On today’s episode, Editor in Chief Sarah Wheeler talks with Lead Analyst Logan Mohtashami about the high stakes battle between President Trump and Fed Chairman Jerome Powell.
Related to this episode:
Why President Trump wants to fire Powell now | HousingWire
https://www.housingwire.com/articles/why-president-trump-wants-to-fire-powell-now/
Enjoy the episode!
The HousingWire Daily podcast brings the full picture of the most compelling stories in the housing market reported across HousingWire. Each morning, listen to editor in chief Sarah Wheeler talk to leading industry voices and get a deeper look behind the scenes of the top mortgage and real estate stories. Hosted and produced by the HousingWire Content Studio.
Related to this episode:
Why President Trump wants to fire Powell now | HousingWire
https://www.housingwire.com/articles/why-president-trump-wants-to-fire-powell-now/
Enjoy the episode!
The HousingWire Daily podcast brings the full picture of the most compelling stories in the housing market reported across HousingWire. Each morning, listen to editor in chief Sarah Wheeler talk to leading industry voices and get a deeper look behind the scenes of the top mortgage and real estate stories. Hosted and produced by the HousingWire Content Studio.
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NewsTranscript
00:00Welcome, everyone. My guest today is lead analyst Logan Motoshami to talk about the high stakes
00:11of President Trump's desire to fire Fed Chairman Jerome Powell. Things are changing fast here,
00:16so we want to talk about the background and what's behind this conflict. Logan,
00:21welcome back to the podcast on a very, very momentous day here.
00:25Sarah, we always say this, it's always something interesting. And today we were going to talk
00:34about Zillow's negative year over year forecast and prices and things that Ivy Zellman and I talked
00:42about. But an hour before we got on, the White House counsel is, Hassett came out and said,
00:48we are looking into, you know, if it's possible to fire Jerome Powell. So we had our previous
00:57podcast talking about like the Civil War, we wrote that article about this on Friday. So Monday
01:02morning, of course, today, who knows by this time, what the hell's happening. But I think the I mean,
01:10just for me personally, politics is the word itself, politics, many bloodsucking parasites,
01:16right? There's reasons why we keep politicians away from certain things, because they'll tend to do
01:24things that they believe themselves is good for the short term or whatever they want. But it could have
01:33broader implications in a negative sense. A lot of people always go look at Turkey. Turkey basically
01:39threatens all their Fed presidents and inflation run rampant. I don't we don't have like the
01:46Turkey situation. But you don't want to go in that slippery slope where all of a sudden the
01:51president can because basically the president dictates policy. Like he could fire the next
01:56Fed president, he could fire he keep on firing people until he gets what he wants. So President Trump
02:03wants lower rates now. But the question is, why now get into this whole aggressive front
02:12on camera with the White House counsel? What changed recently for this to become now open policy?
02:23Okay, well, let's take one step back. And pretty much everyone thinks that this could be a very bad
02:28idea, correct? What do you think the market reaction would be as far as like what this does to the
02:33overall economy? It's very easy what Secretary Secretary Besant and even Kevin Warsh, the guy that
02:42Trump wants to replace says don't do it, it will create market instability. Right? And whatever you
02:50thought the bond market was doing before or anything like that, you are putting the greatest agent of
02:56chaos into a Dante's Inferno Bosch painting. You have no control over any of that. And it you once
03:03you break that, that genie bottle, there's no going back in there. So I understand why Besant and
03:12Warsh, the guy who Trump wants says don't do this. So it's one of these things where I always go back,
03:23I really believe Peter Navarro does not do Trump any good. I don't think he understands markets. I think
03:30he, this is just full China related. And, and in that sense, you think you have power over things
03:39you can't control. And clearly what the market showed is stock market doesn't care. What do you
03:44do? Get everybody to stop selling? The bond market doesn't care? Oh my God, we have we have one
03:51reversal yield trade go to 458 on the 10 year yield and people are freaking out about this. So
03:57you don't want to open this genie bottle. There's like no going back on this because then basically
04:04the president of the United States is the Fed chair in that conversation.
04:11And what does that look like? Okay. So we are, we're recording this on Friday morning. So go live
04:16on, on Monday morning. If something happened over the weekend where this happened, what do you think
04:20the market would do? Well, forget about the concept of the market. The whole thing goes away. We have,
04:28we have this principle about the Fed and keeping them away. This is, this would be a titanic shift.
04:36Even if the, what, if the market goes down or market goes up or whatever, this, you can't have this.
04:43You can't have presidents running Fed policy. Then Democrats would come in and they would want
04:51lower rates. And then, you know, whoever president that that's, that's not their job. The dual mandate
04:57is to keep, you know, things at bay. This is why you don't, don't even want to even have the
05:03conversation or what the market does. It's the principle of keeping politicians out of this choice
05:10and having some separation because you, it, it's the president of the United States. It's not the
05:17president of the Fed. That's why, that's why treasury secretary said, and Warsh said, don't do this
05:25market instability right away. And when you lose that market instability, how do you get this back?
05:34Because to me, the clock is ticking on Trump and that's, that's the problem that, uh, he has right
05:41now. Well, let's talk about then, even in the face of his own people saying, this is a terrible idea.
05:47Why do you think that he's, you know, what's the pressure he's under? What, why does this make sense
05:51to him right now? I, whatever the original trade war was, it's obviously gone astray. Okay. So, um,
06:01now it seems like the white house wants to get everybody to go after China.
06:07If you want that, why alienate your neighbors and allies? So that's, that's the question a lot of
06:14people are asking that if you wanted this to be a pure China play, why are you going after Canada
06:20for fentanyl? Why are you going after Mexico? Now my, my counter to that is that we, we've, we force,
06:28you know, the gods of tariffs on these countries and they can't handle it. So they have to join us.
06:33You then say, Hey, listen, we'll take all the tariff thoughts. If you, uh, uh, go after China
06:38with us. Well, if that's the case, you're going to have to do that soon because what happens is
06:45this is a democracy and you have midterms, right? This is not, this is not the Chinese. The Chinese
06:52have thousands of thousands of years of history about not losing face and their dictatorship.
06:59They lock their peoples down for a very long time. They can out, out weight this because if Trump
07:05loses the midterms in terms of the Republicans losing house in the Senate, those tariffs will come
07:11back because Congress could get a veto proof vote on this. And then this whole two year thing goes away.
07:17So I believe that Trump has said, listen, we, we have to do something concrete here. So let's just
07:25go all blitz on China. The problem we're seeing now is manufacturing surveys are tanking. Consumer
07:32confidence surveys are tanking. The truckers, if anybody's looks at the trucking data, which I'm a lot
07:40of Republicans, uh, tanking, um, trade data, the consequences of not knowing what, uh, uh, what to
07:48do with your own business is, is very, it's a very, it's, it's such a, uh, a chaotic time that even the
07:55small business index, which are basically 91% conservative tanking it's April, the midterm elections
08:03in terms of getting marketing is not that far off. So he has a very small window of time. Like we've
08:10talked about for, for, uh, uh, a few months now, whatever he's going to do, he's going to have
08:15to do it fast. However, he believes like the white house believes since majority of the U S, uh, uh,
08:22economy is domestic consumption, right? This is correct. That if rates go lower and energy prices
08:29go lower, then he has more wiggle room to deal with it because people will consume, right?
08:36More homes are going to be bought. When more homes are bought, more consumption of goods,
08:41right? Into your house. Uh, he's counting on that to give him a little bit more time to whatever he
08:48wants. But again, time, right? The Chinese don't have midterm elections. And when you flinch on one
08:59bond market move already, you have to remember there are very sophisticated trained people right now in
09:05other countries, looking at Trump's body language, looking at staff members, everything to try to
09:10figure out the counter to the best ways in this. And we are a little bit late in the game to China
09:14just, okay, let's change everything and focus all on China. So it's easier for him to kind of do this
09:20if hypothetical, right? If mortgage rates were at 4%, if energy gas prices are at three, four year lows,
09:29right? Because people will still then consume, but now we don't have that. We have near 7% mortgage
09:38rates. Gas prices are, are, are coming lower, but, uh, I think there's just frustration, right?
09:47There's frustration because whatever this trade war started since liberation day, it's, it's been a
09:52little bit more hectic. And now we've moved into the, let's all focus on China, uh, act. We'll take
09:58your tariffs off, which then implies then when, why are we going after our allies and trade? You see,
10:04it's, it's, it seems like something went astray and out of frustration, he is openly saying,
10:12you know, on, uh, you know, when we did our podcast last time, it was before he went on TV
10:17and said, he's been thinking about firing Powell for months. So, uh, I don't know it to me, that's,
10:25you, you show your cards when you're frustrated, you know, let's like what Q told James Bond,
10:32never let them see you bleed and always have an exit plan. Okay. So, um, I, I, by Monday,
10:41who knows what happens and we're just, we're just throwing variables out and, and, and things coming
10:47in that we just, we, we were, we're dealing with a bigger version of what 2018 and 19 was. Um, but
10:55if you want to know why the whole focus is on lower energy and lower, lower rates is that they all
11:01believe they can still keep the economy going with that. We had a manufacturing recession in 2015,
11:0716. Um, you didn't know me back then. That was my big fight against the, uh, uh, the anti-central
11:14movement back then they thought, well, manufacturing goes into a recession. Then, uh, the U S goes into
11:20recession. That's always happened. Technically there are some validity to that, except the U S
11:25consumer was still consuming. You would need like residential real estate and then manufacturing to
11:30go in together. So we had this contraction back then, uh, and the U S was still expanding here.
11:37It's, it's, it's a little bit more difficult, right? The fed is not cooperating. Um, and you have
11:44rates and you're 7%, not three and a half to four and a half percent like you were back then. So
11:50I think time, right? The, the midterms are coming closer and closer and you already have
11:58Republicans in the Senate and the house being a little bit more, Hey, listen, what's going on here?
12:03Uh, uh, and I'm sure he hears that as well. So it becomes more problematic as the longer this goes,
12:09the more problematic I can get if rates are elevated, if gas prices are elevated,
12:15but he believes and his staff believes that they can weather this storm. If those two things come
12:21down. So I think this is the, you know, um, one of the things that Trump said was that he was calling
12:26Powell. I think he named him like too late Powell or something like that. You've said before that you
12:31feel like, you know, um, the fed can be old and slow. Sometimes they get behind, but there's maybe
12:37a difference between that. Would you say? And then like, you can't just say, Oh, we can, there's not
12:41the economic case to bring down rates at this point. Do you think? Here's the thing. The fed is
12:47naturally behind the curve. That's just who they are. I mean, that's, they tend to be reactive to
12:53negative data when it's too apparent. Um, I'm going to give you, I'm going to give everyone a good
12:59example. We always say we believe in economic models. We don't believe in human being, especially
13:04men. American men tend to be like the most egotistical, but have no models. My six recession
13:11red flag model flagged in 2006. And then we're seeing all of a sudden residential construction
13:19workers, all these things are happening. That would be a recessionary indicator right there.
13:24Fed didn't do anything until well late into the game. Um, credit was deteriorating in 2005,
13:33six, seven, eight. We show these charts all the time. Fed didn't do anything until later. We see
13:39credit deteriorating now. Fed's like, okay, we've cut rates 1%. We believe we're so by the nature of
13:47the beast. They kind of went ahead of the curve already. Um, but in this case, Trump wants a lot
13:55more lower rates because this becomes a housing thing, right? We've, it's what we've talked about
14:00for, for some reason, this has become the white house policy on housing. And if you look at economic
14:06cycles, post-World War II, there is one variable fact. Housing typically leads you into a recession
14:13and housing leads you out. This means housing starts, permits fall, residential construction
14:18workers lose their jobs, a recession happens, rates go lower. And then all of a sudden it comes
14:23back up higher. The expansion starts over again. This is why people say permits are really, but here
14:28we are. Housing permits have been dead for like two, three years now. Um, so this is more not about the
14:36economic cycle. This is about, I need better weapons to fight the trade war. So of course,
14:43for me, it's always, listen, in the reality of what fed policy is and inflation above their target,
14:516% mortgage rates cures some of the fear of recessions. This is before, this is what we were
14:58talking about in, you know, November and December of 2024, that the, the housing data, the builders are at
15:05risk. Right. And I think what happened was that in toward the end of the year, the builders confidence
15:11started to rise because Trump won. So a lot of people would just say, well, they're, they're front
15:15loading their confidence data. So housing should be fine, except rates were going up. And what we've
15:20seen is that when rates get towards seven and above, it doesn't work for the builders, right? So
15:25confidence, one thing, but the rate factor was the other. So you hypothetical, let's just say,
15:31let's just say mortgage rates were five and a half to 6.125 the entire year. Builders feel better.
15:40Home sales grow. Activity picks up. This is what Trump wants. So this look at it in that, because
15:48during this trade war, he believes, well, okay, the consumption data is still going because you have
15:53a model to work off. You had a manufacturing recession in 2015, 16, and you, and you were able
15:59to weather that here. It's kind of the, it's kind of the same thing, but that in lower energy prices,
16:05more disposable income is kind of keep it as simple as that. He wants to fight this trade war
16:12with more disposable income and housing growing. And he feels that gives him a better chance.
16:17That's why he wants to fire Trump. That would, that would imply that whoever he has has cut a deal
16:25with them and they're going to cut rates right away. That's a whole problem in itself too,
16:30because then the president becomes basically the fed president making policy. So, and what if that
16:36person doesn't do what Trump wants? You fire him. Do you see the slippery slope it gets into,
16:41uh, out there? So, uh, that's why you kind of, you listen, if you want to yell at the,
16:47the fed 24 seven, go ahead. Everyone does that. But when you start, when you open this Pandora's box
16:55and, Oh, that's, that's the issue. It's also, you know, it's not like settled that he can even do
17:04this. So if, if he attempts to do this and then, you know, Powell has already said he's going to have
17:09a defense, it would go between up to the Supreme court. Like all of that in between time is that's
17:14not good. That instability is not good. It's chaos. And we saw what chaos already did.
17:19Liberation day. What happened? All hell broke loose. So I think it's frustration. I think what,
17:25whatever the original trade war tap dance was, because let, let's remember this isn't like day
17:31one. We went into this, whatever that tariff, you know, percentage, uh, increase was we waited a few
17:40months then decided not to tell kind of everybody. And then threw that in there. And now we're dealing
17:46with all this. Um, see, when you do tariff on and tariff off, you have time to negotiate deals.
17:53Okay. Whatever. But when you, I mean, that was the problem. We remember like, was it two months ago?
17:59We said maybe an unforced error. When you, when you bluff so much, you eventually have to do something,
18:05you know, and people say, no, he could keep on doing this. No, he can't. He has to do something
18:09because everyone's going to say he's just not serious. So serious here, but now it seems like
18:15the goalpost has moved on what the direct plan is. So, uh, this is why, again, the original thing
18:20was about why does Trump want to fire him now? It's getting late, right? It's soon. We're going to
18:27start having midterm, um, um, marketing going on and this and that. And it's, it's harder for him
18:34if red States start to lose jobs, right? Because people go, well, what are you going to do for us?
18:40So I'm expecting farmer bailouts. I'm expecting trucker bailouts. I'm expecting whatever you can
18:47to facilitate because he's going to start losing. We are in a war now and we need to use whatever tools
18:52we have to fight this war. So think of that mindset. I need the fed to lower rates to fight
18:58this war. I need lower energy prices. I need bailouts for the farmers. I need money to go to truck. I
19:02need all of this to fight them. And they're sitting there. China's going midterms election.
19:10We don't have that issue, homie. So it's the reality. They just have a different timeline.
19:16I mean, that's, that's, that's kind of the issue. So if you want to know why we got so aggressive on
19:21Thursday and Friday, it's, it's April, June, July, then all of a sudden Christmas is here.
19:28And, you know, I think I, I, I might be off on here, but I think the 90 day when they did the
19:3590 day timing, it was July the 4th. You know, I, I think I, I might be off, but I, I, the first
19:42thing I say is the 90 day timing of, of what? Remember when they said, we're going to put the
19:46tariff, there's a tariff reprieve until 90 days. Oh, right.
19:50Right. The 90 days was July 4th. I I'd have to look that up, but you could see there's
19:54tactical things being done here for a theatric presence.
20:00Boy, we have a lot to continue to talk about. I wish we could do a podcast on Sunday because
20:05I feel like things are going to change so fast, but this is great background information
20:09and it's going to be 24, seven, seven days a week.
20:13We're just going to like have a camera on you to be like the Truman show. And it just
20:18follows you around. And at anything you say at any time, I mean, this is, this is why
20:23I, I I'll give you guys an example, how crazy things that. So I do live videos on Instagram
20:29stories that tell you what everyone's going. And I think that thing was like maybe 15,000
20:35people a month came in January of 2020. We're like up to a million now, just because it's
20:40like the, that is crazy. You have to, people want something fast and you know, in normal
20:48times we don't have to deal with this normal times. We just, you know, we, we wait for the
20:52data. We, you know, but when you're have such a high, I mean, we weren't going to talk about
20:57this today. We were going to talk about Zillow's price forecast and stuff that Ivy and I talked
21:02about, but because what happened Thursday afternoon and what happened Friday morning, we have to
21:07address the situation and what we wrote about on, on Friday on the reasons.
21:12I appreciate all the background and, and giving us, um, you know, the why behind everything
21:16that's going on. Logan, thank you again. We will talk very soon.
21:20Pleasure. And who knows it's Monday morning. This is coming out. We don't know what, what's
21:24going to be announced Saturday, Friday night, Saturday, Sunday, Monday morning. So
21:29Easter weekend means nothing for people making the news these days. I'm just telling you, I expect
21:34fully expect stuff to happen at, you know, six o'clock tonight.
21:39May the odds be with you all.
21:42Thanks, Logan.