Choose a Fed chairman who is "willing to lower interest rates", the history of American presidents has always been "difficult to fulfill their wishes"!

President Trump nominates Kevin Walsh as the chairman of the Federal Reserve, with the intention of pushing for a lower interest rate policy. However, historical experience shows that attempts by presidents to make the Fed chairman comply with their wishes are often difficult to achieve. The experiences of the past three presidents present three typical scenarios: the chairman complying with requests leading to uncontrollable inflation, the chairman being loyal but unable to persuade other members, or the chairman turning towards policy independence and ultimately implementing interest rate increases against the president's wishes. President Trump has clearly expressed his expectations for Walsh at a recent Washington Alpha Club dinner. He jokingly threatened to sue Walsh if he didn't lower interest rates when asked to stand up by Trump. Considering Trump's public criticism of the current Fed chairman, Powell, whom he appointed, and even a criminal investigation launched by the Justice Department against Powell at one point, these remarks hold significant meaning. Walsh's nomination itself is under policy tension. He has been known for his hawkish stance for many years, warning of the risks of loose monetary policies and now being nominated for expressing a inclination towards lowering rates to the president. Despite current inflation still being higher than the Fed's 2% target. This change in stance may lead to questions within the Federal Open Market Committee about his true policy intentions. Nixon and Burns: The Cost of Compliance There is a precedent for presidents humorously conveying their policy expectations to the Federal Reserve chairman. In 1970, when Arthur Burns was sworn in as chairman, Nixon joked that the applause from the audience was "an early vote for lower interest rates and more money." As Nixon's long-time economic advisor, Burns understood the president's demands: "I respect his independence. But, I hope that he will independently come to the conclusion that my views should be followed." Burns eventually fulfilled the president's expectations, maintaining loose monetary policy in the run-up to the 1972 election. However, this led to inflation soaring from below 4% to over 12% by 1974. The Fed was forced to raise interest rates significantly, causing a severe economic recession, and Nixon resigned due to the Watergate scandal. Although inflation eased temporarily, it rebounded again due to the Fed's subsequent abandonment of its tightening stance. Burns' case has become a typical warning of political interference in monetary policy. However, the experiences of the other two chairmen, William Miller and William McChesney Martin, may be more relevant, as they show that even in the absence of severe inflation pressures, the Fed chairman may still fail to meet the president's policy expectations. Carter and Miller: An Unmanageable Institution At the end of 1977, Carter nominated former Textron CEO William Miller as the Federal Reserve chairman, hoping he would be a pragmatic leader who could collaborate with the government. However, Miller quickly encountered cultural clashes upon entering the central bank. He frequently voted against rate hikes in his initial meetings, often in the minority, swiftly undermining his internal credibility. Nancy Teeters, a former Fed governor who worked with him, recalled in a 2008 interview: "Bill Miller had a tough time especially in his first four or five months because he didn't realize he needed to have the majority. He thought he could tell us what to do and we would do it. And we all just looked at him, thinking, 'Huh?'" 17 months later, Carter moved Miller to become Secretary of the Treasury and appointed Paul Volcker to lead the Federal Reserve. Volcker implemented a radical tightening policy to curb inflation, but the economic recession it caused also affected Carter's re-election prospects. Unlike Miller, Kevin Walsh already has significant institutional experience upon joining the Federal Reserve. He served as chairman for five years during the financial crisis, giving him a deep understanding of the central bank's operations. However, he also faces the challenge of building consensus. Former New York Fed President William Dudley pointed out: "He is very thoughtful, but he may initially struggle to win the support of Fed staff and FOMC members because some of his policy ideas 'may not be fully formed.'" For example, Walsh voted in favor of quantitative easing in 2010, but a few days later, he published a column questioning that decision. Years later, when he criticized the Fed's policies as "chaotic and disordered," Minneapolis Fed President Neel Kashkari publicly rebuked him: "Kevin is a puzzle, contradicting himself, voting for QE one moment, criticizing it the next." It is worth noting that Kashkari is a voting member of the FOMC this year. This history highlights the challenges Walsh may face in terms of policy consistency and committee cohesion if he is nominated. Truman and Martin: The Victory of Independence History also reveals a third possibility: even if the Fed chairman performs well, they may still diverge from the president's expectations. This was the case between Truman and William McChesney Martin. Before 1951, the Federal Reserve was long under the actual control of the Treasury Department. When Truman's advisors negotiated an agreement to grant the Fed independence, the incumbent chairman resigned. Truman appointed Treasury Department official Martin, who had been involved in the negotiations, as his successor. At that time, Washington and Wall Street believed that this was just the "Treasury controlling the central bank in a different way," seemingly giving the Fed institutional independence but actually placing "their man" in charge. However, Martin expressed his position to Truman before his nomination. According to biographical records, during a meeting at the White House, Truman asked Martin if he promised to maintain stable interest rates, Martin did not concede, but pointed out that if the policy was not prudent, he said, "a rate increase might be necessary again. The market won't wait for a king, prime minister, president, treasury secretary, or Fed chairman." Truman still appointed him, but soon regretted it. The Fed under Martin's leadership continued to pursue a contractionary policy. The metaphor Martin later introduced, "leaving the punch bowl just as the party gets going," became a classic analogy for central bank independence. In 1952, the two met on the street, and Martin greeted the president, but Truman only responded with one word: "traitor!" Martin served for 19 years under four presidents. His early commitment to central bank independence, compared to the later case of Burns succumbing to political pressures, is deeply embedded in the institutional memory of the Federal Reserve and serves as an important reference for chairmen when weighing policy autonomy against political expectations. Walsh's Tightrope During his time as a Federal Reserve governor, Walsh himself emphasized the importance of the central bank's independence. In a speech in 2010 about the role of the Fed, he clearly stated: "The one reputation that a central bank governor should seek, if one needs to be sought at all, is to leave a mark on the pages of history." Now, if Walsh were to become chairman, he would face a complex balance test. Darip Singh, a former New York Fed official and economic and national security assistant in the Biden administration, pointed out: "He is genuinely committed to maintaining the Fed as a respected and independent institution." Singh also emphasized that maintaining institutional autonomy could lead to disagreements between Walsh and Trump, potentially putting him in a similar situation as Powell. He said: "The key is how he handles this relationship in private. Once it becomes a public confrontation, the situation will be difficult to salvage." Last month, at the World Economic Forum, Trump commented on the phenomenon of the "independence shift" of Federal Reserve chairs before formally announcing his nominee: "It's surprising how they change once they get this position." This not only reflects his understanding of the central bank's independence tradition but also foretells potential future policy tensions. This article was reprinted from Wall Street View, written by Jia Li; edited by GMTEight: Wenwen.