Jim Bianco: The Fed Has Changed Forever

**Jim Bianco** (0:00)
I think the Fed should be raising rates tomorrow. This committee is very divided. There's a lot to see here, because the Fed is fundamentally changing. The Fed gives you these promises, so you can go become a degen gambler. You want the 10-year note yield to stop going up, raise rates.

**Maggie Lake** (0:20)
Hello, and welcome to Wealthion, I'm Maggie Lake. Joining me to discuss the outlook for monetary policy in the economy is Jim Bianco, president of Bianco Research. Jim, it's great to see you.

**Jim Bianco** (0:31)
Good to see you, Maggie, looking forward to the conversation.

**Maggie Lake** (0:34)
So the Fed meets, drum roll, Wednesday. What are you expecting?

**Jim Bianco** (0:40)
I'm expecting no raid hike, although I think they should. And I'm expecting several dissents and a raucous meeting that we won't know about, that there could be as many as five or six dissents, that it could be a seven, five or six, six vote in order to not raise rates.
And Kevin Warsh will probably, if it gets to six, six will decide whether or not to raise rates. In other words, what I'm arguing is, this committee is very divided. This committee has got a number of hardcore people on it that want to raise rates. And that's why you've seen earlier today, the day before the meeting, as high as 40 percent chance that this committee might raise rates. They probably won't do it, but don't confuse that with, oh, there's nothing to see here. There's a lot to see here because the Fed is fundamentally changing.

**Maggie Lake** (1:35)
So how would you describe it now? What is the fundamental change you see?

**Jim Bianco** (1:39)
The biggest thing I see is that the chairman is one-twelfth of the Fed. He used to be 90 percent of the Fed.
He's like the Supreme Court justice. He's won nine votes.
Everybody at the Fed, because of the incessant attacks by Trump on the Fed, is now said that they're independent. They're going to assess the economy and inflation, and they're going to vote as they see fit. They're not going to wait for the chairman to tell them how to vote. That's the way it's worked for 40 years. It doesn't work that way anymore.
I think what you need to understand is that the chairman's job is now going to be one of persuasion of his colleagues to try and go along with what he believes. But at the end of the day, he could get outvoted by his colleagues. You might not think outvoted today, but they're definitely moving in that direction right now. And so I think that that's the thing that people have to understand is that everybody asked me, what is Warsh thinking? What is Warsh going to do? Why don't you ask me about the other 11? Because they're 87% of what's going to be decided. The other 11 voters, they're 87% of what's going to be decided out of the meeting. And that's, I think, going to be the biggest change. So what I see on social media and a lot of hot takes is, let me tell you what the Fed's going to do. And then they proceed to tell you how it's always been under everybody else. And I'm like, no, there's a demarcation here with Warsh. He's doing it differently. And the committee, because of Trump's attacks, is now taking their job differently. They're taking their job more independently.

**Maggie Lake** (3:09)
That's so interesting. I mean, remember the cover of the Maestro, right? With Greenspan. I mean, that was the sort of quintessential no dissents. All the arguments were behind closed doors. Because there's been difference of opinion all along. It was just sort of more kept behind the sort of hallowed doors of the Fed.

**Jim Bianco** (3:25)
So I might add about that Maestro thing that famously they would have a meeting, the FOMC meeting, Greenspan would write the statement the night before, which used to beg the question, what's the point of the meeting if you wrote the statement the night before? At this meeting, there might actually be some emotion and some sharp words at each other. I don't know if you saw the Wall Street Journal this morning, but after the June meeting, there was a dinner with all of the FOMC members. And according to Nick Timmeros in the Wall Street Journal, Chris Waller had some pretty sharp words to say at Warsh in front of all of his other members at the meeting about his task force, saying, what's the point of them? Tell me who's on the task force and I'll tell you what the outcome is. There is no magic thing we never thought of that we should be doing that a task force should enlighten us on or something to that effect. That's what Waller told Warsh at his first dinner.