Logan may become a key figure in the post-Powell era!

After the shocking September 11 terrorist attacks in the United States in 2001, the current President of the Dallas Federal Reserve, Logan, became an important figure in maintaining the operation of the U.S. financial system. Since then, she has gradually approached the decision-making center of the Federal Reserve and is expected to play a greater role in the future.

The financial crisis at that time was the first of several crises that affected Logan's career. She helped maintain financial stability during the 2007-09 financial crisis and the COVID-19 pandemic. Now, as the President of the Dallas Federal Reserve, Logan is leveraging her expertise accumulated during those critical moments as the Federal Reserve faces unprecedented scrutiny.

After rapidly raising interest rates in 2022 and 2023 to curb inflation, the Federal Reserve shifted to easing in September, attempting to help the economy achieve a so-called soft landing and avoid a recession.

At the same time, the issues surrounding the future of the Federal Reserve are becoming increasingly prominent. The presidential election may impact the independence of the Federal Reserve, and the question of who will succeed Chairman Powell, expected to step down in 2026, remains unresolved.

Having worked in the market department of the New York Fed for over 20 years, Logan was promoted to manage the Fed's $7 trillion balance sheet. She is not only a rising star among the 19 senior officials of the Federal Reserve but also continues to maintain market stability through her relatively new role as President of the Dallas Federal Reserve. She has been named one of the 50 most influential people by MarketWatch.

"Logan is someone worth paying attention to," said former senior Federal Reserve official Julia Coronado, who now leads her own research firm, MacroPolicy Perspectives.

In May 2022, after Robert Kaplan resigned due to a trading scandal, Logan was appointed President of the Dallas Federal Reserve.

Central bank expert Kathryn Judge, who teaches at Columbia Law School, speaks highly of Logan, saying, "Logan doesn't care about politics. Her views come from her expertise. Many people I know in New York actually talk to her to ensure that the Federal Reserve is aware of what they are seeing."

Steering at Critical Moments

This kind of confidence from colleagues may be crucial for Logan as she leads the Dallas Federal Reserve at a time when many are watching the future of the Federal Reserve and the potential threats to its political independence.

Over the past three years, Biden has kept his promise to maintain a hands-off approach to Powell and his colleagues. However, Republican presidential candidate Trump has indicated that he would weaken the independence of the Federal Reserve. Progressive allies of Democratic candidate and Vice President Harris may push her to openly criticize the Federal Reserve.

Despite these concerns, the structure of the Federal Reserve—relying on non-partisan officials like Logan—may shield it from political pressures. The President and Congress have no say in selecting the 12 regional Fed presidents. Instead, they are chosen by the boards of directors of private sector banks and must be approved by the seven-member Federal Reserve Board Former New York Fed President Bill Dudley recently said in an interview with the London think tank OMFIF, "It is difficult to abolish the independence of the Federal Reserve within one presidential term. The turnover of the Board of Governors is relatively slow, and the turnover speed of regional Fed presidents is even slower."

David Wessel, a senior fellow at the Brookings Institution, pointed out that the Federal Reserve has experienced "a lot of personnel changes" in the past few years, which may shape the institution in the years to come.

President Biden has appointed four new governors to the Federal Reserve Board in Washington, three of whom will serve beyond 2030. Since the summer of 2022, 6 out of the 12 regional Feds have appointed new presidents; 51-year-old Logan is one of the relatively new appointees. Regional Fed presidents can serve until the age of 65.

Guiding the Federal Reserve in Reducing its Balance Sheet

Perhaps Logan's most significant impact on the Federal Reserve so far is earlier this year when she guided the ongoing balance sheet reduction plan to slow down.

After purchasing so many assets and doubling the size of its holdings, the Fed initiated a plan to reduce its balance sheet in 2022. To some extent, the Fed wants to ensure there is room on its balance sheet to purchase assets in any future crisis.

However, the Fed must proceed with caution because banks hold the liabilities for these assets, namely reserves, which fluctuate with the expansion or contraction of the Fed's balance sheet. Banks need a certain level of reserves to handle unexpected withdrawals.

In the fall of 2019, due to concerns about low bank reserves, the money markets experienced turmoil, and the first round of quantitative tightening had to end abruptly.

This time, in mid-2022, the Fed took swift action, allowing $600 billion of U.S. Treasuries to mature without reinvestment each month.

In a speech in early January this year, Logan became the first Fed official to publicly advocate for slowing down the pace of balance sheet reduction to avoid the money market turmoil seen in 2019. Logan believed that slowing down would allow the Fed's quantitative tightening plan to last longer.

In June, the Fed approved the plan and slowed the pace of reducing U.S. Treasuries from $600 billion per month to $250 billion per month.

Currently, the Fed has reduced its balance sheet by nearly $2 trillion.

Potentially Playing a Greater Role in the Post-Powell Era

Logan's leadership in formulating the balance sheet plan has led some Fed watchers to speculate that she may take on a higher position in the future.

Some Fed watchers are looking ahead to 2028, suggesting that Logan may succeed New York Fed President Williams. According to the Brookings Institution's report on Fed officials' terms, Williams can serve until 2028 as per Fed regulations Being appointed as the President of the New York Fed would be a promotion for Logan, as the President of the regional Fed has the voting rights on every interest rate decision. In contrast, the President of the Dallas Fed only has voting rights once every three years.

Furthermore, experts consider the New York Fed President - who is also the Vice Chair of the Federal Open Market Committee (FOMC) - as part of the core leadership of the Federal Reserve.

Powell's term is set to end in mid-2026, and if Logan successfully ascends, she may play a significant role in the post-Powell era.

Federal Reserve observers believe that if Trump wins in November, he will not force Powell to resign early. However, Powell is currently in his second term as the Federal Reserve Chair, and it is widely believed that regardless of the election outcome, he is unlikely to be reappointed for another four years. Gertler from New York University mentioned that there seems to be an unwritten rule that the Federal Reserve Chair can only serve two four-year terms after Alan Greenspan's nearly 19-year term ended with some responsibility for the subprime crisis.

If Harris wins the election, the traditional view (which may be incorrect) expects that she would choose former Federal Reserve Vice Chair Brainard as the next Federal Reserve Chair.

If Trump wins, Federal Reserve insiders hope that he chooses experienced individuals like Federal Reserve Governor Waller. Gertler stated that if Trump chooses someone outside the mainstream, Logan and other long-serving Federal Reserve officials will push back.

Gertler said, "It is currently difficult to imagine that the Federal Reserve Chair chosen by Trump would go against conventional wisdom and traditional thinking. Because ultimately, this could mess things up and lead to a historically disastrous outcome."

Logan herself has stated that the Federal Reserve will not get involved in politics.

Before joining the Dallas Fed, she mentioned in a podcast interview in 2022, "I am fortunate to serve in a mission-driven organization that focuses on making the economy stronger and the financial system more stable. For me, this is the foundation of my daily work."