Northwest Arkansas Democrat-Gazette
WEDNESDAY, NOVEMBER 29, 2017 Believe in continuity, Fed pick tells Senate
BINYAMIN APPELBAUM
WASHINGTON — Jerome Powell, nominated by President Donald Trump to lead the Federal Reserve, presented himself as a pragmatic moderate who would largely continue the Fed’s current policies at a confirmation hearing before the Senate Banking Committee on Tuesday.
Powell, a Fed governor since 2012, defended the Fed’s approach to financial regulation.
Sen. Elizabeth Warren, DMass., asked Powell if there were rules that should be strengthened. Powell responded that he favored stronger enforcement in some areas but that he did not see a need for stronger rules.
“I do think we’ve had eight years now of writing new rules and, honestly, I can’t think of a place now where we are lacking,” he said. “I think they’re tough enough.”
He told Republicans that he did not favor rolling back the existing ones, though he did endorse easing the burden on smaller banks.
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Powell also pledged to continue the Fed’s current approach to monetary policy by gradually raising interest rates so long as economic growth remains healthy.
He stopped just short of confirming that the Fed intends to raise its bench mark interest rate in December, a move that is widely expected by financial investors.
“I think that the case for raising interest rates at our next meeting is coming together,” he said.
Powell, 64, is a lawyer by training and an investment banker by trade, with deep roots in the financial industry and the Republican Party. Since joining the Fed, he has voted in favor of every policy decision — both monetary policy and regulatory policy — under the current Fed chairman, Janet Yellen, and her predecessor, Ben Bernanke.
Trump nominated Powell in early November to succeed Yellen, whose four-year term as Fed chairman ends in early February. The position is subject to Senate confirmation.
Trump said he was replacing Yellen because he wanted to appoint his own chairman. Powell in his opening statement pledged to resist any political
pressure.
He added that he had no reason to anticipate such pressure from the White House. “Nothing in my conversations with anyone in the administration has given me any concern on that front,” he said. His plan, he said, is to make policy decisions “with a view solely to right answers.”
The confirmation hearing was a relatively placid affair, with only a third of the seats in the hearing room occupied. Both Bernanke in 2010 and Yellen in 2014 were confirmed during periods of economic turmoil and sharp controversy about the conduct of monetary and regulatory policy.
Powell spent much of the hearing avoiding questions about fiscal policy, including tax legislation that currently commands most of the attention on Capitol Hill.
Committee Chairman Mike Crapo, R-Idaho, urged members to quickly submit their follow-up questions for Powell to answer in writing.
Crapo gave no indication of when the committee might vote, but several senators suggested that Powell will have no trouble winning confirmation.
Asked during the hearing whether Congress should pursue tax cuts that would increase the federal debt, he said that such questions should be left to Congress. He said the Fed had no position on the
legislation.
“Do you have a personal position?” asked Sen. Dean Heller, R-Nev.
“No, senator, I don’t,” Powell responded.
Asked by Democrats whether he accepted the analysis of the Congressional Budget Office, which found that the legislation backed by Republicans would sharply increase the federal debt, Powell responded that he had not looked at it.
Yellen and her predecessors have often warned that the growth of the federal debt is a problem for the economy.
Powell finally allowed that he shared those concerns, in the abstract.
“Without commenting on any particular bill, like all of us I am concerned about the sustainability of our fiscal path in the long run,” Powell said.
On regulation, Powell said that post-crisis changes have made the financial system stronger, but that those regulations were unnecessarily uniform.
He said he favored reduced regulation of smaller banks.
“Tailoring of regulation is one of our most fundamental principles,” he said. “We want it to decrease in intensity and stringency as we move down” to smaller banks.
He said the Fed was taking “a fresh look” at those rules.
Powell’s stance creates
some distance from the Trump administration, which has described bank regulations as an ineffective impediment to growth.
It also created some friction with Democrats, who see a continuing need for stronger regulations.
Senators asked few questions about monetary policy, a tacit endorsement of the Fed’s success under Yellen. Unemployment has fallen to 4.1 percent and inflation remains below 2 percent.
Some Republicans argue the Fed should have raised interest rates more quickly. Powell said he does not agree with those critics.
“We’ve been patient in removing accommodation and I think that patience has served us well,” he said.