When Jay Powell was named chairman of the Federal Reserve Board by Donald Trump it was seen as an ok, cautious appointment, though he lacked the credentials of his four predecessors. Fifty years earlier when Richard Nixon appointed the eminent economist Arthur Burns to the Fed it was universally acclaimed.
Today, Burns’ legacy is tarnished for capitulating too much to short term political pressure, the 1972 election, at a longer term cost.
Powell, by contrast, is a hero who stood up to a bully -- Trump -- to maintain the independence and integrity of the Fed. At the end of the month he will be presented the Profile in Courage Award by the John F. Kennedy Library.
The Powell saga tells a larger story about the importance of the central bank, the desirable relationship with the Treasury and senior lawmakers, as well as being instructive on standing up to a bully.
The central bank’s independence is intended to encourage critical monetary decisions based on what is deemed to be best for the economy and not political considerations. The Fed sometimes has failed on monetary and regulatory policies, agitating some presidents, including George H.W. Bush.
But until Trump, no president viciously attacked the institution and its chairman, seeking to illicitly force him out, even starting a phony criminal investigation.
In January when the Trump team sent out the subpoena on criminal charges, they thought this would be the intimidation that forced a frightened chairman to quit. They badly misread Powell’s integrity and courage.
Instead he, aided by his chief of staff Michelle Smith who has guided the last four Fed chairs with extraordinary skill and political instincts, went public over Trump’s extortion.
Powell then dominated the high ground, legally and politically. This ugly saga revealed a lot about the character of some prominent figures.
Treasury Secretary Scott Bessent showed he’s a coward.
The relationship between the Treasury secretary and the independent Federal Reserve chair is important for coordination and to try to be on similar pages, to not rattle markets. In 1999 Time magazine ran a cover story on Treasury Secretary Bob Rubin, his deputy Larry Summers and Fed chair Alan Greenspan entitled, “The Committee to Save the World.”
Bessent not only didn’t come to Powell’s defense, he piled on, pandering to the White House. He accused Powell of “fear-mongering” on tariffs, charged that Powell sought to “politicize” monetary policy while Trump was “committed to the independence of the Fed.”
When you tell lies like that it raises credibility issues on most everything else.
Senate Banking Committee Chairman Tim Scott, of South Carolina, disingenuously suggested cost overruns at the Federal Reserve building expansion raised serious questions about Powell. A fellow cheap shot politician was Ohio Sen. Bernie Moreno who accused Powell of “sabotaging working Americans.”
There were heroes, most prominently North Carolina Sen. Thom Tillis who blocked the nomination of Powell’s successor until the Justice Department dropped its phony investigation. A few other Banking Committee Republicans, including Louisiana’s John Kennedy -- a pleasant surprise to me -- and South Dakota Sen. Mike Rounds were more quietly supportive.
On monetary policy, there was criticism that Powell was too slow to react when inflation started to take off five years ago. It came both from Republicans and Democrats like Summers and Jason Furman, a top Obama Administration economist.
Furman says the criticism was correct but doubts it would have made much difference if Powell had moved faster. The economy survived COVID and other challenges without a recession. Inflation, even with Trump’s tariffs, was moving under control before the Iran war.
Furman, who is the new Summers, the establishment Democrats’ most influential economist, says Powell’s exceptionalism, his legacy, derives from standing up for the crucial independence of the Federal Reserve.
On May 31, Powell, along with the citizens of Minneapolis, will be recognized for his courage by the Kennedy Library.
Previous recipients included John Lewis, the great civil rights leader who never backed down in the face of brutal beatings by southern segregationists; President Gerald Ford for his politically costly, but correct, pardon of Richard Nixon, and Ukrainian President Volodymyr Zelenskyy, who has stood up to the Russian invasion for more than four years.
This is an inspiring collection of courageous leaders. Jay Powell belongs,
Alexander Hamilton would be proud of Powell’s courage to standing up
to the know nothing Trump & his collection of minions
Al Hunt standing up with the facts, thanks