New Head Of Fed Approved

Wednesday, 24 January 2018 19:50

Donald Trump’s pick to replace Janet Yellen as the chairman of the Federal Reserve, Jerome Powell, has secured Senate approval. The vote went through by a majority of 84 to 13 votes. Mr Powell will take over as the chairman of the Federal Reserve when Janet Yellen’s term end next month.

The appointment of Mr Powell breaks with a tradition that incoming presidents continue to work with the sitting Fed chair that has been maintained for decades, but it is a convention, not an obligation. Mrs Yellen has only been in post since 2014 and was appointed by President Obama; she was the Fed’s first female chief.

The incoming Fed Chairman is a lawyer rather than a banker and is a Republican supporter although (nominally at least) the role is non-partisan. Mr Powell has served on the Federal Reserve board since 2012 and has backed the majority position on interest rate policy and winding down QE. He is 64, a Princeton University graduate and a former partner in one of the world’s largest investment companies, the Carlyle Group. He is regards as a moderate conservative on aspects such as the national debt and bank regulation and is a multi-millionaire. He is regarded as a safe pair of hands which explains why he was able to gain support from Democrats in the Senate (in fact, he was appointed to the Fed board by President Obama).

It is thought that he will continue with the policies of gradual interest tightening that were started under Ms Yellen and will adopt a cautious approach to unwinding the asset portfolio that the Fed amassed during its Quantitative Easing programme. This is no small task since it is estimated that the QE programme saw the Fed amass some $4.5 trillion worth of assets against the electronic money which is generated. It has been suggested that the total investment in QE until 2015 was $3.7 trillion; if so the Fed has made a tidy profit of $0.8 trillion, or so!

In principle, the idea with QE was that the electronic money created to fund it would be withdrawn from circulation at the end of the programme. The off-loading of the assets held by the Fed will need to be carefully handled to avoid creating downwards pressure on assets following the release of a glut of them onto the market, so it will be a time consuming process.

Dr. Mike Campbell is a British scientist and freelance writer. Mike got his doctorate in Ghent, Belgium and has worked in Belgium, France, Monaco and Austria since leaving the UK. As a writer, he specialises in business, science, medicine and environmental subjects.

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