AILSA CHANG, HOST:
President Trump has stepped up his attacks on the Federal Reserve. This week after stock prices plunged, Trump ripped into the Fed for raising interest rates, which it's been doing for the last few years.
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PRESIDENT DONALD TRUMP: I think the Fed has gone crazy.
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TRUMP: I think the Fed is out of control. I think what they're doing is wrong.
CHANG: All right. For some perspective on this, we are joined by someone who worked at the Fed for 40 years. Until 2010, Don Kohn was vice chairman of the Fed's Board of Governors. Thank you so much for coming in today.
DONALD KOHN: Thank you for having me here, Ailsa.
CHANG: So how unusual is it for a president to be attacking the Federal Reserve like this?
KOHN: It's been very unusual since the early 1990s. Before that, and particularly under George H.W. Bush, the president and it's administration often voiced displeasure with the Federal Reserve's monetary policy.
CHANG: But maybe didn't call the Fed crazy.
KOHN: No, I don't think so. That doesn't sound like his rhetoric, does it? But since the Clinton administration came in, they decided that it was best for the Federal Reserve and for the country not to be constantly harping on monetary policy. So they could make their views known privately to the chair and other members, other decision-makers but not with this public pressure.
CHANG: OK. So up until now, Fed officials have been defending the Fed from the president's attacks. But then today the President of the Chicago Fed Charlie Evans, he was quoted as saying it's fair to question the rate hikes. So does Evans have a point? Putting aside the president's rhetoric, is it fair to question these rate hikes?
KOHN: I think it's always fair to question whether the Federal Reserve is doing the right thing. In a democratic society, the Federal Reserve has to be able to defend itself with the elected representatives and the public. I think it brings all the information to bear, but it's a legitimate question always. And the Fed needs to be able to answer why is it doing what it's doing.
CHANG: Do you think then that the president's comments pose any risk at all on how the Fed manages the economy? Could the president somehow sway the Fed to slow down the rate hikes?
KOHN: No, I don't think the president's words will affect what the Fed is doing. And I would note that the president has made some very high-quality appointments to the Federal Reserve, which makes me even more confident that it will continue to do the right thing based on economic analysis and information.
CHANG: You think the institution's well-insulated from the political winds the president's attacks could be sending over.
KOHN: I think it's very well-insulated. I do get concerned that if the president keeps up his attacks and others join him - and so far there really hasn't been - that he's putting the Federal Reserve into the middle of a very difficult polarized political situation. So I don't see an economic risk here, given who the decision-makers are. But I see a political risk. And I think it's important for the Federal Reserve to have the confidence of the people of the United States that it is doing the right thing, that it is a deliberate nonpartisan institution that's acting in their best interests.
CHANG: But you're a little concerned that maybe Trump's rhetoric could be affecting that trust among the American public.
KOHN: I think it could over time. Chairman Powell, as he says, has worn out the carpets on Capitol Hill trying to explain to the legislators, who are the Federal Reserve's oversight group, why they're doing what they're doing. And I think that's - as well as explaining to the American people - and I think that the basic insulation for the Federal Reserve from political pressure is understanding.
CHANG: That's Donald Kohn, the former vice chairman of the Federal Reserve Board of Governors. Thank you so much for coming in today.
KOHN: You're welcome, Ailsa. Thank you for having me on.
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