Yes, Jay Powell is the compromise candidate for the Federal Reserve – but not a bad one at that

Perhaps we should be relieved that Donald Trump has made a dull appointment to succeed Janet Yellen as chairman of the Federal Reserve, America’s central bank. He might have picked another alt-right wacko or Kremlin stooge — or his Las Vegas buddy Phil Ruffin, the casino owner he allegedly thought of sending as envoy to China. But in fact he has chosen Jerome ‘Jay’ Powell, an identikit lawyer-turned-banker who has been called the candidate of ‘continuity’ and ‘compromise’ after a late run to beat frontrunner Kevin Warsh, a former Trump adviser with more aggressive opinions on the need for monetary tightening.

The most interesting facts about Powell are that (unlike recent Fed incumbents) he is not an economist but he is rich: one guess says he’s worth $112 million, some of it made when he worked for the private equity group Carlyle, which has been described (in Dan Briody’s book The Iron Triangle) as operating at the ‘murky intersection’ of Washington politics, national security and private capital. So he’s an insider and a plutocrat — but is he the man for the job?

His test will come when US stocks plunge from current highs and Wall Street howls for cheap money again; and when Trump’s tax cuts overheat the economy but the White House doesn’t want the feelgood factor quelled by faster-rising rates. The Washington Post asks: ‘Does [Trump] think, of all the plausible candidates, Powell would be the easiest to influence or intimidate?’ But my man who pours the decaf at Fed board meetings says Powell’s better than that: ‘Pragmatic, mainstream, the best pick Trump could have made once he decided not to reappoint Yellen.’ Dullness isn’t necessarily bad in a central bank governor, so long as it’s accompanied by firmness under fire.

Sin in Paradise

What would a perfect tax system look like? For companies, profit taxes should be competitively low, to encourage inward investment, with generous reliefs for start-ups, research and capital projects; the corporate tax code should be designed to generate rising productivity and prosperity rather than to maximise short-term tax revenues, and companies should acknowledge a duty to contribute wherever their profits arise.