Perhaps no single individual has more sway over the global economy than Jay Powell.
Investors the world over hang on the Federal Reserve chair’s every word, and his speeches are parsed for the slightest directional hint on U.S. interest rate policy—because his institution essentially decides on what money itself costs.
And yet despite Powell’s enormous influence, he earns take-home pay that America’s chief executives would scoff at.
In an interview conducted by billionaire investor David Rubenstein Tuesday at the Economic Club of Washington, D.C., the Fed chair spoke openly about his comparatively meager salary.
“It’s around $190,000, I believe,” said Powell, who joined the Fed’s board of governors in 2012 before rising to become head of the central bank six years later.
“If we have family expenses that exceed my salary, then we have to sell an asset,” he added.
Files from the U.S. Office of Personnel Management suggest the figure may in fact be closer to $203,000. Either way, it is a drop in the bucket for someone whose decisions directly affect business investment, employment levels, and asset prices in a far more meaningful way than any individual executive.
By comparison, corporate boards are far more generous when awarding compensation packages to their top brass. According to the most recent data from market researcher Equilar, the median CEO pay for the top 100 U.S. companies by revenue hit $20 million.
This is a level typically reserved for only the most sought-after managers in Europe. For instance, figures last month revealed that CEOs of the U.K.’s largest 100 companies earned just £3.41 million ($4.1 million).
How the Fed indirectly helped inflate CEO pay
Perhaps more surprising than the absolute amount Powell earns was the Fed chair’s response to another question from Rubenstein, who earned his fortune buying, stripping, and flipping undervalued companies.
The cofounder and cochairman of the Carlyle Group asked whether Powell believed the salary was fair for the job.
“I do, yes,” he replied to Rubenstein, whose skeptical reaction elicited a wave of laughter from an audience that appeared to share the latter’s view.
Powell isn’t a stranger to Wall Street in the same way as predecessors like Ben Bernanke and Janet Yellen, who were both professors of economics previous to their jobs at the Fed: He knows exactly what kinds of salaries can be earned on Wall Street.
A trained lawyer, Powell worked as an investment banker in his earlier days before serving as a partner at Rubenstein’s own Carlyle Group for an eight-year period through to 2005.
It was private equity firms like Carlyle that perhaps profited the most from the Fed’s decision to maintain record low interest rates for the better part of two decades.
Dovish policies by the U.S. central bank helped groups like Carlyle mint billions since it enabled them to easily and cheaply raise the tax-deductible debt they need to fund their leveraged buyouts (LBOs).
Private equity firms also helped contribute to the inflation of executive salaries. Since their business model entails shifting the burden of debt onto the shoulders of the companies that must subsequently pay interest on their very own buyout, firms like Carlyle often compensate CEOs handsomely for taking on the reputational risk of such an assignment.
“We estimate that buyout firm CEOs earned compensation substantially greater than that of CEOs of similarly sized public companies,“ concluded researchers from Harvard Business School, the University of Chicago, and Georgetown University last August.
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