political attacks on the federal reserve could undermine its independence<u+2014>but so could political donations from fed officials to politicians. that is the consensus from a recent wall street journal survey of economists, 94.3% of whom said independent central banks perform somewhat better or much better than central banks controlled directly by government executives or finance ministries. rhetorical attacks on central banks could undermine this independence, 69.2% of economists said. but 70.6% of them also said campaign donations from fed policy makers to politicians undermine the institution<u+2019>s independence as well. more than one-third of economists also said that if the next president asks fed chairwoman janet yellen to resign before her term is up in february 2018, she should do so. the questions are more than hypothetical: the fed has faced intense criticism in recent months from republican presidential candidate donald trump, who has accused the central bank of keeping interest rates low ahead of the november election to help democrats, allegations ms. yellen has repeatedly rejected. mr. trump has said he would<u+00a0>not reappoint<u+00a0>ms. yellen if he is elected president.<u+00a0>he hasn't said whether he would ask her to resign. republicans in congress have criticized fed governor lael brainard for donations she made to the campaign of democratic presidential nominee hillary clinton. the barbs from politicians could undermine the fed<u+2019>s credibility with the public and weigh on officials<u+2019> actions, economists said. but donations from fed officials to politicians are <u+201c>terrible optics,<u+201d> said stephen stanley, chief economist for amherst pierpont securities. <u+201c>in this political environment, this action was ill-advised,<u+201d> said sean snaith of the university of central florida, referring to ms. brainard<u+2019>s donations. the donations have put fed chairwoman janet yellen in the awkward position of having to defend ms. brainard, while at the same time fending off charges of a partisan tilt at the central bank. ms. yellen told house lawmakers last month that ms. brainard, a top treasury department official in the obama administration and an adviser to president bill clinton before joining the fed in june 2014, had not violated any federal rules. but rajeev dhawan, an economics professor at georgia state university, said the move <u+201c>doesn<u+2019>t pass the common sense smell test.<u+201d> most economists agreed such donations are a bad idea. <u+201c>like caesar<u+2019>s wife, fed policy makers must be above suspicion,<u+201d> said thomas k. swift of the american chemistry council. some economists went so far as to say fed officials should be prohibited from making<u+00a0>political<u+00a0>donations while they serve at the central bank. nearly a third, however, said such donations didn<u+2019>t compromise the institution<u+2019>s independence. after policy makers join the fed, <u+201c>certain biases remain, that are reflective of leanings politically,<u+201d> said allen sinai of decision economics. <u+201c>but overt decisions for political reasons<u+2014>no.<u+201d> some observers have speculated that mr. trump, if elected, might ask ms. yellen to resign immediately. though 63.3% of economists said the fed chief has a duty to stay in the job until the end of her term, 36.7% said she should step down as chairwoman if asked by the next president, if only to avoid the turmoil that would accompany a showdown between the central bank and the white house. <u+201c>open warfare between the fed chairman and presidents would terrify markets,<u+201d> said lynn reaser, an economist at point loma nazarene university, who said ms. yellen should step down. several said the move would set a dangerous precedent, and could knock the economy off its already low-growth course. <u+201c>the fed by design has a deep bench, but it would be a very unorthodox and market destabilizing move of the next president,<u+201d> said constance hunter, chief economist at kpmg, who said ms. yellen should step down<u+00a0>if asked to by the president. the wall street journal surveyed 61 economists, but not every economist answered every question. write to kate davidson at kate.davidson@wsj.com
survey says political attacks, donations may undermine fed independence  - wsj
kate davidson