News > Capital Markets

What People Are Saying About Jerome Powell, President Trump's Pick to Lead Fed

By NexChange
Capital Markets

As widely expected, President Trump officially nominated Jerome Powell on Thursday, a Fed governor and former investment banker, to succeed Janet Yellen as Federal Reserve chair when her term expires in February.

While Trump has apparently warmed to Yellen during his first 10 months in office, the Wall Street Journal notes that it is the first time in nearly 40 years that a president has not asked the incumbent Fed chair to stay on for another term.

“We have been working together for 10 months and she is absolutely a spectacular person,” Trump said about Yellen while announcing his nomination of Powell during a press conference in the White House Rose Garden.

Powell, who is a lawyer, has worked as a partner at the Carlyle Group, an investment banker, as Treasury undersecretary for financial institutions in the administration of George H.W. Bush and as a scholar at the Bipartisan Policy Center, according to the Journal. Assuming he is confirmed by the Senate, Powell will now add Fed chairman to his resume.

Here’s what people are saying about Trump’s nominee:

Don’t expect Powell to rock the boat While Trump has made a habit of nominating people whose views of the government agencies they are charged with leading run counter to the mission of said agency (See: Scott Pruitt, Environmental Protection Agency), Powell is viewed as a “sensible centrist.” New York magazine’s Eric Levitz notes that Powell is “widely seen as a Republican Yellen. Meaning: Unlike arch conservatives, Powell approves of Yellen’s slow, deliberate approach to bringing interest rates back up.” However, Levitz adds that when it comes to regulation Powell is likely “a bit more sensitive to the financial community’s desires” than Yellen.

Powell is more Yellen than Greenspan The Wall Street Journal‘s Nick Timiraos and David Harrison write that in recent years the people who have served as Fed chair can be broken into two groups: Those with “commanding personalities such as Paul Volcker and Alan Greenspan, whose views on inflation and interest rates dominated central banking from the 1980s through the mid-2000s; and the consensus-driven leaders, Ben Bernanke and Janet Yellen, who guided the central bank toward more open decision-making and de-emphasized the power of the chairman.” Powell, Timiraos and Harrision surmise, is more Yellen and Bernanke than Volcker and Greenspan, at least based on his 40-year career in government.

Powell will be softer on regulation – to a point Powell has pretty much supported Yellen’s Fed policies across the board – being a “part of the Fed’s voting consensus since taking his seat, not once veering from the majority’s position,” CNBC‘s Jeff Cox reports. However, his approach to regulation will likely be such that he will allow Trump to set the Fed during his administration apart from the Fed during the Obama years. “He supports deregulation but not to an extreme,” Ian Katz, an analyst with Capital Alpha Partners, tells Bloomberg. “He’s a known quantity and he’s regarded as a thoughtful consensus-seeker. The finance industry views him as safer choice than someone who would want to blow up the place and scrap all the Dodd-Frank rules.”

But is Powell really cut out for the job? If there is one thing that worries people about Powell’s nomination, it’s that his academic background doesn’t really stack up to what we’re used to with a Fed chair. CNBC‘s Cox notes that most people who have led the Federal Reserve had Ph.D.s with more of an economics pedigree than Powell and his legal background. Paul Ashworth, chief U.S. economist at forecasting firm Capital Economics, said in a note that Powell’s “resume is not up to the standards” that we expect for someone nominated to lead the Fed.  “The risk of a serious policy mistake — in either direction — will arguably be higher under Powell’s leadership than under Yellen’s,” Ashworth said in the note, according to CNBC.

Photo: YouTube

Subscribe to our Newsletter

Be one of the first to experience the future of financial services