What You Need to Know About Jerome Powell's Views

By David Harrison Features Dow Jones Newswires

News that President Donald Trump has interviewed Federal Reserve governor Jerome Powell for possible nomination as Fed chairman focuses attention on his record at the central bank. In his five years, Mr. Powell has emerged as a reliable ally of Chairwoman Janet Yellen on monetary policy, while also calling for easing some of the bank rules put in place following the financial crisis. Mr. Powell, a lawyer and former partner at the Carlyle Group, a private-equity firm, previously served as a Treasury Department official in the George H.W. Bush administration. Here is a roundup some of his policy views.

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On Interest Rates

Mr. Powell, 64 years old, has backed Ms. Yellen's policy of gradually raising interest rates if the economy improves as projected. In recent public remarks he has sounded an optimistic note, saying he expects inflation to move up to the Fed's 2% target, economic growth to remain steady and the unemployment rate to fall further. "I would view it as appropriate to continue to gradually raise rates," he said in June.

On Shrinking the Fed's Portfolio

Mr. Powell in September voted in favor of beginning the yearslong process of winding down the central bank's $4.5 trillion portfolio. Like Ms. Yellen, Mr. Powell has said the Fed could resort to new rounds of asset purchases in another crisis if the economy needs more stimulus. Putting new assets on the Fed's balance sheet should be an option "only in extraordinary circumstances," he said in February.

On Monetary Policy Rules

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Mr. Powell has joined several of his Fed colleagues in warning against relying too heavily on mathematical rules such as the so-called Taylor Rule to guide monetary policy. That could put him at odds with congressional Republicans who have pushed the Fed to adopt such a formula in an attempt to make Fed policy-making more transparent and predictable.

"Simple policy rules are widely thought to be both interesting and useful, but to represent only a small part of the analysis needed to assess the appropriate path for policy," he said February. "I am unable to think of any critical, complex human activity that could be safely reduced to a simple summary equation."

On Dodd Frank

Mr. Powell has expressed willingness to ease some of the burdens imposed on financial institutions from the 2010 Dodd Frank law, a position that could appeal to the Trump administration.

Speaking before lawmakers in June, Mr. Powell said he was looking into softening the Volcker rule preventing banks for making overly risky bets with their own money. He also said it might be appropriate to ease some of the annual stress tests that big banks must perform.

He has also called for revisiting new supervisory requirements imposed on bank boards of directors after the crisis. In his view, a board's role "is one of oversight, not management." That, he said in a 2015 speech, means boards should not be saddled with "an ever-increasing checklist."

On Fannie Mae and Freddie Mac

Mr. Powell has called on Congress to overhaul the housing finance system, saying he'd like to see the country's two large mortgage-finance firms, Fannie Mae and Freddie Mac, move out from under government conservatorship. More private capital in those firms would reduce the risk of a taxpayer-funded bailout in the event of a downturn, he said in a speech in July.

Although the Fed isn't responsible for housing finance, it supervises some of the country's largest lenders who frequently sell their loan to the two agencies. "No single housing finance institution should be too big to fail," he said.

Write to David Harrison at david.harrison@wsj.com

(END) Dow Jones Newswires

September 29, 2017 18:17 ET (22:17 GMT)