From a small northwestern observatory…

Even though we’re both South Carolinians, I didn’t meet former FED Chair Ben Bernanke until 2004, when we were introduced at the American Economic Association’s annual FED luncheon in San Diego.  He was, at the time, a member of the FED Board of Governors, a seat he would soon resign to become the Chair of President W’s Council of Economic Advisors, and shortly thereafter the FED Chair, succeeding the long-serving Alan Greenspan.

So now, somewhat in contrast, we have  Jerome Powell nominated to be the new FED Chair.  Like Bernanke, Powell will come to the job having served as a FED Governor.  He also served in government, as Treasury Undersecretary, but spent most of his career in the private sector, most recently, intriguingly, at the Global Environment Fund, focused on specialty finance and opportunistic investments.  After several years of Yellen and Bernanke, we tend to forget that many prior FED chairs came with significant private sector experience.  Greenspan spent nearly his entire career on Wall Street, interrupted by a stint as President Ford’s Council of Economic Advisors Chair.  Paul Volker before him had two long stints at Chase Bank, interrupted by a brief period in the Kennedy Administration as an Undersecretary of the Treasury.   William Martin worked as a stockbroker at A.G. Edwards, Thomas McCabe was the CEO of Scott Paper, and William Miller was CEO of Textron.

Powell will be the 9th FED Chair since WW II, and most intriguingly, one without a degree in economics or finance.  Yellen, Bernanke, Greenspan, and Burns all had doctorates, so we tend to think that’s de rigueur.  Actually, it would appear that holding a Ph.D. in economics isn’t a prerequisite at all, and in fact of all of the FED Chairs in history, only those 4 held doctorates.  McCabe, the first FED Chair after WW II, held an BA in economics.  Martin, who succeeded him, studied Latin, originally considering a career as a Presbyterian minister.  (Originally appointed by Truman in 1951, Martin served as FED Chair under 5 presidents, leaving office in 1970.)  Miller, who served under Carter, was also a lawyer (and before that a Coast Guard officer) before joining Textron.  The great Marriner Eccles, who served as Chair for 14 years under Roosevelt and Truman, had an undergrad degree and came out of his family’s business in Utah.  (Intriguingly, this FED Chair who helped define Roosevelt’s New Deal was a registered republican.  Go figure…)

So, why the history lesson?  In part, to reflect on the fact that Powell may be one of the most mainstream appointments this White House has made.  While FED chairs tend to have an agenda, the job tends to be somewhat more reactive than proactive.  Consider the storm that Bernanke waded into, or the aftermath which Yellen has had to manage.  Powell’s job will be to stay the course, which has been quite good the past few years.  One tends to feel a bit sorry for him, recognizing that his will probably be an unenviably tough term of office.

(Footnote — Many will disagree with my comment about doctorates, and argue that Paul Volker had one.  He did not.  Volker held an MA in political economy from Harvard, and went on to do advanced graduate work in the subject at the London School but without the award of a degree, not that it appears to have held him back…)