President Trump nominated Jerome H. Powell as the next chair of the Federal Reserve on Thursday.
Powell, a former Carlyle Group executive, had traded a high-finance job to work for $1 a year at one of Washington's quiet think tanks. He was traveling the halls of Congress urging calm and restraint. In contrast, flashy businessman Donald Trump was tweeting: “The Debt Limit cannot be raised until Obama spending is contained."
Powell's view prevailed as Republicans made a last-minute deal to raise the debt limit.
"He was the right person at the right time,” says Jason Grumet, president of the Bipartisan Policy Center. “Powell brought a credible, factual presentation to Capitol Hill that allowed him to be effective despite the aggressive politics at the time.”
Now Trump, a combative politician who has tried to upend the institutions of Washington, has named Powell as the new chairman of the Federal Reserve. Powell is no stranger to the Fed. He's been serving as a governor there since President Barack Obama nominated him to the role in 2012, but Trump is elevating Powell to the marquee post.
Fed chair is the top job steering America's economy. Trump picked Powell instead of keeping current chair Janet L. Yellen or going in a sharply different direction by tapping Fed critics John Taylor or Kevin Warsh for the job. Prior presidents had typically renominated the sitting Fed chair, especially when the economy was doing well.
In some ways, Powell, who goes by the nickname “Jay,” fits the mold of a typical Trump pick for a premium post. He's a Republican who built a vast wealth as a partner at Carlyle. Powell's latest financial disclosure from June lists his net worth between $19.7 million and $55 million. If he gets the job, Powell would be the richest Fed chair since banker Marriner Eccles, who held the position from 1934 to 1948, according to Washington Post reviews of former Fed chair financial disclosures and former Fed historian Gary Richardson.
But the decision to tap Powell highlights how Trump is willing to compromise the bomb-throwing mentality that has characterized much of his time in Washington and many of his appointments. Powell has developed a reputation in Washington as a consensus builder who prefers to operate behind the scenes. Obama felt comfortable enough with Powell to nominate him to the Fed board in 2012, renominating him again in 2014.
“I never saw him lose his temper,” says Richard Fisher, the former president of the Federal Reserve Bank of Dallas, who sat next to Powell at many Fed meetings and had dinner with him from time to time. “Jay doesn't promote himself like so many do in Washington. He likes to do the unglamorous jobs.”
After joining the Fed in 2012, Fisher says Powell continued to travel to Capitol Hill to soothe Republicans, some of whom felt the Fed had erred by cutting interest rates to zero and purchasing trillions in assets after the financial crisis. Powell, who had served a stint in the George H.W. Bush administration, worked closely alongside Yellen, a Democrat, to keep interest rates low in recent years and defend the Fed's actions.
Finding someone who wouldn't raise rates too quickly was a key consideration for Trump, according to two people familiar with the president's thinking who spoke on the condition of anonymity because they aren't authorized to speak publicly. Trump has repeatedly tweeted about how the stock market's rise since the election and how many jobs are being created. Taylor and Warsh have criticized the Fed's low-interest-rate policy and may be more willing to raise rates faster, potentially curtailing the market rally.
Trump wasn't willing to take that risk. Powell is widely expected to keep Yellen's tactics largely in place, albeit with a bit more of a Wall Street touch.
“He is not the kind of person who would exert himself immediately,” Fisher says, but “he has a market background, which is needed at the Fed.”
Powell is a lawyer, not a PhD economist like Yellen and the two prior holders of the post before her: Ben Bernanke and Alan Greenspan. But people who worked with Powell at the Fed say he has done everything he can in the past five years to learn the technical details of the Fed and macroeconomics.
“When he showed up at the Fed, he basically did not know much about macroeconomics or monetary policy,” says Seth Carpenter, chief U.S. economist at UBS who spent 15 years at the Fed, including time overlapping with Powell. “He made a conscious decision to spend a lot of time with staff and colleagues to learn as deeply and completely as possible.”
Many on the left are frustrated that Trump isn't keeping Yellen, the first woman to hold the post, who has seen the employment market improve significantly under her tenure.
They also see Powell as more likely to bow to the interests of big banks. Powell has defended some of the Fed's tighter oversight of the financial market but also pointed to areas where he thinks regulation may have run amok.
“Yellen's background as a trained economist and experienced Fed official gave her needed independence from the influence of Wall Street,” says Jordan Haedtler, campaign manager for Fed Up, a grass roots Democratic effort. He says it's concerning that Powell would be Trump's second Carlyle Group veteran appointed to the Fed board. Earlier this year, Trump nominated Randal Quarles, another Carlyle Group alum, to an open Fed board seat overseeing bank regulation.
Despite his wealth, friends and former colleagues of Powell's describe him as “annoyingly normal.” He lives in Chevy Chase, Md., and often rides his bike about eight miles from home to the Fed. He doesn't drink much, plays golf and the guitar, and has an odd ability to repeat people's sentences backward to them, a quirk former colleagues say is a reminder of his smarts — and how closely he listens.
After Powell left the Carlyle Group, he got involved with several charities, including the Nature Conservancy and a Washington charter school operator, and wanted to get back into public service, ultimately leading him to the Bipartisan Policy Center.
Grumet recalls they weren’t quite sure what to do with Powell at first, so they gave him a “junky little office in the back overlooking the alley.” Powell didn’t complain. He began researching key issues, building up binders of prep material.
“This is a guy who does his homework,” says Grumet. “In the three years we worked together, there was only one thing he ever asked for: Larger binders.” Powell has a reputation for carrying around huge binders to meetings full of all his prep materials.
Powell is expected to easily clear the Senate, which confirmed him 74 to 21 in 2012 and 67 to 24 in 2014.
The Fed chair plays three major roles: Setting monetary policy (interest rates), overseeing bank regulation and being the public face of the institution. In his time at the Fed, Powell never cast any dissenting votes, opting instead to voice any concerns he had at the decision-making table.
On Wall Street and in Washington, Powell has been portrayed as Trump's safe choice, a steady hand who can appease hardcore Republicans without politicizing the Fed. Powell's degrees from Princeton and Georgetown University Law School and his many connections in politics and business also make many feel comfortable with him stepping into the top job.
“In my experience, the best outcomes are reached when opposing viewpoints are clearly and strongly presented before decisions are made,” Powell said at a speech in West Virginia in March.