That was the Fed’s political Playbook: Help Republicans gain and retain power.
Fed Chair Jerome Powell was appointed Fed Chair by Trump and then reappointed by Biden.
Jerome Powell, when questioned by Sen. Warren about corporations raising prices and achieving record profits, answered: “Because they can”.1
And one example of what corporations are doing to increase profits and inflation is raising gasoline prices.2
And this week the Fed announced the biggest interest rate increase since 2000.3
As control of the Congress is in danger of falling to Republicans this fall, this appears to be part of the Corporate Governance Playbook that defeated Jimmy Carter in 1980.
Back then, the Fed under Volker raised interest rates to 18% by election day and to 21% by Reagan’s Inauguration Day. The idea was to give Republicans the ability to ask voters “Do you want to go back to 21% interest rates under Democrats?”
Reagan then appointed a coal industry lobbyist to head NHTSA, who then reduced NHTSA staff by 30% (300 auto safety workers), a level that still exists at NHTSA 42 years later. The Reagan administration also rescinded automatic crash protection rules for air bags. (The rescission was overturned years later).
At the time, NHTSA was nearly shut down. One of us, a trusted statistician, examined the history of Fed interest rates back to the beginning of the Fed in 1913 to see if there was a political pattern.
He found a pattern that in general the Fed raised interest rates in the second two years when Democrats held the White House and lowered interest rates in the second two years when Republicans held the White House. That was the Fed’s political Playbook: Help Republicans gain and retain power.
Corporate Governance also increased by legal decisions that allowed more money into politics. Legal decisions and money flows have resulted in greater influence and control of government policies by corporations.4
References (Live Links to Documents):
- Sen. Warren Questions Fed. Chair Powell On Inflation During Senate Confirmation Hearing
- Shell posts record quarterly profit, lifted by energy price surge