President Trump has put the Federal Reserve on notice for violating the new administration’s America First policy, claiming the central bank has been operating illegally and ripping off Americans.
A warning letter, written by top Republicans and obtained by the Financial Times, accuses the Federal Reserve of burdening American businesses and workers with bad financial deals made with global central banks “without transparency, accountability, or the authority to do so”.
The Federal Reserve’s involvement in secret international banking forums dealing with financial regulation must cease and desist immediately, according to the letter.
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“This is unacceptable,” the letter states. “Accordingly, the Federal Reserve must cease all attempts to negotiate binding standards burdening American businesses until President Trump has had an opportunity to nominate and appoint officials that prioritize America’s best interests.”
FT reports:
Ralph Hamers, chief executive of Dutch bank ING, told the Financial Times that he feared the US could pull back from a global agreement on banking regulation, which has been delayed because of divisions on the Basel Committee on Banking Supervision.
“We don’t know the position of the Americans any more,” Mr Hamers said. “That does mean further uncertainty and uncertainty is never good, it holds back investment and restricts economic growth.”
Mr Hamers was speaking after the emergence of a letter to Janet Yellen, the Fed chair, from Patrick McHenry, one of the top five Republicans in the House of Representatives.
The letter, dated January 31, warned that the US’s “continued participation” in international forums such as Basel, the Financial Stability Board and the International Association of Insurance Supervisors would depend on meeting the Trump administration’s objectives.
Mr McHenry added that such a step would probably involve “a comprehensive review of past agreements that unfairly penalised the American financial system in areas as varied as bank capital, insurance, derivatives, systemic risk and asset management”.
Republicans are also pushing legislation to restrict the Fed’s freedom of manoeuvre. During the election, Donald Trump accused Ms Yellen of keeping rates low at the behest of former president Barack Obama.
“This is a multi-pronged attack on the Fed’s independence,” said Diane Swonk of DS Economics.
In a further marked shift of approach from the Obama administration, Mr Trump is also due on Friday take his first steps towards undoing parts of the Dodd-Frank reformsthat reshaped US banking in the aftermath of the financial crisis.
Mr McHenry wrote: “Despite the clear message delivered by President Donald Trump in prioritising America’s interest in international negotiations, it appears that the Federal Reserve continues negotiating international regulatory standards for financial institutions among global bureaucrats in foreign lands.”
He said the Fed was doing so “without transparency, accountability, or the authority to do so”. He added: “This is unacceptable.”
Mr McHenry has clout because he is vice-chairman of the House financial services committee. But whether the White House agrees with him on the issue is yet to be seen.
Steven Mnuchin, Mr Trump’s designated Treasury secretary, is still awaiting confirmation by the full Senate.
Wayne Abernathy, a senior official at the American Bankers Association, a lobby group, welcomed Mr McHenry’s intervention. “This whole international process is far too opaque and needs more public scrutiny and visibility,” he said.
As examples of problematic Basel regulations, Mr Abernathy cited rules that penalise banks for having heavy exposure to mortgage debt collection businesses, and liquidity rules that do not recognise that Americans tend to see banks as havens in times during crises.
Mr McHenry wrote: “The Federal Reserve must cease all attempts to negotiate binding standards burdening American business until President Trump has an opportunity to nominate and appoint officials that prioritise America’s best interests.”
Ms Yellen has said she plans to serve out the rest of her term, which expires in 2018. The Fed said the central bank had received the letter and planned to respond.
Baxter Dmitry
Email: baxter@thepeoplesvoice.tv
I want to know what happened to my interest on my bank savings deposit which has been stolen from me and tens of millions of others the past decade. Who got all of this money?.