WASHINGTON — Jerome Powell, President Trump’s pick to be chairman of the Federal Reserve, told senators at his confirmation hearing Tuesday he believes some bank regulations can be rolled back – something the administration and Wall Street favor. But he stressed he will protect the central bank’s political independence, calling it vital for the Fed’s role.
Powell also strongly hinted in his appearance before the Senate Banking Committee the Fed would hike rates again in December.
Powell said he believed the Dodd-Frank Act, passed in the wake of the devastating 2008 financial crisis, had succeeded in making the financial system stronger, including ensuring no major institution now is too big to fail.
But in some areas, such as regulation of smaller banks, the law had imposed unnecessary burdens that should be eased, he said.
Powell’s comments pleased many GOP senators, who have complained for years Dodd-Frank was hurting the economic recovery by making it harder to get bank loans. Democratic senators, however, pressed Powell to say whether he would cut key consumer protections in the 2010 law, a measure Trump often attacked on the campaign trail as a disaster.
Powell stressed he was “strongly committed” to the political independence of the Federal Reserve. He said he has not had any conversation with anyone in the administration that concerned him.
During two hours of testimony, Powell sought to convey a sense of stability and praised his predecessors Janet Yellen and Ben Bernanke. He said the Fed would continue on a gradual path of raising interest rates and shrinking the Fed’s massive $4.5 trillion balance sheet, which grew five-fold in the wake of the Great Recession as the Fed bought government bonds to push long-term interest rates lower.
Powell said he expected the balance sheet to shrink to around $2.5 trillion to $3 trillion over the next three to four years under a program set in motion by Yellen.
Trump tapped Powell on Nov. 2 to succeed Yellen, the first woman to head the nation’s central bank and the first Fed leader in four decades not to be offered a second term as chair. Yellen’s term ends Feb. 3. She said last week she will leave the Fed once Powell is confirmed by the Senate.
Private economists said there were no surprises in Powell’s testimony. He sought to bolster the reputation he built in his five years as a Fed board member as a centrist.