The World Bank, IMF, and Fed May All Be in Trump's Line of Fire

Financial markets would react badly to institutional instability, but he might injure them anyway

- BARRY EICHENGREEN

During his first presidential term, Donald Trump took a relatively light-touch approach to the US Federal Reserve (Fed), International Monetary Fund (IMF), and the World Bank. He jawboned the Fed to reduce interest rates but did not demand that it clear its decisions with the White House or otherwise seriously challenge its independence.

At the World Bank, he installed David Malpass but otherwise left the institution untouched. He kept David Lipton, an advisor to Democrats, in place as the IMF's number two official, an appointment that is traditionally the prerogative of US presidents.

Trump's reluctance to move against the Fed reflected a recognition that financial markets would react negatively to a president tampering with monetary affairs. And Trump clearly cared about financial markets, publicly gauging his success by the trajectory of stock prices.

The IMF, for its part, served a useful purpose. Expensive economic problems in emerging markets that might otherwise end up in the lap of the Trump Treasury could be outsourced to the Fund. And the World Bank was simply too big and complex to understand, much less rein in, as Malpass learned to his chagrin.