The long-awaited new appointment of the head of the Federal Reserve was announced yesterday. Replacing Janet Yellen, whose four-year term ends in February, will be Jerome “Jay” Powell, a current member of the Federal Reserve Board. While Powell’s outward economics standpoint differs little from that of Yellen’s, Trump critics are already lining up to take a shot.
Despite the fact that Powell was an Obama appointee, described by the former president as, “tremendously qualified,” media outlets are making it plain that they see Yellen’s replacement as “less qualified, male and, in line with Trump’s penchant for appointing members of the 1%, far, far richer,” according to The Guardian.
Much of the criticism so far has been about Powell’s apparent lack of qualification. And while it is true that he is not an economist (which for the last 40 years has been the norm), he is a hugely successful investment banker who made his fortune with the Carlyle Group.
Some would suggest that the ability of someone to operate banks and keep money coming in may be a useful skill for the chief of the Federal Reserve.
To date, both Powell and Yellen have sung from the same hymn sheet. Since he joined the Fed board in 2012, he has voted along with every Fed policy and has been a staunch supporter of keeping interest rates low and only gradually increasing them as America escapes the recession.
President Trump, with his usual flair, built up excitement and anticipation prior to the appointment. Just last week he posted on Instagram, “People are anxiously awaiting my decision about who the next head of the Fed will be. I have somebody very specific in mind. I think everybody will be very impressed.” This coincided with an informal poll he carried out among Republican Senators. The poll will all but guarantee the appointment will be confirmed. One notable abstainer was Senator Bob Corker.
President Trump said that in the Fed, there is a need for:
“(S)trong, sound and steady leadership at the Federal Reserve” and that his choice will “provide exactly that type of leadership.”
Ms. Yellen seemed confident that not only would Powell’s appointment be confirmed, but that he would maintain a level course for the Fed. She said:
“(He has a) deep commitment to carrying out the vital public mission of the Federal Reserve. I am committed to working with him to ensure a smooth transition.”
Based on previous indications, it looks as if Powell will continue the Feds policy of minor interest rate rises and not attempt any “grandstand” moves. However, he has noted in the past that while he would not seek to overburden banking institutions with more regulation, he would want to see present regulation enacted better.
This was a solid (if uninspired) appointment. It will keep lawmakers satisfied and the Governors of the Fed in line, yet it will still be an opportunity for Trump critics to start looking for a clear line of sight.