ECONOMICS Bloomberg Businessweek July 22, 201932
Powell was a governor for six years, earning
the respect of fellow policymakers and the bank’s
army of brainy economists because of his studi-
ous and thoughtful commitment to work. Along
the way, he’s also won a reputation for keeping
his cool. “In some people, it’s just their nature
to be straightforward and not get flustered,” says
G. William Hoagland, senior vice president at the
Bipartisan Policy Center.
That doesn’t mean Powell has been entirely
passive in the face of his tormentor. Although he’s
carefully avoided a direct clash with Trump, he’s
made it clear the Fed won’t cave to political pres-
sure when setting rates, something that would be
tantamount to a moral failure in Powell’s book.
“We’re human. We’ll make mistakes,” he told an
audience in New York on June 25. “But we won’t
make mistakes of integrity or character.”
Powell has also worked to cultivate allies in
Congress, the Fed’s real boss. He’s made good on
his 2018 pledge to “wear the carpets of Capitol Hill
out,” holding almost 150 meetings or phone calls
with legislators since becoming chair, according to
his public calendar through May.
His pilgrimages to Capitol Hill appear to be pay-
ing off. Several Republicans have voiced support
for him in recent months. Pennsylvania Senator
Pat Toomey told Bloomberg TV on July 10 that any
attempt by Trump to remove the Fed chief “would
be a very, very bad idea.”
While the president’s criticism of the central
bank generates headlines, there’s no hint that it’s
disrupted the way Powell and the rest of the staff
go about the business of crafting monetary policy.
This is an intensely focused—some would say noto-
riously insular—organization. Its circadian clock is
set to the calendar of FOMC meetings, of which
there are eight a year.
Each cycle features an intense preparatory pro-
cess aimed at developing policy proposals that can
be defended before a roomful of macroeconomic
experts. Political views are taboo. Gut calls don’t cut
it. “If one of them has a strong view and they can’t
articulate it, they’re not going to get anybody else to
go with them,” says Nellie Liang, former director of
the Fed’s Division of Financial Stability. Liang was
nominated to serve as a Fed governor by Trump in
September, but she withdrew her name in January,
saying a prolonged confirmation process would
leave her “in professional limbo for too long.”
The bank has a culture that puts a premium on
professional competence and breeds a fierce loy-
alty to the institution. It’s not that the Fed never
screws up: Speaking before Congress this month,
Powell admitted the Fed may have overtightenedrates by underestimating certain fundamental shifts
in the U.S. economy. Still, the staff and leadership
approach their work convinced that no one else
is likely to do better, not because they’re smarter,
but because they have no agenda other than get-
ting policy right. It’s a quality that comes across as
valiant to their allies and self-righteous to critics.
After more than seven years at the Fed, Powell is
thought to be as loyal to those ideals as anyone in the
building. A decision to up and quit would constitute
a mammoth betrayal. “What would cause deep and
long-lasting damage is if Jay were to step down and
some person was nominated whose only credentials
were their political partisanship,” Wilcox says.
In 2016, with two seats open on the Board of
Governors and Yellen’s term set to expire in 2018,
that fear emerged as soon as Trump won the pres-
idency. For a while, however, his nominations
proved a pleasant surprise. Although he shunted
aside the widely respected Yellen, he made entirely
conventional choices in promoting Powell and in
tapping Richard Clarida as vice chair and Randal
Quarles as vice chair for banking supervision.
But the profile of Trump’s picks has changed
now that Lawrence Kudlow, director of the National
Economic Council, has assumed full control of
the process of identifying potential nominees for
the president’s approval. On the outs is Treasury
Secretary Steven Mnuchin, who championed
Powell’s candidacy for the chair, though insiders
say he still retains influence through Kudlow.
Kudlow, a Wall Street analyst-turned-TV per-
sonality, struck out with his first two choices this
year. One was his friend Stephen Moore, a fixture of
conservative think tanks and a lifelong advocate of
supply-side economics. The other was Herman Cain,
a businessman who briefly ran for the Republican
Party’s presidential nomination in 2018. Neither
was coy about suddenly calling for lower rates
under Trump. However, their loyalty to the presi-
dent couldn’t compensate for an assortment of per-
sonal and professional shortcomings that presaged
a difficult confirmation process. Both withdrew their
names before being formally nominated.
Kudlow’s latest picks are safer bets. Christopher
Waller, research director at the St. Louis Fed, has
decidedly dovish views on monetary policy that are
in sync with Trump’s. Nonetheless, his status as a
Fed insider and his long record of academic work
explaining his views pretty much guarantee the
respect of his colleagues on the FOMC.
Shelton, whose selection was revealed in a
Trump tweet on July 2, is something altogether
different and potentially troubling to anyone who
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