The evening after the Trump administration announced the president was nominating Jerome Powell to become the next Chairperson of the Federal Reserve, I combed the major news network sites and could barely find a single article about him. Since many — including me — believe the Chair of the Board of Governors of the U.S. Federal Reserve System is the second most powerful person on the planet after the U.S. President, I was unpleasantly surprised. The so-called Fed Chairperson has the awesome responsibility of shaping monetary policy through the nation’s Federal Reserve System. Unlike fiscal policy, which is shaped by 535 members of Congress and the president’s veto pen, monetary policy is mostly controlled by the Federal Reserve banking system. Since the U.S. dollar is widely held internationally as the world’s reserve currency, the role of Chair has great influence among all economies.
Unfortunately, global currency reserves and interest rates are not the first choices for provocative clickbait, but to see so little written about this critical pick is astonishing. To start, this is clearly an indictment of the American news consumer. Somehow, less than ten years removed from the greatest recession to hit the global economy since the 1930s, we remain transfixed in the usual beltway banter and celebrity obsession. The ratio of time we spend on such compared to the effect they have on our immediate lives is sadly disproportionate. Of course, the public’s interest in how the Federal Reserve operated was a lot higher back in 2008. That was when the Fed decided to save Bear Stearns and let Lehman Brothers fail, which many saw as the start of the Great Recession. Waiting until after the calamity to research the definition of uncollateralized derivatives, liquidity tests, and the Federal Reserve’s regulatory responsibility is a bit late, in my humble opinion. Now that we are past the Great Recession, it looks like the public’s interest is back to where it was pre-2008, unfortunately.
Now that I am off of my soapbox let us discuss Jerome Powell and how his pending appointment might affect our lives.
While the general public has not given a large amount of attention to Powell’s appointment yet, the economic and financial world is very interested in his past. They are in search of clues on how he would make decisions if his nomination survives the Senate approval process. Would Powell continue with the same cautious approach employed by Obama-appointee Janet Yellen, the current Chair? Goldman Sachs issued a report on Powell’s nomination that noted Powell would probably “preserve continuity at the Fed, as his stated economic and monetary policy views largely mirror those of the current leadership.” Overall, the consensus appears to be that Powell would take a common-sense approach and continue to cautiously raise interest rates while the economy improves.
It is noteworthy that President Donald Trump broke with tradition and chose not to reinstate Janet Yellen at the post (presidents typically do not replace Fed Chairs and allow them to stay until they voluntarily retire). Also noteworthy is that he will be the first former investment banker to lead the Federal Reserve and the first non-economist in 40 years.
The experts in the world of finance and economics seem comfortable with the pick. Powell, an alum of powerful private equity firm The Carlyle Group with experience as an investment banker, served in George W. Bush’s Treasury Department before he was nominated to serve on the Federal Reserve’s Board of Governors by then-President Barack Obama, according to The New York Times.
Powell’s experience on Wall Street and in private equity shows he has the capacity for this incredibly important job. However, Main Street still needs to understand Powell’s philosophy on issues closer to home, such as the growing income inequality afflicting the U.S. and developed world. Who is asking how Powell feels about the risk of creating speculative bubbles and their effects on the middle and working classes who are not well positioned to profit off of those bubbles? Where is Powell on the question of the Federal Reserve’s role in keeping unemployment rates low in light of managing inflation? How will his background in private equity and investment banking influence his beliefs on the Fed’s role in regulating the financial industry?
It is troubling that such a consequential choice has not garnered more immediate scrutiny in the mainstream press. Of course, with sexual assault scandals in Hollywood, Russian scandals in the Trump administration and DNC collusion scandals, people have many competing priorities on which to focus. Additionally, since Powell’s nomination will not be before the Senate until February, there may be more questions asked once he appears on Capitol Hill.
I certainly hope the mainstream press and middle-class news consumer pay more attention to issues like this in general. Back in 2007, issues like liquidity tests, over-leveraged balance sheets and derivatives were not sexy until the apocalyptic crisis hit and we remember where that got us.
An economic conservative till the end, Hughey strongly believes in the power of self-empowerment as the solution to many of society's problems. He is a business consultant for a management advisory firm in the Washington DC area and a contributor to Project 21, a black conservative organization. He also appears on television as a political and policy commentator on TVOne and RT. A graduate of Stanford Univeristy and Harvard Business School, Hughey believes that education and economic awareness are the keys to empower Americans to take back our nation.