WOODRUFF: The Republican tax cut plan was not the only important economic story of this
day.
President Trump announced his nomination for a new chairman of the Federal Reserve to replace
Janet Yellen early next year.
Our economics correspondent, Paul Solman, begins with this report, for his weekly series,
"Making Sense".
(BEGIN VIDEOTAPE)
TRUMP: I'm pleased to welcome members of the cabinet --
PAUL SOLMAN, PBS NEWSHOUR ECONOMICS CORRESPONDENT (voice-over): in announcing his pick, the
president praised Jerome J. Powell's private sector experience:
TRUMP: As a result, he understands what it takes for our economy to grow, and just as
importantly, he understands what truly drives American success -- the innovation, hard work,
and dreams of the American people.
SOLMAN: Powell, a centrist Republican, has served as one of the seven Federal Reserve
governors since 2012 and will replace Janet Yellen, a Democrat.
JEROME POWELL, NOMINEE, FEDERAL RESERVE CHAIR: I will continue to work with my colleagues
to ensure that the Federal Reserve remains vigilant and prepared to respond to changes
in markets and evolving risks.
SOLMAN: A lawyer by training, Powell would be the first Fed chairman in almost 40 years
without a PhD in economics.
He spent his career in finance and government as treasury undersecretary for George H.W.
Bush, as a partner in the private equity firm the Carlyle Group, and scholar at the Bipartisan
Policy Center.
Seth carpenter, chief U.S. economist at UBS, worked with Powell at the Fed.
SETH CARPENTER, CHIEF U.S. ECONOMIST, UBS: He seems very interested in being non-dogmatic,
about very much asking the questions: what is the most likely outcome?
What's the best outcome that policy can achieve?
SOLMAN: Today's announcement ended weeks of drummed up anticipation about who would lead
the Fed, the president Instagramming a video message.
TRUMP: I have somebody very specific in mind.
I think everyone will be very impressed.
SOLMAN: Powell's selection means that Yellen will be the first chair in modern history
to complete one term and not be nominated for a second.
During the campaign, candidate Trump railed against Yellen for keeping interest rates
low.
TRUMP: Janet Yellen is highly political and she's not raising rates for a very specific
reason because Obama told her not to.
SOLMAN: But, today, President Trump praised Yellen's performance.
TRUMP: We have been working together for 10 months and she is absolutely a spectacular
person.
SOLMAN: But one apparent area of disagreement is regulation.
Yellen strongly supports the reforms in the Dodd-Frank law that President Obama signed
after the financial crisis.
JANET YELLEN, CHAIR, FEDERAL RESERVE: In my personal view, it's important they remain
in place.
SOLMAN: President Trump has long pledged to dismantle those reforms.
TRUMP: So, we're going to do a very major haircut on Ddd-Frank.
SOLMAN: And in June, the Treasury Department proposed looser restrictions on banks to let
them borrow more easily and take more risk.
At the time, nominee Powell called the plan a mixed bag.
POWELL: There are some ideas in the report that make sense, maybe not exactly as expressed
there, but that would enable us to reduce the cost without affecting safety and soundness.
SOLMAN: Mainly, though, he has supported exempting smaller banks from Dodd-Frank, while backing
the main aspects of the law.
And in many other areas, Powell is in sync with current Chair Yellen.
He supports current Fed policy to slowly reverse the stimulus measures put in place after the
crash of '08.
Carpenter thinks Powell's consensus-building skills will serve him well as Fed chair.
SETH CARPENTER, CHIEF U.S. ECONOMIST, UBS: His ability to generate a strong rapport with
other people whether they be people who report to him or they're his peers I think is very
important.
The Federal Reserve, the Federal Open Market Committee works, in general, as a committee
and they work very much on consensus.
SOLMAN: If confirmed by the Senate, Powell will begin his term in February.
This is economics correspondent Paul Solman.
(END VIDEOTAPE)
JUDY WOODRUFF, PBS NEWHOUR ANCHOR: For more about Jerome Powell, who goes by Jay, I'm
joined now by Krishna Guha.
He is with the investment bank Evercore, and has long experience at the Fed.
From 2010 to 2013, he served as a member of the management committee and head of the communications
group at the New York Fed.
Krishna Guha, welcome back to the program.
KRISHNA GUHA, EVERCORE ISI: Thank you.
WOODRUFF: Why did the president make this change?
GUHA: So, I think you've heard from the president today that he came to respect Janet Yellen
quite highly, but at the same time, he's talked about wanting to put his own mark on the Fed.
And in choosing someone like Jay Powell, he could try to get the best of both worlds,
someone who could continue to deliver the same kind of monetary policy as Janet Yellen,
but who is a card-carrying Republican and would be more open to revisiting some of those
crisis, post-crisis financial regulations.
WOODRUFF: Well, let's talk about that.
So, in essence, we can pretty much expect someone to do what Janet Yellen and the board,
the Federal Reserve board has been doing with regard to monetary policies, interest rates.
GUHA: I think we are going to see broad continuity there, and that's not a bad thing.
You know, Jay Powell has been part of the centrist Fed majority for many years, charting
this gradual course towards gradually normalizing interest rates, gradually reducing the Federal
Reserve balance sheet that was increased by QE.
And in his temperament, he's a very careful guy, like Janet Yellen.
He's going to take a careful and gradual approach to taking away the remaining stimulus.
WOODRUFF: And what about when it comes to regulation?
We heard in the report from Paul Solman just now that he is expected, perhaps, to have
a lighter touch when it comes to banking regulation?
SOLMAN: Yes.
So, I do think that Jay Powell is somebody who thinks that, you know, these -- some years
now after the crisis passed, we implemented a lot of reforms, it is the right time to
step back, look at all of these regulations, and see how they're doing in practice, see
if there are ways that we can achieve the financial stability goals while imposing fewer
costs, fewer burdens in certain places at least.
I think he very much wants to keep the core of these new regulations in place, but does
-- does have that openness to trying to reduce, revise those burdens when it can be done safely.
WOODRUFF: Which raises the question, it seemed to me, he made a point today, I noticed, of
speaking about the independence of the Fed.
Can he be expected to pay -- to do what President Trump wants or to be an independent thinker,
figure at the Federal Reserve?
SOLMAN: So, I think no question, Jay will be an independent leader of an independent
institution at the Fed.
To be fair to President Trump, he's shown a lot of respect for the institutional independence
for the Fed since assuming the office of the president himself, and I think he understands
that if it looks like the Fed is no longer independent, then its ability to deliver good
economic outcomes for the country would decline.
WOODRUFF: Just one last thing, Krishna Guha, this is the first time in four decades, as
we heard, that a sitting Fed chair has not been reappointed.
Janet Yellen, a woman.
How should we read that?
SOLMAN: So, I think -- you know, it's -- it's not any bad mark against Janet's tenure as
Fed chair that she was not renewed in office.
If you look at what she's achieved, you know, she took a fragile recovery and brought it
to safety.
She took unemployment down from very high levels to historically quite low levels today.
She did so with the backing of a number of important figures at the Fed.
One of them is Jay Powell.
And I think she'll feel comfortable handing off to him as her successor.
WOODRUFF: Krishna Guha, thank you very much.
GUHA: Thank you.