Bill unveiled to let Fed tax foreign buys of U.S. assets

WASHINGTON — Federal Reserve Chairman Jerome Powell has spent several months fending off President Donald Trump’s demands to lower the value of the dollar to help American manufacturers sell their goods abroad. Under a bipartisan Senate bill due today, the central bank chief no longer would have any choice.

Sens. Tammy Baldwin, DWis., and Josh Hawley, R-Mo., are introducing legislation that would require the Fed to balance the nation’s current account, the broadest measure of the trade balance, within five years. Under the bill, the task would become a third official mandate for the Fed, along with maintaining stable prices and promoting full employment.

The legislation would empower the Fed to impose a “market access charge” on all foreign purchases of U.S. stocks, bonds, property and other assets. Supporters say the modest fee would discourage speculative short-term investments, reducing demand for dollars and causing the greenback to settle at a lower value, while not discouraging purchases of long-term assets such as factories.

Foreign investors purchased more than $21 trillion worth of U.S. stocks and bonds last year, according to Fed data.

The Baldwin-Hawley proposal, which will likely face stiff opposition from the financial industry, will be introduced as the Fed’s board of governors wraps up a two-day meeting widely expected to reduce the benchmark U.S. interest rate by a quarter of a percentage point, the first cut since 2008.

On Tuesday, the president said he was “very disappointed in the Fed,” which he blames for keeping interest rates higher than key U.S. trading partners. Higher rates push the dollar up, economists say.

There is wide agreement that the dollar is overvalued, though economists differ on the extent and the significance. Rob Scott, an economist with the Economic Policy Institute, a liberal group, said the dollar needs to sink by 25% to 30%. The International Monetary Fund this month said the dollar was 6% to 12% too high.