President Barack Obama plans to nominate Jerome Powell, a former partner at Carlyle Group LP, to serve another term on the Federal Reserve Board, according to a government official briefed on the matter.
Powell’s reappointment, coinciding with record Fed stimulus, would provide some continuity during a transition of leadership and membership on the Board of Governors. Obama has nominated Vice Chairman Janet Yellen to succeed Ben S. Bernanke, whose term as chairman ends Jan. 31, and has three other governor vacancies to fill on the board.
Fed policy makers today began a two-day meeting to discuss efforts to fuel economic growth and combat 7.2 percent unemployment by holding the main interest rate at a record low and buying $85 billion in bonds each month. The purchases have expanded the Fed balance sheet to $3.84 trillion.
Since taking office in May 2012, Powell has supported Bernanke’s policy, never dissenting from a Federal Open Market Committee decision. Still, he has voiced caution about the ballooning balance sheet, and taken interest in board staff studies on costs and benefits of so-called quantitative easing.
The asset purchases are an “innovative, unconventional policy,” Powell said in a June 27 speech in Washington. The “likely benefits may be accompanied by costs and risks, the nature and size of which remain uncertain.”
Powell said on Oct. 11 that the FOMC’s unexpected move in September to refrain from tapering the pace of bond buying was “a reasonable exercise in risk management.” He also called the decision a close call.
“I would have been comfortable with a small reduction in purchases,” he said in the speech in Washington.
“Given his business background, I think he is looking at quantitative easing as maybe not as effective” as some of his colleagues consider it to be, said Joseph LaVorgna, chief U.S. economist for Deutsche Bank in New York. “He certainly isn’t a dove. I would put him in the middle of the road” in terms of monetary policy.
The Standard and Poor’s 500 stock index was 0.4 percent higher at 1769.65 as of 3:44 p.m. in New York on expectations the Fed will continue record monetary stimulus. The benchmark stock index is up 24 percent year-to-date. Yields on U.S. 10-year government bonds were 2 basis points lower at 2.5 percent.
Powell’s appointment in 2012 filled an unexpired governor term ending Jan. 31, 2014. The 60-year-old Republican was put forward along with Fed Governor Jeremy Stein as part of a package of nominees designed to win bipartisan support. He was confirmed in a 74-21 vote by the U.S. Senate.
Powell’s renomination could also be combined with a Democrat, said Sarah Binder, a senior fellow at the Brookings Institution, a Washington-based public policy research organization.
“His value to Obama here is the ability to package a set of nominations -- Democrat and Republican -- to cajole Republican votes,” said Binder. “Like most governors, Powell’s tenure has been pretty quiet.”
Elizabeth Duke, a Virginia banker, resigned as a Fed governor on Aug. 31, and Obama has nominated Sarah Bloom Raskin, another governor, to be the U.S. Treasury’s first female deputy secretary. The changes open up two more vacancies besides Bernanke’s governorship.
In addition, Obama could appoint a Fed vice chairman and a vice chairman for supervision, a new office established by the Dodd-Frank Act. Those positions could be filled from current governors or new appointments. When fully staffed, the Fed has seven board members.
As a governor, Powell sits on the bank supervision committee and leads the committee on payments, clearing and settlement. He also serves on two committees that oversee administrative matters at the board and the 12 regional Fed banks.
He spent his career as an attorney and an investment banker and, from 1997 to 2005, was a partner at the Carlyle Group, a private-equity firm.
Powell is the wealthiest Fed governor, with assets exceeding $20 million, according to financial disclosures from when he joined the board. He served at the U.S. Treasury under President George H.W. Bush as an undersecretary responsible for domestic finance from 1990 until 1993.
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