Federal Reserve Chairwoman Janet Yellen was caught unprepared in an appearance on Capitol Hill Wednesday for questions about whether her independent agency is partisan, just days after Donald Trump accused her during the presidential debate of manipulating monetary policy to benefit Democrats.
Hounded by Rep. Scott Garrett, R-N.J., one of the most conservative members of the financial services panel, about possible conflicts of interest between the Fed and Democrats, Yellen appeared to be taken by surprise.
In particular, Yellen didn’t have an answer when Garrett asked whether Yellen would demand the recusal of board member Lael Brainard if she learned that Brainard was negotiating with the Hillary Clinton campaign about a potential top post in a Clinton administration, for which Brainard is thought to be a leading candidate.
“I would have to consult my counsel,” Yellen said. “I’m not aware that’s a conflict.”
Republicans have raised criticisms of Brainard’s associations with Clinton. Earlier this year, it was disclosed that Brainard, a former Obama Treasury official, donated the maximum allowable amount to Clinton’s presidential campaign.
Garrett decried the “cozy relationship” between the Yellen Fed and the Obama administration. He cited Brainard’s donation, Yellen’s weekly meetings with Treasury officials, Yellen’s decision to give a speech on income inequality just before the 2014 midterm elections, and recent headlines suggesting that the Fed’s decision not to raise rates this month might benefit Clinton’s odds.
Yellen said just last week that politics do not factor into the Fed’s decision making, but Garrett said that “less and less people really do believe that.”
“What’s important to me is whether or not in our decision making … I see politics being brought to bear in reasoning about our decisions, and I’ve never seen that,” Yellen said Wednesday under questioning from Garrett.
Yellen’s appearance followed Trump’s suggestion Monday, before an audience of more than 80 million, that she is keeping interest rates low to benefit Democrats and in doing so is propping up an economic bubble. He accused her of being more political than Clinton.
At Wednesday’s hearing, Rep. Carolyn Maloney, D-N.Y., said she was “disturbed” by the unusually direct criticism of the Fed’s status from a politician.
Although the Fed chairman is appointed by the president, the central bank is set up as a quasi-private independent agency. In part, that structure was determined by Congress to allow the Fed to make monetary policy decisions apart from politics. Fed governors have staggered terms meant to insulate them from partisan pressures.
