Who Is Jerome Powell?

And what we can expect of the new Fed Chairman.

Come February 1, your new Chairman of the Federal Reserve will be Jerome Jay Powell. The Wall Street Journal reported yesterday that Trump informed Powell of his decision Tuesday and will introduce him as his nominee for Fed Chairman later today in a press conference at the White House.

Powell should have an easy confirmation path as he is a Republican and he is considered a Yellen clone.

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The Powell Rundown

Here is the fact sheet on Chairman Jay :

  • Powell has been a member of the Federal Reserve Board of Governors since 2012.
  • He is considered a moderate-to-dovish on monetary policy, along the lines of Janet Yellen.
  • Powell has also stated he would be open to lessening regulatory burdens. This could have been his main selling point to Trump.
  • Powell’s other government experience was a two-year stint as Assistant Secretary of the Treasury under President George H.W. Bush.
  • Powell is not an economist and has no working experience in economics. Some of you might think this is a big plus, but the last Fed Chair with no economic background was G.William Miller, who lasted one disastrous year (1978) as Fed Chairman.
  • Powell is a lawyer. He is a graduate of Princeton and Georgetown University School of Law.
  • Most of his post-collegiate career has been with investment banks in a variety of capacities but mostly in the deal-making realm.
  • Powell is not a billionaire. In his 2016 filing he listed assets of only $55 million.

That is all we know for sure at this point about Powell. He has mostly flown under the radar while at the Fed. He never gave a speech that the caused any reactions from the bond market. That will change. The more you look at him and his background, the more curious his selection seems to be. We also know that we don’t know what kind of Chairman he will be. We’ll find that out when he faces the first rough patch.

Powell was the choice in the bond community, but bond prices are little changed on the news simply because traders had already priced in this event. It is likely that some of the bond rally the past few days was directly due to expectations of a Powell nomination. Bonds might yet rally, but it won’t be on Powell. Those pesky chartheads are back on the bull side of things with the 10-year yield comfortably below 2.40%.

Here is one final fact about change at the Fed that came from Bloomberg: Whenever there has been a change of Chairman at the Fed, three months after the nomination the 10-year note yield has been higher 100% of the time.

Of course, these were all coincidences. But that’s quite a record.

Dwight Johnston is the chief economist of the California and Nevada Credit Union Leagues and president of Dwight Johnston Economics. He is the author of a popular commentary site and is a frequent speaker at credit union board planning sessions and industry conferences.

November 2, 2017

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