The position of Chairman of the Federal Reserve is the most important central banking/monetary policy position in the world. One would think that the holder of this job would be an economist and would have extensive graduate training in the field of monetary economics. While that is logical, that is not the case in the United States. It is, however, for the Bank of England, Bank of Japan, Bank of Canada, Reserve Bank of Australia, as well as the Peoples Bank of China and other central banks.

Jerome Powell was first appointed to the Federal Open Market Committee by President Obama replacing Professor Frederic Mishkin who holds a Ph.D. in economics from MIT, is a Columbia University economics professor and author of the leading textbook in money and banking. Mr. Powell, however, is a lawyer by training and not an economist. In fact, his undergraduate degree is in “politics” (not that a bachelor’s degree would be that relevant). His primary experience is from the world of private equity which has absolutely nothing to do with monetary economics and policy other than that business thrives when interest rates are extremely low and when equity and real estate values are high. Amazingly, during his tenure at the Fed, interest rates approached zero and the stock market did well, generating high returns for the private equity industry.

We have appointed a man to the Board of Governors and to be Chairman of the Federal Reserve who has no background whatsoever in economics. Indeed, the man we picked for the most important monetary policy position in the world – the central banker to the world – has zero training in the field. He basically had to engage in “on-the-job training” and tried (unsuccessfully) to play catch up. It is no wonder he repeatedly says in his speeches how surprised he always is at economic events and reactions to the policies his Fed implemented.

The Fed, under Mr. Powell, made major policy mistakes such as pouring in stimulus into an overheated economy and continuing to buy mortgage bonds when the real estate market was booming. The Fed should have tuned off the spigot or, as William McChesney Martin Jr., famously said, “take away the punchbowl”. Due to that harmful screw up, we now have to try to tame inflation while we also have major international supply disruptions – something we would not have to deal with if the problem was addressed earlier and if we had a professional who was trained in the field of economics. It is clear this was a Fed that did not know what it was doing.

It is amazing that the Powell led Fed engaged in an incredibly aggressive interest rate increase program, one done to try to offset the errors Powell never admitted to and seems so surprised by the broad effects it would have. These effects are right out of Finance 101! Plus, what is the San Francisco Fed actually doing? Why do we even have regional banks if the staff working there do nothing meaningful other than “pick up pay checks” and plan their next career move. In New York we have a bank with major crypto exposure. All this is a surprise to the untrained Powell – the perpetually bewildered Fed chair. Unfortunately, the typical “man or woman in the street” has to pay the price for his bungling. They see this when they look at their 401(k).

Also, Mr. Powell presided over one of the most conflicted Open Market Committees where three members had to resign over ethical issues related to their own personal trading. This is disgraceful but for some reason the politically connected Mr. Powell continues to get pass-after-pass.

Having a Fed chair with no graduate training in economics is like having a Surgeon General who never went to medical school and is not a medical doctor or an Attorney General who never went to law school and is not an attorney. The nation deserves better.

Patrick A. Gaughan, Ph.D., is an economist and a retired, graduate level, full professor of economics and finance at Fairleigh Dickinson University (FDU) in New Jersey. After retiring from FDU, he taught financial economics in the MBA program at the University of International Business and Economics in Beijing, China as well as the CBAD Academy (for executive MBAs of major state-owned enterprises) in Dalian, China. He is also president of Economatrix Research Associates, Inc., which is an economic and financial consulting firm in New York City, Miami and East Rutherford, NJ. Economatrix Research Associates, Inc. measures damages in a variety of litigated matters and also conducts business valuations.

Dr. Gaughan has authored numerous publications including his most recent titles, Measuring Business Interruption Losses & Other Commercial Damages: An Economic Approach, 3rd Edition (John Wiley and Sons 2020), the 7th edition of his award-winning textbook Mergers, Acquisitions and Corporate Restructurings (Wiley 2017), and Maximizing Corporate Value through Mergers and Acquisitions: A Strategic Growth Guide (Wiley 2013). His other books include Mergers: What Can Go Wrong and How to Prevent It (Wiley 2005), Recent Developments in Litigation Economics (Elsevier 2005), and Litigation Economics (JAI Press 1993). He has published articles in various scholarly journals including International Review of Law & Economics, Journal of Forensic Economics, Journal of Legal Economics, Litigation Economics Digest and Journal of Corporate Accounting and Finance.