The Senate Banking Committee approved Jerome Powell as new FOMC Chair by a wide margin, with only Senator Elizabeth Warren voting against his nomination. Powell was originally nominated to the Federal Reserve’s board by President Obama, and therefore he already had considerable support among both parties leading up to his current nomination. However, it was not surprising that Senator Warren voted against him, seeing that she was highly skeptical during his confirmation hearing with respect to his firm statements advocating some rollbacks and modifications of Dodd-Frank regulations. Warren had been a long time advocate of the need for such reforms long before the financial crisis, and generally has a strong tendency to advocate very extensive regulation. However, Powell is more favorable to loosening some of the constraints brought about by Dodd-Frank, arguing that some of the regulations made at that time have been shown to need revision or elimination.
The financial markets immediately rallied after Powell’s nomination was confirmed, leaving little doubt that traders generally see him as a mild reformer who will not advocate any aggressive changes, and will generally favor policies aligned with the desires of the market. Powell’s opinions on interest rates and unwinding the Fed’s balance sheet seem to be aligned with those of outgoing Chairperson Janet Yellen, leading me to expect a smooth transition of leadership. Powell was also criticized during his confirmation hearing for being to willing to vote along with the rest of the board by Senator John Kennedy, suggesting that the Senator didn’t see Powell as being sincere in his calls for moderate reform. However, with the 22-1 vote in favor of Powell, it seems clear that the Banking Committee is indeed comfortable with him as the new leader of the FOMC.