Centrist is pick to take over Fed

Declining to keep Yellen on, Trump names banker Powell

In this Sunday, Oct. 15, 2017, file photo, U.S. Federal Reserve Chair Janet Yellen speaks during the G30 International Banking Seminar, at Inter-American Development Bank headquarters in Washington. On Wednesday, Nov. 1, 2017, the Federal Reserve releases its latest monetary policy statement after a two-day meeting.
In this Sunday, Oct. 15, 2017, file photo, U.S. Federal Reserve Chair Janet Yellen speaks during the G30 International Banking Seminar, at Inter-American Development Bank headquarters in Washington. On Wednesday, Nov. 1, 2017, the Federal Reserve releases its latest monetary policy statement after a two-day meeting.

WASHINGTON -- President Donald Trump tapped Jerome Powell on Thursday to replace Janet Yellen as Federal Reserve chairman when her term ends in February, choosing a moderate member of the Fed's board who has backed Yellen's cautious approach to interest-rate increases.

Powell, 64, is seen as a safe pick whose selection likely will assure investors hoping for continuity at the central bank. Some analysts see Powell, though, as more inclined than Yellen to ease financial regulations and possibly to favor a faster pace of rate increases.

Trump made the announcement in a Rose Garden ceremony with Powell standing beside him. He said Powell had earned the "respect and admiration of his colleagues" in his five years on the Fed's board.

The president also praised Yellen, the first woman to lead the Fed, whom he decided not to nominate for a second term. She will become the first Fed leader in decades not to be offered a second term after completing a first.

[PRESIDENT TRUMP: Timeline, appointments, executive orders + guide to actions in first 200 days]

Trump called her a "wonderful woman who has done a terrific job."

Powell said it had been a privilege to serve under Yellen and her predecessor, Ben Bernanke, and said he'd do all he could to meet the Fed's dual mandates of stable prices and maximum employment.

Powell, a Republican, was nominated by President Barack Obama in 2011, and is expected to get support from both parties.

If confirmed by the Senate, Powell would become chairman when Yellen's term ends Feb. 3.

But Republicans Pat Toomey of Pennsylvania and Dean Heller of Nevada of the Senate Banking Committee, which will hold hearings on the nomination, voted against Powell in 2012. Heller also voted against him in 2014, as did the current committee chairman, Michael Crapo, R-Idaho, and panel member Tim Scott, R-S.C. All of the five current top Senate GOP leaders, including Majority Leader Mitch McConnell of Kentucky, did so as well.

His tenure as a central banker has been relatively brief and, unlike the past three Fed leaders, Powell lacks a doctorate in economics and spent years working at investment firms.

Aaron Klein, a fellow at the Brookings Institution who worked in the Obama administration's Treasury Department, suggested that the absence of a scholarly background in economics should not impede Powell's ability to lead the central bank.

"I do not believe you need a Ph.D. in economics to chair the Fed," Klein said. "What's needed is judgment, confidence and the ability to know when the models and data and the best minds of the Fed staff may have missed something."

Powell supported rules the Fed adopted to implement the 2010 Dodd-Frank Act, which tightened regulations for financial firms after the 2008 crisis, but he has expressed skepticism in the past about the unconventional measures that the Fed has taken in the wake of the severe recession.

A graduate of Princeton University with a law degree from Georgetown, Powell worked at the venerable Wall Street investment bank Dillon, Read & Co. before serving as a senior Treasury official under President George H.W. Bush. Later, he was a partner in the Carlyle Group, a giant in the private equity business, from 1997 through 2005.

Powell has built a reputation as a collegial centrist on the Fed's board. Like the current and recent board members, Powell never dissented on Yellen's moves at the Fed to embrace low rates and to adopt other unorthodox policies to help sustain the economy's recovery from the 2008 financial crisis. In a book about his years leading the Fed, Bernanke praised Powell "as a moderate and a consensus builder."

With unemployment at a 16-year low and the economy on firm footing, Powell might want to step up the pace of the Fed's rate increases, which make loans costlier for companies and individuals over time. For any Fed, the risk in doing so would be in potentially miscalculating the proper pace of rate increases and inadvertently triggering a recession. Corporate profits would suffer, and stock prices likely would tumble.

The Yellen Fed and its go-slow approach to rate increases have been credited with helping nurture the continued recovery from the recession.

Nor can anyone know how well Powell would manage an unforeseen economic crisis that might arise over the next four years -- whether a recession, a credit crunch or a global financial crisis.

Powell, known as Jay, has maintained a low profile on the Fed board -- refraining, for example, from giving speeches on interest-rate policy. Instead, he has chosen to focus more on the regulation of banks and on overseeing such obscure but vital Fed functions as the U.S. payments system. Yet by the accounts of many Fed watchers, Powell has demonstrated a firm grasp of the nuances of interest-rate policy.

Powell's years in investment management have made him one of the wealthiest members of the Fed's board. According to his latest financial disclosure form, his assets were valued at a range between $19.7 million and $54.9 million.

Information for this article was contributed by Josh Boak of The Associated Press; by Laura Litvan and Elizabeth Dexheimer of Bloomberg News; and by Ana Swanson and Binyamin Appelbaum of The New York Times.

A Section on 11/03/2017

Upcoming Events