire just long enough to initiate WWIII and nuclear armageddon, plunging our planet into nuclear winter for thousands of years.

May God help us all.

In reply to by ted41776

Balance-Sheet brushhog Sat, 07/21/2018 - 20:04 Permalink

Don't need saved capital- what you save is for your own eventual use if it is USD.

Banks do not need to take deposits to lend as money is created at the moment a buyer and a seller need it to complete a transaction. You and the dealer need 30K for you to have a new truck. Bank creates the 30K hands it to the dealer and you get the truck. When you pay back the 30K the money that was created is destroyed. It was replaced with the money you earned to repay the loan.

In reply to by brushhog

DingleBarryObummer bshirley1968 Sat, 07/21/2018 - 20:31 Permalink

There is always more interest than debt issued.  It can never be paid back in full.  It's game of musical chairs.  Fiscal conservative in this type of usury fiat system is really a farce. 

I know Mike Maloney is trying to sell you Gold (which I am not necessarily advocating), but his video explains the scam better than I've seen it explained anywhere===>

The Biggest Scam In The History Of Mankind - Hidden Secrets of Money 4 - YouTube


In reply to by bshirley1968

brushhog DingleBarryObummer Sat, 07/21/2018 - 21:43 Permalink

If the money is "created" in total at the point of sale by the bank, then the buyer pays interest on the total amount [ in your case of the truck 30k ]. Savings allows you to put at least something down and reduce the amount of interest paid to the bank. Paying full interest on every purchase drains the consumer which eventually loops back and hurts the producer. The banker is enriched at the expense of both buyer and seller.

In reply to by DingleBarryObummer

Balance-Sheet brushhog Sun, 07/22/2018 - 00:29 Permalink

Let's be honest Banking is a lousy business to be in. The cost structure is ridiculously high and the returns are poor. JP Morgan Bank started in 1854 and has been consolidated with many banks for over 160 years and the entire company is worth less than 400B USD in wildly diluted 2018 dollars. To correct back to 1854 we have to discount by 96.8% Official Data btw making todays 385B about 13.6. 

It does pay a massive 2.9% dividend- the 52 wk low is about 88. so to earn 2.8% you only have to risk a 20% loss of Capital and after 164 years the company is about a high as it has ever been.

At a 14 to1 ratio too and NO ONE is lined up around the block to buy any.

In reply to by brushhog

GPW brushhog Sun, 07/22/2018 - 07:11 Permalink

Yes, the banker always wins in the end.  Avoid taking a loan and paying interest on anything but an appreciating asset (a house....maybe?: a new car....never). 

Don't run a credit balance on a credit card. Paying 20% interest on a monthly cc balance is absolute lunacy. 

Don't be a debt slave to the money changers.

In reply to by brushhog

Balance-Sheet bshirley1968 Sun, 07/22/2018 - 00:08 Permalink

Interest is the time you wish to rent the loan principal for and if that is 30 years it will be considerable and this is why we want to see interest rates rock bottom all the time and this means pass book savings at net zero return. We are definitely headed in the right direction with this.

The big savings on loans will come when banking is fully automated and all the employees are released and all the buildings/storefronts are closed.

The interest you pay now mostly goes to the titanic number of employees in the banks at every level. Once banking is 100% online with cashless banking loan margins can be razor thin. The same is true with education as 90% of all teachers and professors can be released along with 100% of the staffing. This will collapse the cost structure there too. You are very ably pointing out the costs of our obsolete institutions.

Just out of curiosity what rate do you feel would be fair on a 30 year mortgage?


In reply to by bshirley1968