A Look at the New Head of the Fed: Jerome Powell Set to Keep the Good Times Rolling?
Jerome “Jay” Powell is next-in-line to chair the country's most important financial institution, the Fed. As we wrote about in the BAM blog previously, current chair Janet Yellen steps down when her term ends in February, paving the way for the new chair. Once considered too hard on banks by some, and not possessing the right background by others, Powell is set to step into a Fed overseeing a currently bustling economy with low unemployment and a solid stock market. Will the next Fed chair keep the good times rolling as predicted? We take a look at what you should know about Jay Powell with information from a lengthy feature article in Bloomberg.
He's not a trained economist by trade: Unlike every Fed chair dating back to the early 1980s, Jay Powell doesn't possess a Ph.D. in economics. He holds his undergrad degree in politics from Princeton and a law degree from Georgetown. His lack of formal education specific to the nuance of finance has concerned some, while others have noted Powell's drive and determination to adapt and learn in the field. A financial emergency could be tough for a leader who hasn't spent his career monitoring the economy – as a chair like Yellen has, for example. Yet the same skepticism about his ability was present when Powell joined the Fed in 2012; however, he impressed colleagues with his work ethic and became known for attending meetings with a binder bursting with material.
He doesn't make waves: While some argued for the president to appoint a chair who would shake things up, Powell is seen as being pragmatic, measured, and deliberate. He oversaw four of the Fed's seven committees and basically did jobs other governors didn't want to do; this gave him valuable insight into the Fed's inner workings.
He's a successful businessman: Powell certainly isn't taking the position for the salary. Recent financial disclosure forms estimated his assets at upwards of $55 million, making Powell one of the wealthiest Fed chairs in modern history. Jay Powell spent most of his career in finance, landing at private-equity firm Carlyle Group. While there he set up an industrial unit, and was regarded as a selective and wise investor. His combination of private sector finance, legal training, and government experience create a unique package.
He has impressive Washington experience: Back in 1991, Powell was working at the Treasury Dept with colleague-and-future-Fed-chair Randal Quarles. Powell saw his first true financial emergency as Salomon Brothers attempted to corner a Treasury debt auction with fake bids, facing a possible bank run. Despite being on vacation at the time, Powell spent that weekend under a barrage of phone calls with then-Fed Chairman Alan Greenspan and Treasury Secretary Nicholas Brady. Powell performed as the contact person with Saloman Brothers investor Warren Buffet. According to Brady later, Powell had done a great job and Saloman Brothers did survive the Monday morning opening. Treasury colleagues respected Powell, including now-Harvard professor Robert Glauber, who said that others both trusted and respected Powell.
He is balanced: Initially, some discounted Powell as being too tough on banks to be appointed Fed chair to begin with. Now that view has changed to Powell being one who will create a finance-friendly environment. While it's true that Powell did sign off on tougher regulations, he also privately voiced concerns. He was sometimes what Bloomberg calls the “lone voice” warning of stringent regulation holding the economy back. Powell is expected to loosen some regulations while sticking with monetary policy that the Trump administration supports. Powell was initially tapped by former President Obama, which worries some Republicans that he might not be truly on board with the deregulation agenda. Yet unlike other wild cards initially pitched to chair the Fed, Powell is likely to continue Janet Yellen's gradual interest rate increases - where some wanted dramatic hikes which could have a destabilizing effect.
Jay Powell may equate to a safe pick, what Bloomberg calls a “known quantity.” The article proposes that Trump may have tapped Powell in order to continue the current economic and stock market success that they've seen under Janet Yellen's tenure....in which case if he follows suit as expected, he may indeed keep the good times rolling!