Jerome Powell is not prepared to sacrifice this, economist says
Citi Global Chief Economist Nathan Sheets reveals why the Fed is in wait-and-see mode on ‘The Claman Countdown.’
Federal Reserve Chair Jerome Powell on Wednesday announced that he will remain a member of the Fed's Board of Governors after his term as chairman ends next month, though he added that he won't be a "shadow Fed chair."
The outgoing Fed chair hosted his final press conference after the Federal Open Market Committee (FOMC) voted to hold interest rates steady at the current range of 3.5% to 3.75%. The presser occurred hours after the Senate Banking Committee voted to advance his successor as Fed chair, former Fed Governor Kevin Warsh.
Powell said that he intends to continue serving as a member of the Fed's Board of Governors for a "period of time to be determined" and was asked during the press conference about how he will conduct himself as a governor and not have an outsized influence over the process.
"That's just something I would never do, the shadow chair thing. I don't know what the exact specifics of it will be, but I'm going back to being a governor, I respect the role of chair," Powell said. "I was a governor for six years and I know what that's like."
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Fed Chair Jerome Powell said he doesn't plan to act like a "shadow Fed chair" and wants to help build consensus where he can. (Daniel Heuer/Bloomberg via Getty Images)
"I had a pretty front row seat, particularly with Chair Yellen, to whom I was close. When I worked with Chairman Bernanke for two years, I was brand new at that time. So I got a sense of what it was and I had real sympathy for how hard it is to get that group to consensus," he explained.
"I always felt like I don't want to add that unnecessarily, and that means trying to support the chair or the direction the chair wants to go. And if you can't, you can't. I think that's the way it's always worked there because the chair only has one vote plus the ability to develop consensus," Powell said. "I propose to be a very constructive participant in that process, really out of respect for the office of the chair."
In his opening remarks, Powell said that he plans to "keep a low profile as a governor," and explained, "There's only ever one chair of the Federal Reserve Board. When Kevin Warsh is confirmed and sworn in, he will be that chair once sworn in as board chair, his new colleagues will elect him to chair the FOMC as well."
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Powell said he will stay on as a member of the Fed's Board of Governors until the investigation is closed with finality and transparency. (Kent Nishimura/Reuters)
Powell said that while he planned to retire at the end of his chairmanship, the Justice Department investigation launched by the Trump administration caused him to shift those plans, as he was concerned about threats to the independence of the Fed to conduct monetary policy free of political pressure.
In January, U.S. District Attorney for the District of Columbia Jeanine Pirro issued subpoenas to the Fed as part of a criminal investigation into whether Powell misled Congress about the Fed's costly renovation project at its D.C. headquarters.
Powell said the investigation was politically motivated, and courts quashed the DOJ subpoenas as being a "pretext" to pressure him into cutting interest rates or stepping down.
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Powell said he planned to retire at the end of his chairmanship prior to the DOJ investigation. (Anna Moneymaker/Getty Images)
Pirro announced on Friday that the DOJ is dropping the investigation and allowing the Fed's inspector general, Michael Horowitz, to handle the matter. Pirro said she wouldn't hesitate to "restart a criminal investigation should the facts warrant doing so," while the DOJ told Powell and the Fed over the weekend that it would only be reopened if the IG submits a criminal referral. The move allowed Warsh's nomination to advance in the Senate after a Republican senator lifted his block over concerns about Fed independence.
"My concern is really about the series of legal attacks on the Fed, which threaten our ability to conduct monetary policy without political factors," Powell said. "These legal actions by the administration are unprecedented in our 113-year history and there are ongoing threats of additional such actions."
He added that the Fed's ability to operate independently is "so important for our economy, for the people that we serve, that they can depend, over time, on a central bank that operates that way free of political influence. It's part of the absolute foundation of this amazing economy that we have, it's just one of the many reasons why the U.S. economy is the envy of the world."
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Trump picked Powell to serve as Fed chair starting in 2018, though he went on to repeatedly threaten to fire him for not cutting interest rates. (Saul Loeb/AFP via Getty Images)
During Wednesday's press conference, Powell was asked if remaining at the Fed after his chairmanship was a political act to influence the board's actions. He responded that the legal inquiry left him with no choice but to stay on until it's truly over and that he doesn't want to interfere in the Fed's operations when Warsh becomes the chair.
"I'm literally staying because of the actions that have been taken. I had long planned to be retiring. And you know, the things that have happened, really in the last three months, left me no choice but to stay until I see them through, at least that long," Powell explained. "In addition, I don't see how this will interfere. My intention is not to interfere."
Powell's term as a member of the Fed's Board of Governors runs until January 31, 2028, though he didn't say whether he would consider staying on for the remainder of his term and emphasized he will leave when the investigation is "well and truly over with finality and transparency, and I'm waiting for that and I will leave when I think it's appropriate to do so."
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Powell won't be the first former Fed chair to remain on as a governor after their term as chair expires. Marriner Eccles, who one of the buildings at the Federal Reserve's D.C. headquarters is named for, served as Fed chair from 1934 to 1948 and remained on as a member of the Fed's Board of Governors until 1951.
