The Fed - Is It Back to the Future

My first reaction was – I’ve seen that man before, a long time ago. Harry Melkonian
Harry Melkonian


When President Trump nominated Jerome Powell to be the next Chair of the US Federal Reserve, my first reaction was – I’ve seen that man before, a long time ago.

Jerome Powell
Jerome Powell

Jerome Powell is the first non-economist to head the Fed in 30 years. His background is in law, investment banking and commercial banking. This is a radical departure from the economists who have led the central bank for many years. Jerome Powell even looks like a banker.

And, when I saw his face, I was immediately reminded of another banker who ran the Fed for many years – William McChesney Martin.

William McChesney Martin
William McChesney Martin

Martin was Fed Chair for 19 years, spanning 5 presidents – Truman through Nixon. And, he made all of them a little crazy.

William McChesney Martin was a banker. Educated at Yale, he became a bank examiner. He began advanced studies in economics at Columbia but never received a degree. His father was President of the Federal Reserve of St Louis. At the tender age of 31, William became President of the New York Stock Exchange and was dubbed – the ‘boy wonder of Wall Street.’ Martin ran the Fed in the manner of a no-nonsense banker and infuriated Presidents by refusing to go along with easy-money policies. In short, he didn’t have grand plans for the economy, he ran the Country’s finances like a prudent neighbourhood banker would manage a local bank.

As I recall Wm McChesney Martin’s uniform response to Presidents who wanted low interest rates to promote economic expansion was a simple and direct ‘no.’ Not even Lyndon Johnson could browbeat Martin into submission. Martin resigned in 1970 and returned to commercial banking.

Jerome Powell’s background is not all that dissimilar to Martin’s, though Martin was a Democrat and Powell is a Republican. Neither man is a graduate economist, both worked in the securities industry – Powell was an investment banker before and after his stint at Bankers Trust Company (now part of Deutsche Bank) in New York.

If the past is any predicter, then we can expect Jerome Powell to be just as stubborn as William McChesney Martin in resisting the pleas of politicians to loosen the money supply. By promising further increases to the discount rate (the rate at which banks borrow money from the Fed), Powell is already showing signs of following in Martin’s footsteps.

If Powell remains true to his roots, there should be exciting times ahead as the sparks will definitely fly when Powell just says ‘no’ to Trump. Wm McChesney Martin will certainly be smiling.

First published . Last updated 22 Mar 2018. Disclaimer: The views, information, or opinions expressed in this article are solely those of the author and do not necessarily represent those of the University of Newcastle and its employees.

About Harry Melkonian

Harry Melkonian is a freelance writer, educator, commentator and lawyer with a focus on US politics. He has conducted short courses on US politics in Sydney on topics ranging from current elections to historical issues including well-known events such as the Kennedy Assassination and Nixon and Watergate to less well-known American history such as When No One Was Elected – the Presidency and Vice Presidency 1974-1976. He has periodically appeared on the ABC and SBS as a commentator for Australian elections. Harry was previously a partner at the law firm White & Case in the US, and is licensed to practice law in the jurisdictions of New York, California, England and New South Wales. He is now an Honorary Associate at Macquarie Law School, specialising in US constitutional issues as well as media and defamation law.

The University of Newcastle, Sydney Campus is a leading provider of short courses in Australia, with industry qualified and experienced educators that bring up-to-date real-world skills directly to the classroom.