Trump's "Fed Transformation Technique": A Quiet Financial Revolution!

Trump, that old guy, keeps shouting about wanting to fire Fed Chairman Powell. Whether he has succeeded or not is beside the point, but look at all the little moves he’s making behind the scenes? Tsk tsk, the Fed building is almost completely "renovated" by his people inside and out! Even Treasury Secretary Basent has made it clear: this institution, we need to "examine" it properly, just like cleaning up other departments, it needs a thorough overhaul!

Here comes the main point, let's talk in several parts:

Bank rules? Tear it down! Tear it down! Tear it down!

What does Trump hate the most? Strict regulations! He feels there are too many rules, and banks can't fully unleash their potential to make money. So, he quickly appointed his ally—Ms. Bowman—to a key position in regulating banking rules. This lady has been in the Fed since 2018, and now she is in power.

As soon as Aunt Bauman took the stage, she acted decisively! She quickly stripped away the "thick cotton coat" (the rules added after the financial crisis, called capital buffer) from the banks. The banks were ecstatic: "Oh my, now we can lend more money and make a fortune!" But sharp-eyed people were jumping in a panic! The former head of the banking authority, Barr, started to scold: "Isn't this ridiculous? You've emptied the banks' life-saving reserves, and if anything goes wrong, the entire banking system will collapse! Isn't this asking for disaster?"

What’s even scarier is that Aunt Bowman recently closed the door and held a small meeting with the banking bigwigs, with one theme: how to make the banking rules more "simple"? The representative from the bank said it quite "reasonably": "In the past, the rules were loose but easy to understand; now, the rules are strict but seem like a celestial book. Can’t we have rules that are both strict and simple?" Bah! Sounds nice, but in practice, "simple" often serves as an excuse for "loosening"! When the rules are relaxed, who suffers? Isn’t it us common folks with our savings?

Lay off people! Save money! The Fed also needs to "downsize"!

The Trump administration looked at the tens of thousands of employees at the Fed, their eyes almost popping out: "Are we really keeping so many people just to do nothing? Layoffs! Must lay off!" Chairman Powell is actually quite savvy; he had already announced that he plans to cut 10% of the workforce in the coming years (around two thousand or so), under the guise of "improving efficiency."

But the folks at the White House think it's not enough! Treasury Secretary Basant is shouting for something "tougher"! Trump is keeping an eye on his preferred candidate for the next chair, Walsh, who directly lashed out on television: "There are too many idle people at the Fed! They are raising a bunch of useless old men!" It sounds like he thinks that those who actually work are just air.

Why are they so eagerly cutting people's spending? Hey, even the Fed can't make ends meet at home! To keep those rising prices (inflation) in check, they're aggressively raising interest rates, and as a result, they dug their own grave—losing over 220 billion dollars on paper! Bessent has got a handle on this and keeps bringing it up every couple of days: "Look! Look at the mess you wasteful folks have created!" Even funnier is that when the Fed wants to spend 2.5 billion to renovate their old place, Trump goes around and surprisingly doesn't criticize? Their change of face is quicker than flipping a page! What principles? It all depends on their mood!

Game of Thrones: Can this "renovation" be done?

Former Fed veteran English has come out to say a big truth: it's easy for the Fed chair to fire a few executives, but completely overhauling the entire institution and making massive layoffs? That's tough! It requires a vote of approval from the whole committee! The new chair (like the person Trump might want to slot in) may be ambitious and eager to make big changes, but will the other committee members buy into it? That's another story! These people are not pushovers either.

Finally, we need to think it over:

Trump is playing a deep game! While Powell is still in his position, he's quietly placing his own people (Bowman) in key roles, intensively dismantling the banks' "buffers" (loosening regulations), and shouting about massive layoffs (saving money + blood transfusion). All of this is aimed at the moment in 2026 when Powell is out (or kicked out early)! By then, he'll replace him with someone he absolutely trusts (like that Waller), and the Fed will truly become his "personal fiefdom"!

Just thinking about it gives me cold sweat:

The bank's "bumper" has been dismantled. If one day there is another "big tumble," who will bear the risk? Isn't it still our taxpayers' money?

The people managing the banks are buddy-buddy with the banking tycoons, so how can they enforce the law fairly? Doesn’t this amount to "insider theft"?

The Fed was originally supposed to be an independent "technical department" for managing money, but it seems it is about to become a "political tool" in Trump's hands! Is this going to work?

What's the most frustrating thing?

The Trump administration criticized those PhD economists working at the Fed as "being on the payroll without doing any work," "not understanding what they are doing," and "academic slackers on a basic salary!" They disparaged a professional institution that is supposed to regulate finance and stabilize the economy to nothing! All to push their flawed ideas of "burden reduction" (reducing burdens on banks) and "efficiency" (cutting jobs to save money)!

So, we have to ask one last question honestly:

When the day comes that the big shots in the banks mess up and crash the economy, who will they blame? Will it be the economists who are today being criticized as "useless," or will it be the banks themselves, who are now shouting "long live deregulation"? At that time, will those who are clamoring to dismantle the "guardrails" today come forward to admit their mistakes and compensate for the losses? Think about it, ponder it carefully!