MICHEL MARTIN, HOST:
We wanted to hear more about Jerome Powell's legacy as chairman of the Federal Reserve, his impact on the institution, as well as on monetary policy, so we've called Alan Blinder. He served as vice chair of the Fed from 1994 to 1996. He was a member of President Bill Clinton's Council of Economic Advisers, and he's a professor of economics and public affairs at Princeton. Professor Blinder, welcome back. Thank you for joining us once again.
ALAN BLINDER: Well, nice to be with you, Michel.
MARTIN: So let me start with the news that, as we just heard, Jerome Powell will stay on as a Federal Reserve governor for a period of time to be determined in response to attacks from the White House and the Department of Justice. So first, what do you think of his decision to stay on? And overall, how do you think he's responded to these attacks, which at times have become very personal?
BLINDER: Well, this decision is kind of the capstone or the last episode of his legacy, which will surely be that he defended the independence of the Fed. To your question, I applaud his decision. He's not going to stay forever. I doubt that he'll stay till the end of his term in '28. But he's going to stay - I'm paraphrasing what he said - until he sees that the ship is sailing along and not sinking.
MARTIN: He said he worries the attacks are, quote, "battering this institution and putting at risk the things that really matter to the public," unquote. And his use of the present tense sort of suggests that he thinks the attacks on the Fed are not over. Like, what about you?
BLINDER: I wouldn't think they're over either. I mean, you'll have now - a Federal Open Market Committee, in due time, will be led by Kevin Warsh, and he is qualified for the job. If he doesn't get too much interference from the White House or if he doesn't listen to the interference from the White House that he gets, which is what Powell was doing, he'll be fine. But if he becomes a parrot for Donald Trump, there's going to be problems on the Federal Open Market Committee and on the Fed in general.
MARTIN: So let's look more broadly at Mr. Powell's tenure. He navigated a number of crises - the pandemic...
BLINDER: He did.
MARTIN: ...Trade wars, the current war with the Middle East. Obviously, there's so much to talk about. And there'll probably be, you know, books written about his tenure, given all of that. But how do you assess his tenure as Fed chair, as briefly as you can?
BLINDER: I think he's been great. And the reason I say that mostly is what I was just talking about, about - he had an extreme need to defend the Fed's independence. I served on the Fed with Alan Greenspan, who served 18-plus years. He never really had to defend the Fed's independence. But for Jay Powell, it has been the main part of his job description, unfortunately.
MARTIN: There are critics who point to the Fed keeping interest rates low as the economy emerged from the pandemic, expecting transitory inflation that turned out not to be. Do you see that as a misstep? And how does that fit into his time as chair?
BLINDER: That was a mistake. I consider - and Powell has said so. I consider it a forgivable error, given what we had come through, given the fact that the economy was still far from booming and - this is important - given the fact that almost everyone was under-predicting inflation at the time. You had almost nobody saying - fearing out loud that the consumer price index inflation rate was going to go to 9%.
MARTIN: Before we let you go, maybe you don't consider this sort of part of your portfolio, but I am curious if you have an opinion about where you think the public - what do you think the public's confidence in the Fed is today?
BLINDER: I think it's been damaged by the incessant attacks by Mr. Trump. I mean, he's used all sorts of derogatory terms to describe Powell. A lot of people are going to look at that and say, oh, there goes President Trump again. He does this all the time. But a number are going to take it more seriously. And that is not a good image for any branch of the government, and especially not the Fed, which is supposed to be independent and making decisions in the public interest.
MARTIN: So do you think that that is something that Mr. Warsh needs to be attentive to - the public's confidence in the Fed as part of his portfolio?
BLINDER: Oh, yes. I think it's - I wouldn't say it's been shattered, but it's brought down a couple of notches from a high level to a much less high level. And one of his jobs is going to be to restore that. And a big part of that job is how he manages whatever relationship evolves between him and the president of the United States.
MARTIN: That's Alan Blinder. He's a former vice chair of the Federal Reserve. He's currently a professor at Princeton. Professor Blinder, thank you so much for talking with us.
BLINDER: You're very welcome. Transcript provided by NPR, Copyright NPR.
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