Powell’s tenure as Federal Reserve chair is marked by the collapse of poorly supervised banks, ruinous predictions, and wrong-headed decisions.
Kevin Warsh, the primary intermediary between the Federal Reserve and Wall Street during the 2008 financial crisis, was confirmed on Tuesday to a 14-year term as Federal Reserve governor and Wednesday as Jerome Powell’s successor as chairman of the U.S. central bank.
Powell, who was first nominated to the Federal Board of Governors by former President Barack Obama and whose term as chair ends on Friday, wished Warsh well but also provided his replacement with examples of what not to do.
Powell has dropped the ball on numerous occasions — sometimes with catastrophic consequences for the country. Here are just four examples.
In a March 4, 2021 statement during the second year of the pandemic, Powell declared that inflation might increase but would likely be “transitory” and not necessitate rate hikes — a decision some suspect was aimed at pleasing then-President Joe Biden to secure his reappointment.
Greg Robb noted that Powell’s wrong-headed view of inflation precluded the Federal Reserve from raising interest rates until 2022 while simultaneously expanding its balance sheet through bond purchases.
Economist Mohamed El-Erian, former PIMCO chief executive, called this “probably the worst inflation call in the history of the Federal Reserve.” The Fed remained on the back foot as inflation rose to levels not seen in four decades.
Facing persistent inflation, Powell raised interest rates 11 times between March 2022 and July 2023, pushing the benchmark rate to a range of 5.25% to 5.5%.
In a February 1, 2024, interview with “60 Minutes,” Powell stated: “Powell leaves office with inflation well above the Fed’s 2% target for five consecutive years.”
During his tenure under President Donald Trump, Powell raised interest rates in 2018 despite low inflation and a strong economy. Former President Trump remarked, “Every time we do something great, he raises the interest rates,” adding that Powell “almost looks like he’s happy raising interest rates.”
These rate hikes, which Trump blamed for stock market turmoil, were reportedly prompted by concerns that Republican tax cuts and tariffs would spark inflation.
Powell stated: “Fiscal policy is becoming more stimulative. In this environment, we anticipate that inflation … will move up this year.”
Economist Donald Luskin noted there was no evidence that Trump’s 2018 and 2019 tariffs led to inflation.
Economist and former Trump trade adviser Peter Navarro wrote: “Powell’s audition for ‘worst Fed chair’ began shortly after his February 2018 appointment. Promising President Trump in the Oval Office a supportive posture, Powell instead aggressively raised rates into the low-inflation, high-growth economy. Powell wrongly believed Trump’s tax cuts and tariffs would spark inflation — they didn’t.”
Powell’s bet against Trump’s policies proved consequential. According to Navarro: “As Powell’s Fed hiked interest rates four times in 2018 — despite muted inflation and strong labor market gains — economic momentum slowed sharply.” He added that the Fed’s own September Tealbook indicated most of the expected GDP slowdown (from over 3% to 1.5%) was due to Powell’s actions.
Navarro stated: “It would cost the American economy hundreds of thousands of jobs and hundreds of billions in lost economic output and tax revenues.”
Powell reportedly approved luxury renovations for the Fed’s Washington, D.C., headquarters that exceeded the original budget by $700 million and are now set to cost $2.5 billion.
The renovations — including a rooftop terrace with gardens, VIP dining rooms, “premium” marble, and water features — sparked controversy in January after U.S. Federal Housing Finance Agency Director William Pulte called for an investigation into Powell and his removal as Fed chair.
Powell stated on January 11 that the Department of Justice had served the Federal Reserve with grand jury subpoenas threatening a criminal indictment related to testimony before the Senate Banking Committee about a multiyear renovation project.
An activist Biden-appointed judge quashed the subpoenas in March. U.S. Attorney Jeanine Pirro said: “Jerome Powell today is now bathed in immunity, preventing my office from investigating the Federal Reserve. This is wrong, and it is without legal authority.”
The Trump administration dropped a criminal investigation into Powell over the renovations last month.
Despite being off the hook, the controversy remains an example of costly mismanagement.
Powell also failed to prevent the March 2023 collapses of Silicon Valley Bank and Signature Bank — the third- and fourth-largest bank failures in American history.
Weeks after the collapses, Powell acknowledged that the Fed’s interventions were too little, too late. He stated: “It does kind of suggest there’s a need for … regulatory and supervisory changes, just because supervision and regulation need to keep up with what’s happening.”
One of Powell’s lieutenants, then-Vice Chair Michael Barr, admitted that “the Federal Reserve supervisors failed to take forceful enough action.”
A damning April 28, 2023 report on the Fed’s bungled supervision of Silicon Valley Bank — which Powell ultimately accepted as accurate — highlighted these failures.
