Trump Takes on the Fed

The president has criticized Federal Reserve policy for undermining his attempts to build the economy. The best way to make the central bank serve the needs of the economy is to make it a public utility.

For nearly half a century, presidents have refrained from criticizing the “independent” Federal Reserve; but that was before Donald Trump. In response to a question about Fed interest rate policy in a CNBC interview on July 19, 2018, he shocked commentators by stating, “I’m not thrilled. Because we go up and every time you go up they want to raise rates again. . . . I am not happy about it. . . . I don’t like all of this work that we’re putting into the economy and then I see rates going up.” He acknowledged the central bank’s independence, but the point was made: the Fed was hurting the economy with its “Quantitative Tightening” policies and needed to watch its step.

In commentary on, Richard Bove contended that the president was positioning himself to take control of the Federal Reserve. Bove said Trump will do it “both because he can and because his broader policies argue that he should do so. . . . By raising interest rates and stopping the growth in the money supply [the Fed] stands in the way of further growth in the American economy.”

Bove noted that in the second quarter of 2018, the growth in the money supply (M2) was zero. Why? He blamed “the tightest monetary policy since Paul Volcker, whose policies in the mid-1980s led to back-to-back recessions.” The Fed has raised interest rates seven times, with five more scheduled, while it is shrinking its balance sheet by $40 billion per month, soon to be $50 billion per month.

How could the president take control? Bove explained:

The Board of Governors of the Federal Reserve is required to have seven members. It has three. Two of the current governors were put into their position by President Trump. Two more have been nominated by the president and are awaiting confirmation by the Senate. After these two are put on the Fed’s board, the president will then nominate two more to follow them. In essence, it is possible that six of the seven Board members will be put in place by Trump.

Those seven, along with five federal district bank presidents, compose the Federal Open Market Committee, which sets monetary policy; and one of those district bank presidents, Minnesota Fed head Neel Kashkari, is already arguing against further rate increases. Bove concluded:

The president can and will take control of the Fed. It may be recalled when the law was written creating the Federal Reserve the secretary of the Treasury was designated as the head of the Federal Reserve. We are going to return to that era.

Returning the Fed to Treasury control, however, means more than appointing new Board members. It means “nationalizing” the central bank, making it a public utility responsive to the needs of the public and the economy. And that means modifying the Federal Reserve Act to change the Fed’s mandate and tools.

The Controversial History of Central Bank Independence

Ever since the 1970s, the Fed and other central banks have insisted on their independence from political control. But according to Timothy Canova, Professor of Law and Public Finance at Nova Southeastern University, independence has really come to mean a central bank that has been captured by very large banking interests. It might be independent of oversight by politicians, but it is not a neutral arbiter. This has not always been the case. During the period coming out of the Great Depression, says Canova, the Fed as a practical matter was not independent but took its marching orders from the White House and the Treasury; and that period was the most successful in American economic history.

According to Bernard Lietaer, a former Belgian central banker who has written extensively on monetary innovation, the real job of central bankers today is to serve the banking system by keeping the debt machine going. He writes:

[W]e can produce more than enough food to feed everybody, and there is definitely enough work for everybody in the world, but there is clearly not enough money to pay for it all. The scarcity is in our national currencies. In fact, the job of central banks is to create and maintain that currency scarcity. The direct consequence is that we have to fight with each other in order to survive.

The rationale for central bank independence dates back to a bout in the 1970s of “stagflation” – rapidly rising prices along with stagnant productivity. The inflation surges were blamed on political pressure put on Fed Chairman Arthur Burns by the Nixon administration to follow easy-money policies. But the link between easy-money policies and inflation is not at all clear. The Japanese have had near-zero interest rates for two decades and cannot generate price inflation although they are trying to. An alternative explanation for the rising prices of the 1970s is that producers’ costs had gone up, largely from increased labor costs due to the strong bargaining power of unions and the skyrocketing cost of oil from an engineered 1973-74 oil crisis.

Fed policy nevertheless remains stuck on the “Quantity Theory of Money,” which says that increasing the money in the system will decrease the value of the currency, driving up prices. The theory omits the supply factor. As long as workers and materials are available, increasing “demand” (money) can generate the supply needed to meet that demand. Supply and demand increase together and prices remain stable. And while the speculative economy may be awash in money, today the local productive economy is suffering from a lack of demand. Consumers are short of funds and heavily in debt. Moreover, plenty of workers are available to generate the supply needed to meet any new demand (injection of money). According to John Williams at, the real unemployment figure as of April 2018, including long-term discouraged workers who were defined out of official existence in 1994, was 21.5 percent. Beyond that is the expanding labor potential of robots and computers. A vast workforce is thus available to fill the gap between supply and demand, allowing new money to be added to the productive economy.

But the Fed insists on “sterilizing” every purported effort to stimulate demand, by making sure the new money never gets into the real economy. The money produced through quantitative easing remains trapped on bank balance sheets, where the Fed pays interest on excess reserves, killing any incentive for the banks to lend even to other banks; and the central bank has now begun systematically returning even that money to its own balance sheet.

The High Price of Challenging the Fed

An article in The Economist on July 28, 2018, contends that Nixon was pressuring the Fed to make the economy look good for political purposes, and that Trump is following suit. But there is more to the Nixon story. In a 2010 book titled The American Caliphate,R. Duane Willing says the Nixon White House had quietly drafted and sponsored a Federal Charter Bill that would have changed U.S. financial history. Willing worked for the Federal Home Loan Bank Board during the Nixon era and was tasked with defining the system requirements that would make a central computerized checking account and loan system available to the new banking system. He writes:

Only John Kennedy and Abraham Lincoln and two other assassinated presidents, James Garfield and William McKinley, prior to Nixon, had actively contemplated changes of such magnitude in the U.S. financial system.

President Garfield observed that “whoever controls the volume of money in our country is absolute master of all industry and commerce . . . and when you realize that the entire money system is very easily controlled, one way or another by a few powerful men, you will not have to be told how periods of inflation and depression originate.”

. . . The hidden secret since the beginning of modern capitalism is that money is created and managed by bank control over checking accounts in the loan-making process.

Willing says Nixon was preparing the Federal Home Loan Bank Board to change the traditional role of American savings and loan associations, giving them money creation powers like the big Wall Street banks had, providing a full-service nationwide banking system. The national money supply would thus be regulated according to needs at the local level rather than dictated from the top by the central bank. The proposed legislation provided for a separate central bank to backstop local credit unions and a much greater degree of competition for a wide array of financial services.

But Nixon’s plan for national finance, along with his plan for healthcare and a guaranteed income, alarmed the Wall Street/Federal Reserve power block, which willing says was about to be challenged like never before. Nixon was obviously not blameless in the Watergate scandal, but Willing contends it was pushed by “the Wall Street Great Merchants as owners of the Senate,” who “were making certain that the money dreams of ‘Tricky Dick’ and his vision for the Republic protected with a network of converted Savings and Loan associations was doomed.”

An “Independent” Central Bank or a Public Central Bank?

Challenging the Fed is thus risky business, and the president should be given credit for taking it on. But if he is planning to change the makeup of the Federal Reserve Board, he needs to appoint people who understand that the way to jumpstart the economy is to inject new money directly into it, not keep the money “sterilized” in fake injections that trap it on bank balance sheets until it can be reeled back in by the central bank. Interesting proposals for how the Fed could inject new money into the economy include making direct loans for infrastructure (as the Chinese central bank is doing), making low- or no-interest loans to state and local governments for infrastructure, or refinancing the federal debt interest-free.

Better than changing who is at the helm of the central bank would be to change the rules governing it, something only Congress can do. Putting the needs of the American people first, as Trump promised in his campaign speeches, means making the Fed serve Main Street rather than Wall Street.


previous version of this article was posted on Ellen Brown is an attorney, chairman of the Public Banking Institute, and author of twelve books including Web of Debt and The Public Bank Solution. Her 300+ blog articles are posted at

Ryan Rising: ABOLISH ICE!

We’re here at ICE! 630 Sansome Street to ABOLISH ICE! Come through! We have music, food, light, candles, flowers, electricity, tables, water, dancing : )

What could we use?

A portable stove! Eggs! Cooking oil and pots/pans! Hot food! D batteries! We’ll keep updating this list = )

Thank you all!

This is a 48 hour vigil! Come down anytime from now through Tuesday at 10pm

Follow us on Twitter: @OccupyICESF and Instagram: Abolish ICE SF

and join the facebook group!:

Share this far and wide! < 3

–Ryan Rising

The Triumph of Occupy Wall Street

Protestors affiliated with the Occupy Wall Street movement demonstrate in Duarte Square in New YorkEDUARDO MUNOZ / REUTERS 

On her first campaign stop in Iowa in April, Hillary Clinton struck a decisively populist tone, declaring that “the deck is still stacked in favor of those at the top.” Later, she sharpened her rhetoric on income inequality by comparing the salaries of America’s richest hedge fund managers with kindergarten teachers.

Clinton isn’t alone. Democratic presidential challenger Bernie Sanders has spent the spring railing against the excesses of Wall Street greed while calling for a financial transactions tax and a breakup of the big banks. Even leading Republican contenders have jumped on the inequality bandwagon: Jeb Bush, through his Right to Rise PAC, asserted that “the income gap is real,” while Ted Cruz admitted that “the top 1 percent earn a higher share of our income nationally than any year since 1928,” and Marco Rubio proposed reversing inequality by turning the earned-income tax credit into a subsidy for low-wage earners.

Nearly four years after the precipitous rise of Occupy Wall Street, the movement so many thought had disappeared has instead splintered and regrown into a variety of focused causes. Income inequality is the crisis du jour—a problem that all 2016 presidential candidates must grapple with because they can no longer afford not to. And, in fact, it’s just one of a long list of legislative and political successes for which the Occupy movement can take credit.

Until recently, Occupy’s chief accomplishment was changing the national conversation by giving Americans a new language—the 99 percent and the 1 percent—to frame the dual crises of income inequality and the corrupting influence of money in politics. What began in September 2011 as a small group of protesters camping out in Manhattan’s Zuccotti Park ignited a national and global movement calling out the ruling class of elites by connecting the dots between corporate and political power. Despite the public’s overwhelming support for its message—that the economic system is rigged for the very few while the majority continue to fall further behind—many faulted Occupy for its failure to produce concrete results.

Yet with the 2016 elections looming and a spirit of economic populism spreading throughout the nation, that view of Occupy’s impact is changing. Inequality and the wealth gap are now core tenets of the Democratic platform, providing a frame for other measurable gains spurred by Occupy. The camps may be gone and Occupy may no longer be visible on the streets, but the gulf between the haves and the have-nots is still there, and growing. What appeared to be a passing phenomenon of protest now looks like the future of U.S. political debate, heralded by tangible policy wins and the new era of activist movements Occupy inaugurated.

One of Occupy’s largely unrecognized victories is the momentum it built for a higher minimum wage. The Occupy protests motivated fast-food workers in New York City to walk off the job in November 2012, sparking a national worker-led movement to raise the minimum wage to $15 an hour. In 2014, numerous cities and states including four Republican-dominated ones—Arkansas, Alaska, Nebraska, and South Dakota—voted for higher pay; 2016 will see more showdowns in New York City and Washington, D.C., and in states like Florida, Maine, and Oregon. From Seattle to Los Angeles to Chicago, some of the country’s largest cities are setting a new economic bar to help low-income workers.

The tidal wave didn’t come from nowhere. The grassroots movement composed of fast-food workers and Walmart employees, convenience-store clerks, and adjunct teachers seized on the energy of Occupy to spark a rebirth of the U.S. labor movement. This renaissance was most recently visible on April 15, when tens of thousands of workers marched in hundreds of cities to demand better pay and conditions. McDonald’s and Walmart have responded with incremental wage hikes, and Senate Democrats this spring called for raising the federal minimum wage to $12 an hour. As Seattle City Council member Kshama Sawant, a socialist who rose to prominence with the Occupy movement, put it, “$15 in Seattle is just a beginning. We have an entire world to win.”

Occupy also reshaped the U.S.-environmental movement, which had its rebirth in fall 2011 when 1,200 people were arrested in Washington, D.C., protesting the Keystone XL pipeline. As people gravitated to Occupy encampments, teach-ins, and demonstrations across the country, that energy easily transferred into the fight against climate change. This was especially true on college campuses, where a student-led divestment movement has rid more than $50 billion in fossil-fuel assets from universities and institutional investment funds worldwide.

When it comes to money in politics, Occupy also drew mainstream attention to the corrosive influence of wealth on the political process. That helped spur a nationwide movement as 16 state legislatures and more than 600 U.S. towns and cities have passed resolutions to overturn Citizens United and draft a constitutional amendment declaring that corporations are not people and money is not speech. In April, the “We the People Amendment” to outlaw corporate personhood was introduced in the House by a Democratic coalition led by Representatives Rick Nolan (Minnesota), Jared Huffman (California), Keith Ellison (Minnesota), Matt Cartwright (Pennsylvania), and Raul Grijalva (Arizona). The message has resonated on both sides of the aisle, as presidential candidates from Clinton to Republican Senator Lindsey Graham call for a new era of campaign-finance reform to remove big money from electoral politics.

The student-debt crisis is another magnified arena where the Occupy protests shouted first and loudest—and in which serious policy shifts are now afoot. Occupy offshoot movements like Strike Debt, Rolling Jubilee, and Debt Collective are tackling America’s $1.3 trillion college-debt conundrum by buying back student debt for pennies on the dollar and forgiving it. Those movements also spurred a rebellion by student debtors, known as the Corinthian 15, who in April celebrated the closure of the for-profit Corinthian College chain, which they had accused of deceptive marketing and deliberately steering students into high-cost loans. In January, President Obama addressed the burgeoning crisis by introducing a $60 billion plan to make all community college free for two years. And in late April, nine Democratic Senators joined a list of 60 Congress members supporting a resolution to institute four-year, debt-free college nationwide—a dramatic departure from piecemeal proposals of the past.

Most significant, perhaps, is how the debate over inequality sparked by Occupy has radically remade the Democratic Party. Elizabeth Warren, the Massachusetts senator-who-is-definitely-not-running-for-president and the party’s most dynamic leader, launched her political career in 2012 with the 99 percent movement’s message of Main Street versus Wall Street. Since entering the Senate, Warren has drafted numerous bills to address income inequality, including the 21st Century Glass-Steagall Act that would separate investment banking from commercial banking and the Bank on Students Emergency Loan Refinancing Act that would allow students to refinance college loans at a lower federal rate.  By fighting to strengthen financial regulations in Dodd-Frank, break up “too big to fail” banks, and impose stiff taxes on corporations and the wealthy, Warren is the closest thing to an Occupy candidate the movement ever got. And now an army of elected populists in both the Senate and House is unifying around her.

On a local level, New York Mayor Bill de Blasio swept into office last year on a 99-percent-style “tale of two cities” campaign to address income inequality. He has since expanded pre-K education for tens of thousands of students, created municipal ID cards for undocumented immigrants, increased affordable housing, and guaranteed sick days for workers in America’s largest city. De Blasio now leads a national task force of mayors who hope to aggressively tackle the wealth gap in their cities—something scarcely imaginable before Occupy reshuffled the political deck.

Occupy was, at its core, a movement constrained by its own contradictions: filled with leaders who declared themselves leaderless, governed by a consensus-based structure that failed to reach consensus, and seeking to transform politics while refusing to become political. Ironic as it may seem, the impact of the movement that many view only in the rearview mirror is becoming stronger and clearer with time. Since the Great Recession, shareholder profits, CEO pay, and corporate tax breaks have soared while average household wealth continues to sink, college debt skyrockets, living costs increase, real wages decline, and the middle class struggles to survive. The world’s 1 percent now possess almost as much combined wealth as the bottom 90 percent. And while no one in Washington may have the full answer about how to fix income inequality, everyone, it seems, is now grasping for a solution.

It won’t be easy. Wresting power from the ruling financial elites will be an ongoing challenge, and ending big money’s grip on politics lies at the core of this effort. But business as usual must change because the planet can’t wait, and the people can’t, either. Occupy got the diagnosis correct. It also charted the course for concrete legislative reform. It’s now up to elected officials to achieve much bigger results—and for the grassroots movements to continue driving those policies into being. Because as millions of Americans learned following the election of Barack Obama, real change doesn’t come in slogans: It comes when the people demand it.

We want to hear what you think. Submit a letter to the editor or write to

MICHAEL LEVITIN is an editor and the co-founder of The Occupied Wall Street Journal.

Could San Francisco Open a Public Bank?

A task force is on the case, but how to build it is still up in the air.

San Francisco is considering the launch of a public bank, which would move city funds out of big banks like Wells Fargo. Photo by Mike Koozmin

In the midst of the Occupy movement’s righteous anger toward big banks and their role in the Great Recession, activists floated an idea: What if state-owned banks managed public funds, like San Francisco’s $11 billion annual budget, themselves?

Advocates say public money could be invested in affordable housing, clean energy, and small businesses. Cities could fund student loans at affordable rates, instead of immigrant detention centers, oil pipelines, and other institutions San Franciscans inherently oppose. A public bank has practical applications too, like saving millions of taxpayer dollars in fees spent on financial services.

A public bank is defined as a financial institution owned by a state, city, or county. Unlike big banks with chains nationwide, they aren’t motivated to maximize profits, all of which go back to the jurisdiction that runs it. To open, it would still need insurance, a bank charter granted by the government, access to the Federal Reserve, about 10 percent of its assets saved, and enough money to cover start-up costs.

Upcoming projects that need bonds, such as fortifying the seawall, could be issued through the bank instead of a major bank with millions of dollars in fees. San Francisco could save a staggering $68 million each year just on debt obligations, according to a 2016 study titled “Municipal Banking: An Overview.”

In 2011, at the height of Occupy, the city published a report at the request of then-Supervisor John Avalos, who added it to his mayoral platform — but the lack of support from Board colleagues meant it stayed a pipe dream. A decade after the 2008 mortgage crisis, the political will necessary to carry it through has finally arrived.

“You have to have inside people who have to be for it,” Avalos says. “It can’t just be from the outside.”

Timing has lined up for San Francisco to have both. Supervisor Malia Cohen — another political candidate, this time for the tax revenue distributor State Board of Equalization — in 2017 established a Municipal Bank Feasibility Task Force that Avalos sits on. Fellow Supervisor Sandra Lee Fewer has also advanced the idea in City Hall.

Along the way, the activist-run SF Public Bank Coalition has offered its own vision of principles and potential lines of business for the task force to adopt. Investing in infrastructure and underserved communities and steering clear of the fossil fuel industry and prisons are their guiding principles.

Local politicians have endorsed the idea, too. The coalition got supervisorial candidates Tony Kelly, Matt Haney, Christine Johnson, and Nick Josefowitz on the record as supporting a public bank.

As coalition member Jackie Fielder emphasizes, it also means transparency and public accountability — which aren’t synonymous with private, commercial banks.

“I think at this point, we are in a faith crisis in government [and] a faith crisis in this economic system,” Fielder says. “A public bank is another way to reroute money in the way we want to see [it] spent.”

Other cities and jurisdictions see this faith crisis. Massachusetts, Vermont, New Jersey, Oregon, and Santa Fe, N.M., produced feasibility studies, while movements exist in Oakland, Santa Rosa, Santa Barbara, Seattle, and New York. Los Angeles officials have placed a measure on the November ballot to make a city-owned bank legal.

The Bank of North Dakota, which opened in 1919 and holds all of that state’s funds, is the only operating public bank in the country. According to San Francisco’s 2017 policy analyst report, it withstood the 2008 financial crisis because it had a steady flow of credit for its member banks and commercial banks didn’t.

Since San Francisco has different needs and values than North Dakota, there are a few paths it could go down. The city could simply invest more in credit unions and community development banks, or it could go all in with a city-operated bank that phases in approved financial services.

It sounds like a great idea, but not everyone is on board. Jim Lazarus, a task force member and senior vice president of public policy for the San Francisco Chamber of Commerce, has some reservations. He says there are too many unknown hurdles, doesn’t think it will be legal, and isn’t sure if the effort is worth it.

“There’s no guarantee that somehow the city’s going to save money,” Lazarus says. “There’s still some things that can be done that doesn’t put the public’s money at risk.”

The City Attorney’s Office found that state law does not prevent cities from creating a bank as a separate legal entity. It would be allowed to extend credit while consumer services like checking accounts are not necessarily part of the vision so far.

With a draft of recommendations coming in September, the San Francisco Treasurer’s Office is mum on the details for now. The report will still be largely conceptual, says task force member Lauren Leimbach, who’s also the executive director of the Berkeley anti-poverty nonprofit Community Financial Resources.

Then it will be up to the Board of Supervisors to review and act on, including how to capitalize a bank that could manage the city’s $11 billion budget. A potential 2019 ballot measure put forward by the Public Bank Coalition would give officials a starting point, although Fielder says it would be focused on setting a bank mission statement.

This gives advocates time to educate the public and rally voters before the details are hammered out. Starting next month, the Public Bank Coalition will host information sessions to gather the public’s ideas — while making their case for dramatically changing the city’s finances.

“It’s an incredibly stressful and dark time, but this is also the time for bold ideas — because we have nothing to lose,” Fielder says. “We realize that local politics and local policy is where the magic happens.”

Ida Mojadad is a staff writer at SF Weekly. |  @idamoj