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**AUGUST 26, 2024**
On the Prospect website
Say It to My Face [link removed]
How Democrats learned to tell the plain truth and like it BY RICK PERLSTEIN
What Kamala Harris Could Bring to the Justice Department [link removed]
Harris has a notable record on an issue where the Biden administration hasn't distinguished itself: polluter accountability. BY HANNAH STORY BROWN
Prospect Weekly Roundup: Second City Live [link removed]
From Chicago, our reporters wrap up the Democratic National Convention. BY PROSPECT STAFF
Kuttner on TAP
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**** Powell Reluctantly Relents
After long delay and needless economic damage, the Fed chair commits to cutting interest rates.
Speaking at the Fed's annual policy conference in Jackson Hole, Wyoming, Federal Reserve Chairman Jay Powell did something unusual. He virtually committed to a long-delayed cut in rates well in advance of the Fed's next meeting on September 17-18.
"The time has come for policy to adjust," Powell said in his speech to the group [link removed]. He added, rather defensively, "We do not seek or welcome further cooling in labor market conditions." This is about as close as a Fed chairman ever comes to admitting that the central bank's tight money policies went too far for too long.
The economic data that finally pushed Powell into announcing a reversal included the Consumer Price Index falling to an annual inflation rate below 3 percent, and job growth markedly slowing. More ominously, a revised report from the Labor Department released last week showed that the economy actually added 818,000 fewer jobs [link removed] in the year ending March 2024 than originally reported, an average of 174,000 a month rather than the 242,000 in the earlier estimates. The report for July [link removed] showed a further weakening and an increase in the jobless rate to 4.3 percent.
The question going forward is how readily the Fed's earlier damage can be reversed. Most economists think the economy is still on track for decent growth and low inflation next year. But we could have done even better had the Fed not been so obsessed with inflation, especially since most price increases since pandemic supply chains eased are structural rather than macroeconomic, reflecting excess corporate market power to raise consumer costs.
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The Fed is not only in charge of monetary policy. It also has major regulatory responsibilities. One of Powell's other disgraces is his blockage of a long-delayed rule requiring higher capital standards for large banks. The rule is required by U.S. international commitments, and it has the support of the chiefs of other bank regulatory agencies.
The draft rule was put out for comment more than a year ago. It has been a lightning rod for bank lobbying to weaken or delay it, and so far the banks have prevailed, with Powell's support [link removed]. "The banks have won," said Dennis Kelleher, of Better Markets, which supports a strict rule. "They have delay, stalemate," he said. "It doesn't get better than that if you're Wall Street."
Powell's support for the big banks is yet another manifestation of his willful blindness to the evils of concentrated market power.
Powell, a Republican financial executive who was first appointed as Fed chair by Trump, was reappointed by President Biden in 2022. Along with Attorney General Merrick Garland, Powell is one of Biden's two really bad appointees. Powell's term as chair is up in 2026. Replacing him with someone not from Wall Street should be a key priority for President Harris.
~ ROBERT KUTTNER
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