Jay Powell, the all-but-assured incoming Fed Chairman, had his Senate confirmation hearing yesterday. And the whole drive to extract a hawkish/dovish angle from the proceedings missed the point, in two important ways.
One, we should have learned by now that whether someone is hawkish or dovish at a point in time is far less telling than whether they show ability to evolve over time. Powell showed balanced pragmatism, both on monetary and regulatory issues. This is also consistent with his reputation.
Two, Boris Yeltsin might have been a larger-than-life hero in the Russian constitutional crisis of 1993, but he was an abysmal administrator. Bernanke and Yellen were wartime Chairs, technically deep but pragmatic, with a courage of conviction that only comes from a lifetime immersed in the subject matter. But both were shy on political skills. Hard to forget Bernanke’s quivering lip in his first dozen or so Congressional testimonies.
Powell may not have the technical expertise or the courage of conviction Bernanke showed in the depths of the GFC, but the Fed is not longer at war. The path to normalization is all but set. Financial intermediaries have been defused. The next recession is much more likely to be garden variety than apocalyptic—irrespective of what our lizard brains keep telling us.
The challenges now are political. The Fed now needs someone who can stave off the growing efforts of Congress to politicize the Fed and ‘usurp upon its domain’. It needs someone who can keep Elizabeth Warren and GOP troglodytes at arm’s length while the tweak and streamline the post crisis regulatory framework.
Yesterday, Powell showed great promise that he can be that guy.