Fed pick favors looser regulations
Trump’s nominee wants many rules for small lenders eased
WASHINGTON Jerome Powell, President Donald Trump’s pick to be chairman of the Federal Reserve, told senators at his confirmation hearing Tuesday that he believes some bank regulations can be rolled back — something the administration and Wall Street favor. But he stressed that he will protect the central bank’s political independence, calling it vital for the Fed’s role.
Powell also strongly hinted in his appearance before the Senate Banking Committee that the Fed would hike rates again in December.
Powell said he believed that the Dodd-Frank Act, passed in the wake of the devastating 2008 financial crisis, had succeeded in making the financial system stronger, including ensuring that no major institution now is too big to fail.
But in some areas such as regulation of smaller banks, the law had imposed unnecessary burdens that should be eased, he said.
Powell’s comments pleased many GOP senators, who have complained for years that DoddFrank was hurting the economic recovery by making it harder to get bank loans. Democratic senators, however, pressed Powell to say whether he would cut key consumer protections in the 2010 law, a measure that Trump often attacked on the campaign trail.
Powell stressed he was “strongly committed” to the independence of the Federal Reserve. He said he has not had any conversation with anyone in the administration that concerned him.
During two hours of testimony, Powell sought to convey a sense of stability and praised his predecessors Janet Yellen and Ben Bernanke. He said that the Fed would continue on a gradual path of raising interest rates and shrinking the Fed’s massive $4.5 trillion balance sheet, which grew five-fold in the wake of the Great Recession as the Fed bought government bonds to push long-term interest rates lower.
Powell said he expected the balance sheet to shrink to about $2.5 trillion to $3 trillion over the next three to four years under a program set in motion by Yellen.
On interest rates, Powell said, “I think the case for raising interest rates at our next meeting is coming together.”
When pressed for specifics on a December rate hike, Powell deferred, citing Fed policy not to talk about possible outcomes before officials gathered and heard all views.
Trump tapped Powell on Nov. 2 to succeed Yellen, the first woman to head the nation’s central bank and the first Fed leader in four decades not to be offered a second term as chair. Yellen’s term ends Feb. 3. She said last week she will leave the Fed once Powell is confirmed by the Senate.