Jerome Powell

In 1979, Powell moved to New York City and became a clerk to Judge Ellsworth Van Graafeiland of the United States Court of Appeals for the Second Circuit. From 1981 to 1983, Powell was a lawyer with Davis Polk & Wardwell, and from 1983 to 1984, he worked at the firm of Werbel & McMillen.[24]

From 1984 to 1990, Powell worked at Dillon, Read & Co., an investment bank, where he concentrated on financing, merchant banking, and mergers and acquisitions, rising to the position of vice president.[24][26]

Between 1990 and 1993, Powell worked in the United States Department of the Treasury, at which time Nicholas F. Brady, the former chairman of Dillon, Read & Co., was the United States Secretary of the Treasury. In 1992, Powell became the Under Secretary of the Treasury for Domestic Finance after being nominated by George H. W. Bush.[24][26][23] During his stint at the Treasury, Powell oversaw the investigation and sanctioning of Salomon Brothers after one of its traders submitted false bids for a United States Treasury security.[27] Powell was also involved in the negotiations that made Warren Buffett the chairman of Salomon.[28]

In 1993, Powell began working as a managing director for Bankers Trust. He left in 1995 after the bank faced upset when several wealth generating customers opted-in to derivatives as their higher-risk/higher-reward-or-loss investment choice and realized the downside risk of large losses. He then went back to work for Dillon, Read & Co.[26] From 1997 to 2005, Powell was a partner at The Carlyle Group, where he founded and led the Industrial Group within the Carlyle U.S. Buyout Fund.[25][29] After leaving Carlyle, Powell founded Severn Capital Partners, a private investment firm focused on specialty finance and opportunistic investments in the industrial sector.[30] In 2008, Powell became a managing partner of the Global Environment Fund, a private equity and venture capital firm that invests in sustainable energy.[30]

Between 2010 and 2012, Powell was a visiting scholar at the Bipartisan Policy Center, a think tank in Washington, D.C., where he worked on getting Congress to raise the United States debt ceiling during the United States debt-ceiling crisis of 2011. Powell presented the implications to the economy and interest rates of a default or a delay in raising the debt ceiling.[29] He worked for a salary of $1 per year.[31]

Powell speaks at the Columbus School of Law in February 2015

In December 2011, along with Jeremy C. Stein, Powell was nominated to the Federal Reserve Board of Governors by President Barack Obama. The nomination included two people to help garner bipartisan support for both nominees since Stein's nomination had previously been filibustered. Powell's nomination was the first time that a president nominated a member of the opposition party for such a position since 1988.[1] He took office on May 25, 2012, to fill the unexpired term of Frederic Mishkin, who resigned. In January 2014, he was nominated for another term, and, in June 2014, he was confirmed by the United States Senate in a 67–24 vote for a 14-year term ending January 31, 2028.[32]

Powell was a skeptic of round 3 of quantitative easing (or QE3), initiated in September 2012, although he eventually voted for it.[33]

In 2013 Powell endorsed financial regulation to end the problem of institutions that are too big to fail, while urging that it should be implemented carefully.[34] In April 2017, he took over oversight of the "too big to fail" banks.[35]

In a July 2017 speech, Powell said that in regard to Fannie Mae and Freddie Mac the status quo is "unacceptable" and that the current situation "may feel comfortable, but it is also unsustainable". He warned that "the next few years may present our last best chance" to "address the ultimate status of Fannie Mae and Freddie Mac" and avoid "repeating the mistakes of the past". Powell expressed concerns that, in the current situation, the government is responsible for mortgage defaults and that lending standards were too rigid, noting that these can be solved by encouraging "ample amounts of private capital to support housing finance activities".[36]

In an October 2017 speech, Powell stated that higher capital and liquidity requirements and stress tests from the Dodd–Frank Wall Street Reform and Consumer Protection Act have made the financial system safer and must be preserved. However, he also stated that the Volcker Rule should be re-written to exclude smaller banks.[33]

President Donald Trump nominates Powell in November 2017

Powell takes the oath of office, administered by Randal Quarles, as chair in February 2018

Powell testifies before the U.S. Senate Committee on Banking, Housing, and Urban Affairs in 2018

On November 2, 2017, President Donald Trump nominated Powell to serve as the chair of the Federal Reserve, replacing Janet Yellen at the helm of the central bank.[37] On December 5, the Senate Banking Committee approved Powell's nomination to be chair in a 22–1 vote, with Senator Elizabeth Warren casting the lone dissenting vote.[38] His nomination was confirmed by the Senate on January 23, 2018, by an 84–13 vote.[4] Powell assumed office as chair on February 5, 2018.[39]

One of Powell's first actions was to continue to raise US interest rates, as a response to the increasing strength of the US economy.[39][40] He also announced that the Fed would reduce its asset portfolio from US$4.5 trillion to a range of US$2.5–3 trillion over four years in a process called quantitative tightening.[41][42] This tight policy drew public criticism from President Trump, who expressed second thoughts about nominating Powell and said that the chair was too enthusiastic about raising rates.[43] Financial assets of all classes declined over 2018 and markets erupted in volatility in December. Powell abandoned quantitative tightening in early 2019, leading to a recovery in asset prices.[44] Trump continued to state, with increasing hostility, that Powell was not reacting quickly enough. As a trade war with China escalated over the summer of 2019, Trump called the Fed's policies "insane" and labelled Powell an "enemy."[45][46] He privately discussed with White House counsel the possibility of firing Powell, which Powell dismissed.[47] In an August interview, Trump said that he completely disagreed with Powell's approach and called for a sharp cut in interest rates.[48]

In October 2019, as asset prices waned, Powell announced the Fed would return to expanding its balance sheet, which led to a global rally in assets.[49] Powell said the Fed's actions were not quantitative easing, but some dubbed them as being QE4.[50] Where Bernanke-era quantitative was conducted through outright purchases of assets, Powell's expansion operates through overnight repurchase agreements (repos) where the seller has the option to reverse the transaction. The Fed's primary dealers and other banks use the repo facilities to sell Treasury and agency securities in exchange for credit to supplement their cash on hand.[51][52][53][54]

Powell speaks with the Federal Open Market Committee via videotelephony in June 2020

In early 2020, Powell launched an unprecedented series of actions to counter the financial market impact of the COVID-19 pandemic, which included a dramatic expansion of the Fed's balance sheet and introduction of new tools, including the direct purchase of corporate bonds, and direct lending programs.[12][55] Powell emphasized monetary policy alone without an equivalent fiscal policy response from Congress would widen income inequality.[56] Powell's actions earned him bi-partisan praise,[57][7] including from Trump, who told Fox News that he was "very happy with his performance" and that "over the last period of six months, he's really stepped up to the plate".[58]

CPI inflation reaching 7% as of 2021.

On November 19, 2020, after disagreeing with Treasury Secretary Steve Mnuchin, Powell agreed to return unused crisis funds to the United States Treasury.[59][60] Both he and Mnuchin then urged Congress to approve more stimulus.[61]

To mitigate the financial market impact of the COVID-19 pandemic, Powell accepted asset price inflation as a consequence of Fed policy actions.[11][62][63] Powell was criticized for using high levels of direct and indirect quantitative easing as valuations hit levels last seen at the peaks of previous bubbles.[52][64][65]

The Fed's acceptance of asset price inflation from 2019 onwards resulted in levels of wealth inequality not seen in the United States since the 1920s.[66][67][68] Fed asset purchases were also seen as contributing to the K-shaped recovery that emerged during the coronavirus pandemic, where the asset bubbles protected the wealthier segments of society from the financial effects of the pandemic,[69][70] at the expense of most other segments,[71][12] and particularly on the younger non-asset owning segments such as millennials.[72] In January 2021, Edward Luce of the Financial Times warned that the Fed's use of asset purchases, and the resultant widening of wealth inequality, could lead to political and social instability in the United States, saying: "The majority of people are suffering amid a Great Gatsby-style boom at the top".[73]

Powell's expansion of credit through repo contracts, seen as a new "Greenspan put,"[51][72] created large profits for Wall Street investment banks.[74] In June 2020, Jim Grant likened Powell's policy to drug dealing, calling him "the Fed's Dr. Feelgood."[74][75] In a September 2020 testimony, Powell said: "Our actions were in no way an attempt to relieve pain on Wall Street".[76] By the end of 2020, Wall Street investment banks recorded their best year in history,[77][78] and Bloomberg called 2020, ".. a great year for Wall Street, but a bear market for Humans".[79] Mohamed A. El-Erian called Powell "a follower, not a leader", of markets.[10]

Powell defended his actions saying: "I don't know that the connection between asset purchases and financial stability is a particularly tight one",[65] and that he wasn't worried that the Fed's actions were creating asset bubbles.[62][80][68]

In July 2020, CNBC host Jim Cramer said, "I'm sick and tired of hearing that we're in a bubble, that Powell's overinflating the price of stocks by printing money to keep the economy moving".[81] The Washington Post called the Fed "addicted to propping up markets, even when there is no need".[9] In August 2020, investors Leon Cooperman and Seth Klarman warned of a dangerous "speculative bubble",[82] with market psychology "unhinged from market fundamentals".[83]

In August 2020, Bloomberg News called Powell's policy "exuberantly asymmetric" (echoing Alan Greenspan's "irrational exuberance" quote from 1996),[8] and that the "Powell Put" had become more extreme than the "Greenspan Put".[8] Steven Pearlstein in The Washington Post said that Powell had "adopted a strategy that works like a one-way ratchet, providing a floor for stock and bond prices but never a ceiling", and that any attempt by Powell to abandon this strategy "will trigger a sharp sell-off by investors who have become addicted to monetary stimulus".[9]

By December 2020, Powell's monetary policy, measured by the Goldman Sachs US Financial Conditions Index (GSFCI), was the loosest in the history of the GSFCI (goes back to 1987), and had created simultaneous asset bubbles across most of the major asset classes in the United States:[84][85][86] For example, in equities,[87] in housing,[88][89] and in bonds.[90] Cryptocurrencies also saw dramatic increases in price during 2020, leading Powell to win the 2020 Forbes Person Of The Year In Crypto.[91]

High up on his list, and sooner rather than later, will be dealing with the consequences of the biggest financial bubble in U.S. history. Why the biggest? Because it encompasses not just stocks but pretty much every other financial asset too. And for that, you may thank the Federal Reserve.

— Richard Cookson, Bloomberg (4 February 2021)[92]

The asset price boom during the pandemic attracted a generation of young investors who explicitly credited Powell for promoting froth in financial markets. Gathering in online communities like Reddit's r/wallstreetbets board, they discussed high-risk trades and shared memes that depicted "J-Pow" using the Fed's money printer to flood the economy.[93][94]

In December 2020, Powell defended high asset prices by invoking the controversial Fed model, saying: "Admittedly P/Es are high but that's maybe not as relevant in a world where we think the 10-year Treasury is going to be lower than it's been historically from a return perspective".[95] The author of the Fed model, Dr. Edward Yardeni, said Powell's actions could form the greatest financial bubble in history,[96] while the Wall Street Journal described Powell's comparison as an attempt to "rewrite the laws of investing".[97]

President Joe Biden with Powell and Lael Brainard in November 2021

In April 2021, Powell reassured concerns over a potential housing bubble, similar to the one that preceded the Great Recession. He stated, "we don't see bad loans and unsustainable prices and that kind of thing."[98]

In August 2021, Powell expected the Fed to reduce economic support later in the year.[99][100][101][102] In the past Powell has considered inflation transitory, a term Powell states should now be "retired".[103][104] In response to widespread high inflation readings Jerome Powell has indicated an increase in the speed of tapering asset purchases, namely up to $30 billion per month.[105][106] In Jerome Powell's confirmation hearing in 2022 he described inflation as being a "severe threat" to the US economic recovery due to "higher costs of essentials like food, housing and transportation". Prices for American consumers are rising at their fastest annual rate since June 1982.[15] In response, the central bank aims to raise rates as soon as March 2022. The most recent December 2021 CPI reading hit 7%.[107][108][109]

Powell sworn in for his second term as chair by Lael Brainard in May 2022

In light of his term as chair expiring in February 2022, many Democrats began to express opposition to Powell's reappointment. In August 2021, progressive Democrats, including Alexandria Ocasio-Cortez, called on President Joe Biden to replace Powell, criticizing him for failing to "mitigate the risk climate change poses to our financial system".[110][111] In September 2021, Senator Elizabeth Warren, Democrat of Massachusetts, criticized Powell for his financial regulation track record and called him as a "dangerous man to head up the Fed."[112] Powell was renominated for a second term by President Joe Biden on November 22, 2021.[6] His initial nomination expired at the end of the year and was returned to President Biden on January 3, 2022.[113]

President Biden presented his nomination to the Senate the following day. Hearings were held on Powell's nomination before the Senate Banking Committee on January 11, 2022. The committee favorably reported Powell's nomination to the Senate floor on March 16, 2022, in a 22-1 vote; Senator Elizabeth Warren was the lone member to vote against his nomination.[114] His nomination for another term as chair was confirmed by the full U.S. Senate on May 12, 2022 in an 80-19 vote.[14] He was sworn in for his second term as chair on May 23, 2022.[115]

• Biography from the Federal Reserve
• Federal Reserve main website

• Statements and Speeches of Jerome H. Powell (Saint Louis Federal Reserve Database)
• Appearances on C-SPAN