Powell’s Charm Offensive in Congress Positions Him to Keep Job
Federal Reserve Chair Jerome Powell has built a reputation as a skilled advocate for the U.S. central bank, thanks to strong personal ties forged with Congress that will help if he’s nominated for a second term.
Powell has worked Congress during his three years at the helm like no Fed chair since Alan Greenspan. But where Greenspan was a regular of the cocktail party circuit, Powell has taken a more workmanlike approach.
Since he took the helm of the Fed in February 2018, through June of this year, he’s held at least 350 meetings, dinners or phone calls with members of Congress, according to his monthly calendars. That’s almost nine per month, and many of those included more than one lawmaker.
The tally doesn’t count at least 16 appearances as chair before numerous congressional committees.
Powell, 68, already was favored for renomination, but that status got a significant boost when Treasury Secretary Janet Yellen, a former Fed chair herself, told senior advisers to President Joe Biden that she supports Powell continuing in that role.
Biden is expected to make his decision about who to nominate for the four-year term of Fed chair around Labor Day.
Powell’s relationships with a Senate currently split 50-50 along party lines would prove helpful in navigating any confirmation process, amid expressions of doubt among some progressives over his record on bank regulation. He has charmed both Republicans and Democrats in Congress at a time when Biden sorely needs to regain some goodwill on Capitol Hill amid the crisis in Afghanistan.
Powell, who was confirmed to the chairmanship in 2018 in an 84-13 Senate vote, came into office vowing to repair relations with Congress -- he said in an interview that he intended to “wear the carpets of Capitol Hill out.”
And for good reason.
At the time, the Fed’s standing remained badly damaged by the global financial crisis of 2008-2009. Much of the public and many politicians blamed the Fed for not seeing the crisis coming and for bailing out the banks that caused it. Republicans were especially aghast at the Fed’s emergency response, which included unprecedented purchases of Treasuries and mortgage-backed bonds, aimed at settling financial markets and stimulating the economy.
Not only has Powell rebuilt bipartisan respect for the Fed in Washington, he’s gained many a personal ally. Even Republicans who object to his bringing the Fed into debates on climate change and racial inequity want him reappointed.
Fed spokeswoman Michelle Smith declined to comment on matters related to the nomination process.
Powell, a former Carlyle Group partner, knows his way around Washington, having worked at the Treasury during the administration of George H.W. Bush and made congressional contacts on Capitol Hill during his time at the Bipartisan Policy Center.
As a Fed governor when Donald Trump was elected, he saw the opportunity for a Republican president to name a new chairman. Early in 2017, Powell reached out to then-Treasury Secretary Steven Mnuchin to get to know him, according to people familiar with the matter. The pair hit it off, and Bloomberg News reported at the time that Mnuchin lobbied Trump intensely to choose Powell instead of renominating Yellen as chair.
Once in office, he encountered how easy it was to lose Trump’s confidence. That’s when his charm offensive paid dividends.
In response to reports that Trump was considering firing or demoting Powell because of the level of interest rates, some Republicans rushed to his defense -- a rare occurrence in the Trump era. In an interview on Bloomberg Television at the time, Republican Senator Patrick Toomey warned it would “a very, very bad idea” to try to remove Powell.
Powell’s wooing of lawmakers isn’t reserved for fellow Republicans. He has impressed progressives with his frankness in owning up to Fed mistakes that may have slowed progress on jobs growth.
In a July 2019 exchange with New York Representative Alexandria Ocasio-Cortez during a House Financial Services Committee hearing, the then-freshman legislator asked Powell if the Fed hadn’t repeatedly botched its estimates of the level at which unemployment would begin to provoke inflation. Powell took the sting out of her line of questioning by bluntly responding: “Absolutely. I think we’ve learned that it’s substantially lower than we thought.”
Powell’s strengthened relationship with Republicans on Capitol Hill and the trust he enjoys on Wall Street have helped make it easier for him to more aggressively pursue employment gains and worry less about longer-run inflation than any Fed chair in more than 50 years.
Democrats like Senate Banking Committee Chairman Sherrod Brown, who fault him for rolling back some post-crisis banking regulations, acknowledge they like him personally, and the two have dined together. Almost all agree he’s handled monetary policy well and shepherded financial markets through a period of chaos at the outset of the Covid-19 pandemic.
Powell has met both with skeptics like Senator Elizabeth Warren as well as moderate senators of both parties in what Brown sees as an obvious attempt to keep his chairmanship. Many senior Democrats in interviews with Bloomberg News have said they would vote to confirm Powell for another term.
Republicans are also lining up to back him as the best choice they could plausibly get from the Biden administration.
That said, he still needs the endorsement of key senators on the Banking Committee tasked with confirming the next chair. Brown and Warren have both advocated for more restrictions on banks, including their stock buybacks, even as they and other Democrats have praised Powell’s monetary policies. Neither Warren nor Brown has publicly named a preferred candidate to lead the Fed.
Despite the lift that Yellen’s recommendation gives Powell, Biden has gone with the less obvious choice before. Another leading candidate is Fed Governor Lael Brainard, whom Biden considered for Treasury secretary before settling on Yellen.
The president’s need for a bipartisan political win could prompt him to pick Powell as chair and separately add more liberal nominees for other openings on the board.
Besides Powell, Biden also has the opportunity to replace the vice chair for supervision, who oversees bank regulations, a position now held by Randal Quarles, whose replacement could mollify some liberal senators; the vice chair, a post now held by Richard Clarida, and an open seat on the Fed board.
“If Powell gets another term as Fed chair, Governor Brainard is a clear favorite to be tapped for the Fed’s vice chair/supervision role,” Kevin Cummins, chief U.S. economist at NatWest Markets, wrote in a note to clients Monday.
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