Last month President Trump nominated Jerome Powell to become the next Federal Reserve chair, replacing current chair Janet Yellen in January.
So who is Jerome Powell? What can we expect from him that will directly affect public entities, higher Ed, and health care institutions?
Jerome Powell will be the first Fed chair that comes from the world of investment banking. He has extensive experience as a lawyer, and investment/private-equity banker, with considerable government expertise, having worked closely with the U.S. Treasury Department. What differentiates Powell from previous Fed chairs is that he was never an economist.
Most observers consider Powell to have much the same outlook on economic issues as Yellen.
So what can we expect from the new Fed chair, assuming he will be confirmed by the U.S. Senate?
Powell will take a more corporate approach to managing his office. You will also see more direct messaging by him and fewer opinions offered by various Fed board governors in public.
Powell will likely maintain a similar, centralist approach as Yellen’s on monetary policy. I don’t expect a shift in current Fed policy; that should be calming to the markets.
Under his leadership, we can expect the Fed to stay on track to bring up Fed rates to 2.0% by no later than 2019.
As a former Goldman Sachs investment banker, we can expect Powell to ease up on the level of regulations being imposed on banks under the 24,000+ pages of Dodd-Frank. The same with other various Federal regulations, including the Volker Rule.
While I expect him to go easy on some regulations, I don’t think he will unravel the rules that were established after the financial crisis of 2008 to protect the liquidities levels of the banking system.
Powell will set a strong balance between what economic numbers are surfacing with a strategy that will sustain the U.S. economy in case of a future U.S. recession.
I think Powell was an excellent choice and will prove to be a strong Fed chair. You will find him to be more sensitive to issues affecting smaller banks, as well as to the unnecessary and burdensome regulations on big banks that have piled on onerous costs and needless overhead.
The changes under Powell could lead to a methodical approach in raising short-term rates while making bank deposits and lending more appealing to banks and the marketplace, with hopefully less paperwork.
