So I don’t think Fed Chairman Jay Powell will go quietly into the night. Today is his last meeting as chairman, but he announced his unfriendly decision to stay on as a Fed board member for who knows how long. “I have said I will not leave the board until this investigation is fully and transparently completed, and I stand by that,” he said. “As for when I would leave, I will leave when I think it is appropriate to do so,” he added. “The things that have happened in the last three months, I think, left me no choice but to stay.” Mr. Powell concluded that “after my term as Speaker ends on May 15, I will continue to serve as Governor for a period of time to be determined. I intend to maintain a low profile as Governor.”
Mr. Powell is not the martyr he thinks he is. You can’t have two CEOs.
President Trump’s choice to lead the Fed, Kevin Warsh, was confirmed today by the Senate Banking Committee on a 13-11 vote. And he will no doubt be confirmed by the full Senate sometime next week.
No one will listen to Mr. Powell. The investigation into cost overruns is being led by the Fed’s inspector general, who is independent, and Mr. Powell has nothing to do with it. And by the way, only once before in the central bank’s 113-year history has another former chairman stayed on as a board member.
This speaks poorly of Mr. Powell. His record as Fed chairman was unremarkable. The consumer price index averaged 3.5 percent per year under Mr. Powell. That was the highest level since Paul Volcker’s term, giving Mr. Powell the worst record in more than 40 years. Cumulatively, the CPI rose as much as 32 percent. And in terms of the economy, real gross domestic product averaged 2.4 percent annually. Another unimpressive performance. Moreover, Mr. Powell was also a highly political Fed Chairman who embraced President Biden’s radical climate agenda and even more radical DEI.
US Treasury Secretary Scott Bessent calls off Operation Economic Fury and the pressure on the Iranian regime on ‘Kudlow’.
In an interview today, Treasury Secretary Scott Bessent expressed strong displeasure with Powell, saying, “I think it’s an insult to Kevin Warsh, Miki Bowman and Chris Waller to think that these other Republican nominees don’t care about the institution of the Fed and that only he can uphold the integrity of the Fed.”
The good news is that Mr. Warsh is taking over as chairman and making some important changes. Hopefully, the Fed’s economic models, which are based on the false premise that strong growth leads to higher inflation, will be thrown out the window.
Mr. Warsh understands the positives of low tax rates and deregulation as they have a disinflationary effect of accelerating productivity and lower unit labor costs. Mr. Warsh wants to shrink the Fed’s balance sheet by refocusing the central bank on monetary and fiscal policy and leaving debt management to the Treasury Department’s Mr. Bessent.
The Fed should not be a big central planning agency. And hopefully the cacophony of chatter from various Fed officials will come to an end, along with something called forward guidance. Mr. Warsh wants the Fed to earn its independence by staying out of politics, insisting on better control of the money supply and maintaining a strong and stable dollar. The position of chairman at the central bank is a very powerful job. So whether Mr. Warsh sees fit to give Mr. Powell a parking spot remains to be seen.
