Powell Gives Fed New Public Face Without Big Shift

(Bloomberg View) -- Jerome Powell is a fresh face atop the Federal Reserve who won't fundamentally alter the institution or the course of policy.

The best choice Donald Trump could have made was to give Janet Yellen the nod for another four years. She earned it, the economy is in sound shape, and there's precedent for re-appointment by both Republican and Democratic presidents.

Having thrown tradition overboard on this and so many other issues, Trump is said to have chosen Powell -- a prudent option. He picked an incumbent Fed governor likely to continue the course the Yellen Fed charted and build consensus for any changes the way his predecessor would have. He opted for Yellen without Yellen.

Powell comes with Republican credentials -- he was a senior Treasury official under Bush 41 -- who got bipartisan support in his current role. As a former private-equity executive, he brings valuable contacts in the business community. The Fed can miss things. A broad Rolodex can't hurt Powell in his new gig.

Powell might also allow the Fed to put at least part of the contentious crisis-fighting era behind it. Having joined the Fed in 2012, Powell didn't have to cast votes for pushing rates to zero, embarking on quantitative easing or any of the bank rescue measures that became so politically toxic.

One of his competitors for the job, Kevin Warsh, did serve as a Fed governor during that tumultuous period. He had to take some tough votes that were probably the right ones. Powell has voted with the consensus on every monetary decision since he joined, so his record in that regard is similar to Warsh's. But Powell hasn't positioned himself as a critic or change agent.

Powell has observed Fed culture up close and seen first Bernanke and then Yellen try to shape consensus at the Federal Open Market Committee around policy. He surely recognizes the entire system is a lot more democratic than it once was. Trying to ram decisions through will only result in more dissents, which then risks a narrative that the chair isn't on top of things. That would be disastrous. 

On regulation, Powell probably is inclined toward some easing of post-crisis rules. But he generally isn't seen as someone who would take a flamethrower to them either. The difference with Yellen is probably around the margins.

It's true we don't really know how someone will lead until they actually, well, become the leader. Events can shape policy way more than personal inclinations do. Remember when the Bernanke chairmanship was supposed to be about inflation targets? In retrospect, that initiative almost seems like a footnote given what else Bernanke contended with.

Unlike his immediate predecessors, Powell doesn't have a doctorate in economics. It would be unfair to hold this against him. Paul Volcker didn't have one, and he is generally recognized as a titan of central banking. 

We may hear some of his views fleshed out a bit during Senate confirmation hearings. The good news, as he heads to the Hill, is the significant bipartisan support he got when confirmed for his Fed governor role: 74-21. 

Those numbers may change a bit in the vote for his new role, given the elevated profile. On the face of it, there won't be huge changes elsewhere. That is mostly for the good.

This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.

Daniel Moss writes and edits articles on economics for Bloomberg View. Previously he was executive editor of Bloomberg News for global economics, and has led teams in Asia, Europe and North America.

To contact the author of this story: Daniel Moss at dmoss@bloomberg.net.

To contact the editor responsible for this story: Philip Gray at philipgray@bloomberg.net.

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