Powell’s charm offensive in Congress leads him to keep his job


(Bloomberg) – US Federal Reserve Chairman Jerome Powell has built a reputation for being a skilled Fed attorney through strong personal connections with Congress who will assist him when nominated for a second term.

Powell has served as no Fed chairman since Alan Greenspan during his three years at the helm of Congress. But where Greenspan was a regular at the cocktail party, Powell took a more expert approach.

Since he took over the helm of the Fed in February 2018 through June of this year, he has held at least 350 meetings, dinners, or phone calls with members of Congress, according to his monthly calendar. That’s nearly nine a month, and many of them included more than one legislator.

The record does not include at least 16 appearances as chairman of numerous congressional committees.

Powell, 68, was already favored for renomination, but that status received a significant boost when Treasury Secretary Janet Yellen, herself a former Fed chairman, told senior advisors to President Joe Biden that she would continue to support Powell in that role.

Biden is expected to decide around Labor Day who will be nominated for the four-year term of the Fed chairman.

Powell’s relations with a Senate, currently split 50-50 along the party lines, would prove helpful in navigating any confirmation process while some progressives expressed doubts about his record of banking regulation. He cast a spell on both Republicans and Democrats in Congress when Biden desperately needs to regain his goodwill on Capitol Hill amid the crisis in Afghanistan.

Powell, who was confirmed as chairman 84-13 in a 2018 Senate vote, took office and pledged to fix ties with Congress – he said in an interview that he intended to “pull the carpets off Capitol Hill.”

And for a good reason.

Restore respect

At that time, the position of the Fed was 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 created it. Republicans were particularly appalled by the Fed’s emergency response, which included unprecedented purchases of government and mortgage-backed bonds aimed at calming financial markets and stimulating the Allies’ economy. Even Republicans who oppose him including the Fed in debates over climate change and racial inequality want his reappointment.

Fed spokeswoman Michelle Smith declined to comment on matters related to the nomination process.

Powell, a former partner in the Carlyle Group, is familiar with Washington, having served in the Treasury Department during George HW Bush’s tenure and socializing on Capitol Hill while at the Bipartisan Policy Center.

Trump years

As Fed governor in the election of Donald Trump, he saw an opportunity for a Republican president to appoint a new chairman. In early 2017, Powell reached out to then Treasury Secretary Steven Mnuchin to meet him, according to people familiar with the matter. The couple hit it off, and Bloomberg News reported at the time that Mnuchin was campaigning for Trump to vote for Powell rather than nominating Yellen as chairman.

In office he saw how easy it was to lose Trump’s trust. His charm offensive paid off.

In response to reports that Trump was considering firing or downgrading Powell over interest rates, some Republicans rushed to defend him – a rare occurrence in the Trump era. In an interview with Bloomberg Television at the time, Republican Senator Patrick Toomey warned that it was “a very, very bad idea” to try to remove Powell.

Powell’s wooing lawmakers is not reserved for Republicans. He has impressed progressives with his openness to admitting the Fed’s mistakes that may have slowed progress in employment growth.

Progressive exchange

In a July 2019 exchange with New York Representative Alexandria Ocasio-Cortez during a House Finance Committee hearing, the then-freshman Powell asked whether the Fed had repeatedly botched its estimates of the level at which unemployment would begin to inflate provoke. Powell took the sting off her question by answering bluntly, “Absolutely. I think we learned that it is way lower than we thought. “

Powell’s strengthened relationship with the Republicans on Capitol Hill and the trust he enjoys on Wall Street have made it easier for him to pursue more aggressive job gains and worry less about longer-term inflation than any Fed chairman in more than 50 years.

Democrats like Senate Banking Committee chairman Sherrod Brown, who accuse him of pulling back some banking regulations after the crisis, admit they like him personally and the two have eaten together. Almost everyone agrees that he managed monetary policy well and steered financial markets through a time of chaos at the start of the Covid-19 pandemic.

Powell has met with both skeptics like Senator Elizabeth Warren and moderate senators from both parties, in what Brown sees as an obvious attempt to keep his chairmanship. Many high-ranking Democrats have announced in interviews with Bloomberg News that they will reaffirm Powell for another term.

Read more: Fed Chairman Powell has won fans among senior Senate Democrats

Republicans are also lining up to support him as the best choice they could plausibly get from the Biden administration.

However, he still needs the approval of important senators in the banking committee, which is responsible for confirming the next chairmanship. Brown and Warren have both campaigned for more restrictions on banks, including their share buybacks, though they and other Democrats praised Powell’s monetary policy. Neither Warren nor Brown have publicly named a preferred candidate to lead the Fed.

Despite the boost that Yellen’s recommendation gives Powell, Biden previously went for the less obvious choice. Another top candidate is Fed Governor Lael Brainard, whom Biden considered as Treasury Secretary before choosing Yellen.

The president’s need for a bipartisan political victory could lead him to elect Powell as chairman and separately add more liberal candidates for other positions on the board.

In addition to Powell, Biden also has the option of replacing the vice chairman of oversight who oversees banking regulation, a position now held by Randal Quarles, whose replacement could appease some Liberal senators; the vice-chairman, a post now held by Richard Clarida, and a vacant seat on the Fed’s board of directors.

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