The last few days, President Trump has made inflammatory and in some instances misguided remarks as to the nature of current Fed policy, its impact on the stock market and potentially on the economy. Examples follow:

In the face of these comments, Larry Kudlow, director of the National Economic Council, tried to walk back the idea that the President has been attempting to influence Fed policy and indicated that the President was merely expressing an opinion.

Presidential effort to influence Fed policy are not new, nor are they unique to the present administration, especially during an election season. For example, the Reagan administration tried but failed to get Chairman Paul Volcker to commit to not raising interest rates in the midst of the 1984 presidential election. Similarly, with a slow economy in the election year 1992, President George H. W. Bush called on the Fed to cut interest rates, discounting concerns the Fed might have about inflation. Chairman Greenspan’s Fed did not cut rates and was seen by the President as the reason for his election loss and one-term presidency.

While these presidential attempts to influence have largely played out behind the scenes, the most egregious breakdown in Fed independence involving presidential pressure involved President Nixon and Chairman Burns in the early 1970s and it had significant negative consequences for the US economy, which played out through the end of the 1970s. Leading into the 1972 election, Chairman Burns willingly responded to the President Nixon’s pressure and manipulated FOMC policy decisions to stimulate the economy as it emerged from the 1969–1970 recession. The extent and nature of that pressure has been well documented due to the existence of the Nixon presidential tapes, which are now publicly available.[2]