Powell says he will stay on Fed board after chair term ends, addressing Trump’s attacks

[0:00] The Federal Reserve held rates steady today, as expected, but it was a significant day for [0:05] the central bank as it transitions to new leadership. Kevin Warsh, President Trump's [0:10] pick for Fed chair, was confirmed in a Senate committee vote, clearing the way for a full [0:14] Senate vote in mid-May. The central bank's current head, Jerome Powell, stated that he will step [0:20] aside when his term as chair ends May 15, but he will remain on the Federal Reserve Board of [0:26] Governors. Powell made clear today he was staying on to make sure that a probe into the Fed headquarters [0:32] renovations launched by the Trump administration is, quote, well and truly over. He also addressed [0:38] the persistent attacks from the president himself. I've never suggested that such verbal criticism [0:44] is a problem, and neither has anyone else here. But these legal actions by the administration are [0:49] unprecedented in our 113-year history, and there are ongoing threats of additional such actions. I [0:55] worry that these attacks are battering the institution and putting at risk the thing [1:00] that really matters to the public, which is the ability to conduct monetary policy [1:04] without taking into consideration political factors. David Wessel of the Brookings Institution [1:09] is tracking all of this as usual and joins me now. It's good to see you. Good to see you. [1:13] So Powell's decision to stay on the Federal Reserve Board of Governors even after his chairmanship [1:18] ends, how unusual is that? It's unusual. The last time it happened was in 1948, [1:23] when Mariner Eccles' term as chairman was up. But at that time, President Truman asked Eccles to stay [1:29] on the board. That's the only time this happened before. It's pretty unusual. And as you said, [1:34] it's because he says, I'm staying until this criminal investigation of me in the building ends. [1:40] You want me off the Federal Reserve Board? Finish the investigation. [1:43] So what is your sense of when he might feel satisfied that things, as he puts it, [1:48] things have calmed down, that he can step down? Well, the U.S. Attorney has said that she's waiting [1:53] for a report by the Fed's Inspector General, which actually is something that Powell himself [1:58] initiated several months ago. My guess is that for the next few months, Powell will stay there. He says [2:03] he's going to keep a low profile and that sometime later this year, the IG will report and the IG will [2:10] say that it wasn't well managed, but there were no criminal charges or no criminal wrongdoing. And at that [2:16] point, Powell will go. That's my guess. So let's turn now to his likely successor [2:20] here, Kevin Warsh. He cleared the Senate Banking Committee vote today. He did face a lot of questions [2:24] in his confirmation hearings about his independence from President Trump, if he's fully confirmed. [2:29] Is there any reason to believe that he won't make it through a full confirmation vote in the Senate? [2:33] No, the problem was in the Senate Banking Committee. It was a very partisan vote, though. [2:38] That's unusual. Usually, Fed chairs are more bipartisan. It was 13 to 11, Republicans to Democrats. [2:44] He's almost certain to be confirmed, and I suspect he'll be sworn in before May 15, [2:49] which is the day that Jay Powell's term as chair ends. [2:51] And he insisted that he will maintain independence from President Trump when he was asked about this, [2:56] but he also talked about regime change, about big changes in the way the Fed communicates with [3:01] the public. What would you expect to see from him as Fed chair? [3:03] Well, he does insist that he's going to be independent, but the question is not what he says, [3:09] but what he'll do, and how he'll react if the Fed doesn't rate lower interest rates. [3:14] As President Trump asks, how will he respond? I don't know what regime change means. It might be [3:19] some changes in the Fed's communication, in the forecast they make, in how he does the press [3:26] conferences. My guess is going to be very slow change. I don't think he's going to come down and [3:31] turn the place inside out. But the chair doesn't rule the Fed, right? [3:34] He can move the board, but all the board members have to vote on the changes and the policy. [3:40] Based on the current board makeup, are there people there who will disagree with Warsh, [3:44] who would push back on some of these changes? Absolutely. And remember, [3:46] monetary policy is made by a committee, the seven governors in Washington, [3:50] and five of the 12 Reserve Bank presidents out in the region. And at today's meeting, [3:56] three of those presidents basically fired a shot across Kevin Warsh's bow. They said they did not [4:02] want a statement that implied that the Fed's next move is to lower interest rates. So he's not going [4:08] to be able to do anything on interest rates very quickly because so many of the policy members are [4:14] against him. And he still has to deal on major changes in Fed communications and stuff. He'll need [4:19] a consensus of the board. So I suspect this will be a slow process. It will be interesting how he deals [4:24] with a bunch of people who he's been accusing of screwing up for the last 15 years since he left the [4:29] Fed. This might be some interesting conversations, but he's a pretty smooth guy. There's also the [4:34] ongoing case against Fed board member Governor Lisa Cook. The Trump administration has accused her [4:39] of mortgage fraud. She's been fighting that and her dismissal. It's before the Supreme Court right now. [4:44] If she is ousted, how does that change the makeup of the board or President Trump's influence? [4:48] Well, there's seven members of the Federal Reserve Board, and there are three who were Trump appointees. [4:54] One will leave when Kevin Warsh gets there. If anybody goes, Lisa Cook, Jay Powell, [5:00] Michael Barr, if anyone goes, then the Trump appointees will have a majority and it will be [5:04] easier for them to do something if they all agree on what they want to do. And I think that's what [5:08] the president wants. We will wait and watch and see. David Wessel, always good to see you. [5:12] Thank you so much. Support journalism you trust. Support PBS News. Donate now or even better, [5:32] start a monthly contribution today.