Issue of the week: Trump puts his stamp on the Fed
President Trump “broke precedent” when he nominated Jerome Powell last week to be the next chair of the Federal Reserve, said Ana Swanson and Binyamin Appelbaum in The New York Times. For nearly four decades, chiefs of the U.S. central bank have all been reappointed to second four-year terms, even by presidents of the opposite party. But after weeks of deliberation, Trump bypassed current Chair Janet Yellen, who was nominated by President Obama in 2013, in favor of Powell, a centrist Republican with ties to the party’s establishment. “A lawyer by training and investment banker by trade,” Powell has served since 2012 on the Fed Board of Governors, where he has “consistently voted with Yellen to slowly raise interest rates and sell off assets that the Fed bought up” after the financial crisis. “Trump infused the search with suspense and showmanship seldom seen in the normally staid business of picking a central bank leader,” said Peter Nicholas in The Wall Street Journal. He teased the announcement in an Instagram video and cast a wide net for advice, consulting a TV personality, a casino magnate, and GOP lawmakers. His economic adviser Gary Cohn was briefly considered for the job, while Vice President Mike Pence lobbied for conservative economist John Taylor. Cohn himself made a last-minute case for Yellen. But Trump ultimately settled on the “conventional” Powell.
It’s “indefensible” that Trump didn’t reappoint Yellen, said Matt O’Brien in The Washington Post. Sure, Powell is a solid choice: He’s got experience in both Washington and on Wall Street and has made smart decisions in his five years on the Fed board. But ellen “couldn’t have been better” at her job, with unemployment at a 17-year low and inflation at just 1.6 percent. “Those are fantasy numbers for a central banker.” It’s hard to overlook the fact that Trump is “replacing the most powerful woman in America with a less qualified man,” said Jordan Weissmann in Slate.com. The 64-year-old Powell will be the first Fed chair without an economics Ph.D. since Alan Greenspan took the job in 1987. In a world where women in positions of authority face constant scrutiny about how they made their way to the top, it is worth noting that Powell’s “chief qualification is agreeing with the woman he is set to replace.”
Powell is a “sane and sober” choice who signals at least “shortterm continuity” in Fed policy, said Kenneth Rogoff in The Guardian. He understands the Fed’s myriad challenges in trying to head off the next recession, but he’s also expected to be more open to rolling back financial regulations adopted since the financial crisis. His biggest test may simply be “staying out of Trump’s shadow” and protecting the Fed’s independence from a president “seemingly intent on challenging all institutional norms.” In a presidency that has been marked by personal attacks and rude tweets, “relations between the White House and the Fed have been remarkably calm and monotonous,” said Robert Samuelson in The Washington Post. Can that last? The day will come when the unemployment rate rises and the stock market falls. If Trump directs his ire at his new central banker, “the Powell Fed may be less boring than we now imagine.”