Think American: Parlaying Powell’s Pessimism

I like Treasury Secretary Scott Bessent. His objective outlook and steadfast optimism are reassuring, contagious, and welcome. As with President Trump and Elon Musk, Secretary Bessent is a highly successful person who wants all Americans to prosper, for our Republic to be strong, and to decrease our dependence on government.

Given my appreciation for his opinions, I took notice when I read a Newsmax report that Secretary Bessent had advised the White House against removing Jerome Powell as chairman of the Federal Reserve Board. While President Trump might understandably dismiss Senator Warren’s similar opinions on that matter, I would think that he would carefully consider those of his Treasury Secretary.

Bessent now serves the dual roles of Secretary of the Treasury and Acting Director of the Consumer Financial Protection Bureau (“CFPB”). Thus, he and Chairman Powell each lead powerful organizations that exist outside our traditional Three-Branch system of government.

The Trump administration has significantly and, in my opinion, appropriately reduced CFPB staffing. Meanwhile, it has proven far more challenging and controversial for the President to make one personnel change at the Federal Reserve.

For my entire adult life, any observation that the Federal Reserve is a private banking organization has been countered by the fact that the President appoints members of the Federal Reserve Board of Governors. Alright, so what happens when the President wants to appoint a new Fed chairman before the end of the current chairman’s term? That’s where Secretary Bessent’s advice might prove to be frustrating and valuable.

Back in the late 1990’s following the dot-com bubble burst, then Federal Reserve Chairman Alan Greenspan coined the phrase “irrational exuberance.” He used that phrase to describe how investors and web-based business owners had somehow dismissed the need for a business to be profitable in order to exist.

Today, it seems to me that Fed Chairman Powell is demonstrating irrational pessimism toward our national economy. While the European Central Bank is easing interest rates to bolster its economy, Chairman Powell continues to hold.

Currently, inflation has eased to about 2.4% while 30-year fixed-rate mortgages are hovering around 7%. Coincidentally, that’s comparable to where mortgage rates were in 2001 following the dot-com bubble burst. In March 2020, inflation measured .1%, and 30-year fixed-rate mortgages were available at under 3.5%. 

After years of COVID turmoil and massive inflation, the time is ripe for residential real estate and real estate finance to lead the way to another American economic boom. Pent-up demand includes older homeowners who need to downsize or relocate, younger families who need more space, and first-time homebuyers yearning to shift their housing costs from pure expense to a relatively safe investment. 

Yes, tariffs might affect the price of imported materials, but a home is the single largest purchase that most US consumers will ever make, and our houses are built right here in America. Once homeownership is attained, then we humans start to fill up our homes with all our stuff, credit to the late great comedian George Carlin, which would further perpetuate a growing economy. 

I hope that Chairman Powell appreciates Secretary Bessent’s support. Further, I hope that he will embrace the opportunity to help all Americans prosper by lowering interest rates. No, he doesn’t need to aim for historic low rates, but a full point (or two) would make a significant difference for millions of Americans.

If not, then I would be curious to know whether President Trump must wait until some specific date to nominate the next Fed chairman? Would the US Senate be required to withhold consideration of that nominee until some point in the future? If not, then could the next Fed chairman be confirmed and ready to take the helm prior to May 2026, when Chairman Powell’s term ends? If so, then could that person devote the interim to pointing out the opportunities afforded by reducing interest rates?

Parlaying such blatant politics into the Federal Reserve Board would certainly be condemned by many in and around The Swamp. But what better way to determine whether politics or pessimism are currently driving decisions at the Fed?

Chris Holbert served as a Republican Colorado State Representative (2011-2014) and Colorado State Senator (2015-2022). During his time in the Colorado Senate, he was elected as Senate Majority Leader (2017-2018) and was twice elected unanimously as Senate Minority Leader (2019-2020 & 2021-2022). Subject to term limits, Chris moved with his wife to Florida in 2022.