Trillion Dollar Triage: How Jay Powell and the Fed Battled a President and a Pandemic---and Prevented Economic Disaster

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Unlike Timiraos, Smialek seeks to distinguish herself from the “[m]any people who write about the Fed” who “suggest that its officials have saved the world” or “that they have ruined the world.” Fed officials, including Powell, are “ordinary people who control increasingly potent tools,” she writes. (Maybe, but Greenspan was anything but “ordinary”; Yellen rose to the top of a profession that was—and, in many respects, still is—hostile to women; and Bernanke won a Nobel prize.) Smialek makes a major character of Neel Kashkari, the dynamic, press-friendly, and charismatic president of the Minneapolis Fed who has an expansive view of the Fed’s remit—not because he is central to the action, but because she finds he has “an interesting perspective.” Throughout the book, it’s not clear to whom she has been talking. “To protect my sources and allow a narrative format,” she writes, she doesn’t identify her sources even in footnotes.

Brainard in some ways was even more aggressive than Powell or his predecessors in expanding the Fed’s lending programs, as soon nearly every sector of the financial market was poised to benefit from abailout: “Brainard was pushing the Fed and the Treasury to accept more risk.” One by one, Powell and Brainard justified new support programs, sometimes by merely pointing to other previously supported sectors. “If the Fed was going to buy corporate bonds, it needed to do something for municipalities too,” Brainard rationalized in her no‐​sector‐​left‐​behind strategy. Because she did not really know much about the municipal market, she reached out to Kent Hiteshew, who Timiraos describes as one of the crowd of “well‐​off New Yorkers with second homes outside the city.” During the Obama years, Hiteshew managed the Treasury Department’s response to Puerto Rico’s fiscal and debt crisis, and Brainard peppered him with questions about what was happening in the municipal market. Soon she was asking him to work for the Fed for afew months. Both books are stuffed with juicy little details, reminders that policymaking is not all white papers and spreadsheets. This book left me with a lot of thoughts about not only the Fed, but its seeming independence from the US government, which clearly likes to use the Fed as a tool to further its goals. Timiraos does a really good job at building up this theme of the illusion of independence through the initial summarized history of the Fed and its beleaguered leaders, particularly highlighting such instances as Truman and Nixon's desperation and bullying tactics as a grim parallel to Trump's treatment of Jay Powell during his presidency.So, what do we learn about Powell, who must be reminded of the giants who preceded him every time he walks by the portraits of former Fed chairs that hang in the corridor outside his office? When the Obama administration was considering Powell for the Fed board, Smialek reports, a memo to the president read, “Perhaps the biggest downside of Powell is that he would bring less thought leadership and creativity … than some other candidates might. Nevertheless, he brings many other strengths.” After he got to the Fed, according to Timiraos, he groused that the Fed’s Ph.D. economists talked to him as if he were “a golden retriever.” This is a riveting story of policy making in crisis and an illuminating examination of how drastically the Fed’s role in the economy has changed.”— Publishers Weekly These questions are left unprobed. Timiraos’s reporting ends with Biden’s November 2021 reappointment of Powell for a second term as Fed chair; his book came out in March 2022. Smialek’s came out a year later, in February 2023, but her reporting seems to have stopped at the end of 2021. She barely mentions the aggressive series of rate hikes that the Fed began in March 2022, raising the key short-term rate from near zero to between 4.75 percent and 5 percent in less than 12 months and leading many forecasters in the spring of 2023—including the Fed’s—to predict a recession before year’s end. This is a riveting story of policy making in crisis and an illuminating examination of how drastically the Fed’s role in the economy has changed.” Fed Chairman Jay Powell exemplifies the evidence based pragmatic but deeply compassionate Central Banker who along with his team did ‘whatever it took’ to ensure the US and the world didn’t experience what could have been a global depression.

Two of Powell’s lieutenants figure prominently in both books: Quarles and Lael Brainard, an economist appointed to the Fed in 2014 who is now chief of President Joe Biden’s National Economic Council. Quarles worked in the U.S. Treasury Department in Republican administrations, Brainard in Democratic ones. The inside story, told with “ insight, perspective, and stellar reporting,” of how an unassuming civil servant created trillions of dollars from thin air, combatted a public health crisis, and saved the American economy from a second Great Depression (Alan S. Blinder, former Vice Chair of the Federal Reserve). Readers should know that I read these books as an insider. I covered the Fed in the Alan Greenspan and Ben Bernanke years for the Wall Street Journal and wrote a book about the Fed’s role in the global financial crisis. In my current job as director of the Brookings Institution’s Hutchins Center on Fiscal and Monetary Policy, I talk frequently to both Smialek and Timiraos. I read and commented on Timiraos’s manuscript. Smialek’s book opens with an unnamed interviewer asking Powell on a webcast in the early weeks of the pandemic how much support the Fed could provide during the emergency. (“There’s no limit on how much of that we can do,” Powell said.) The interviewer was me. Powell was an unlikely Fed Chair. He was not an academic or economist, and by some reports got the job because Donald Trump thought he looked the part. But in a case of the man meeting the moment, Powell proved to be exactly the right person to see the U.S. economy through the coronavirus panic. of the Fed’s weekly balance sheet (the H.4.1 release) began showing a negative number for the liability item “Earnings remittances due to the Treasury” (residual net earnings) in early September 2022.

This gushing description is no longer being used to market the book, although it lingers in the deep corners of the internet. The book’s subtitle is in the same vein, although the praise is toned down abit. It is not aging well, given the current economic situation and rising inflation. You might dismiss this as the work of an overzealous publisher, but usually authors review promotional materials and subtitles. I thought this book was extremely informative and included plenty of politics to give context to the technical dissertations in each chapter, but I also thought there were glaring holes in the presented narrative because Timiraos romanticizes the character of Jay Powell to a noticeable degree. While it was entertaining (for me) to read Timiraos' sarcastic side commentary on Trump's antics from 2019 to early 2021, it was also kind of annoying to have all of Jay Powell's colleagues and opponents cast as either villains or deeply flawed lesser heroes compared to the man himself, to whom Timiraos clearly wishes to give a sainthood. While Powell is commendable for resisting Trump's pressures, I highly doubt that he was or is entirely uninfluenced by others or by his own conservative political views, or that he was purely selfless during those years when in-the-know multi-millionaires like Powell benefited profoundly from the volatile economy. Powell should be commended for thinking fast in 2020, but he did a lot more than just make decisions about how to avert disaster, and time is starting to tell how those decisions are going. A summary of the Fed and its major actions of the last few decades, leading up to a detailed blow-by-blow of the brief but steep 2020 recession and its fallout. This is, however, far from an exhaustive or unbiased academic view of those events.

In classic Washington fashion, Powell and Quarles both worked at the law firm of Davis Polk & Wardwell and at the politically well-connected private equity firm Carlyle Group. Powell recruited Quarles to work with him at the Treasury Department in the early 1990s and recommended him to Trump for the Fed post. More than any other person, Fed Chair Jerome Powell is responsible for averting this second depression. The inside story, told with“ insight, perspective, and stellar reporting,” of how an unassuming civil servant created trillions of dollars from thin air, combatteda public health crisis, and saved the American economy from a second Great Depression (Alan S. Blinder,former Vice Chair of the Federal Reserve). Quarles has since left Washington, and Brainard has a key White House post from which she is pressing the Fed and other regulators to undo much of what Quarles and the Trump administration did to ease up on the banks. If she ends up succeeding Yellen as treasury secretary, people will be scrutinizing the passages about her in these books.

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The books lays out in detail the perilous state the US economy was in during March 2020. Credit looked like it was going to completely freeze and the movement of money in the economy looked like it was coming to a complete standstill. As everyone rushed to cash, conventional wisdom was turned on its head as even so called ‘safe investments’ like 10 year US treasuries were being sold off at discounts.