The Fed chairman has an army of Biden fans. Liberal groups have other dreams.
“Any of the plausible candidates would build on what’s admirable about Powell’s track record and be much better on other matters,” said Jeff Hauser, director of the Revolving Door project, which reviews branch nominations. executive.
The Fed’s appointment will be the most important personnel decision left to Biden during his first term. Gaining investor and corporate confidence will drive economic decisions in the 2022 midterm elections. With razor thin majorities in Congress, the Fed could also be the only force providing government support to the economy in the second. half of Biden’s term if he loses control of either house of Congress.
Powell won investor confidence by playing a pivotal role in efforts to pull the economy out of one of its worst recessions, keeping interest rates near zero, and pledging billions of dollars to keep the economy going. credit.
Senior White House officials believe Powell has done a good job of helping the economy and supporting the markets. But they say Biden is not yet close to deciding on another term for the Republican, a move that could come in late summer or early fall. Powell’s term as president doesn’t end until early February, but decisions about the Fed’s leadership are usually made well in advance.
Pressure from a newly empowered left could make the decision on whether or not to retain the Fed chief – who was elevated to the head of the central bank by then-President Donald Trump – a controversial decision.
Senior officials know they will face a challenge when it comes to Powell, a white man with background in private equity – a corner of Wall Street that has come under fierce attack from the left – because they are faced with requests to choose a more diverse one. candidate.
But the Fed chief, who joined the central bank’s board of governors in 2012 after being appointed by then-President Barack Obama, is not without progressive backing. He reached consensus at the central bank for a new framework in which the Fed pledged to vigorously pursue full employment rather than prematurely slowing economic activity with higher interest rates in anticipation of the inflation, a measure that could spread greater prosperity to marginalized communities. This has earned him leading allies.
“I hope he will be reappointed,” said William Spriggs, professor at Howard University and chief economist at the AFL-CIO, a statement of significant support since Spriggs himself is often presented to left as a potential choice to lead. the central bank.
“I don’t think people should take lightly” the importance of the Fed’s pro-worker shift under Powell, Spriggs said, adding that “we need a little bit of stability at the Fed after we go through four years of Trump. “
The message from groups like the Action Center for Race and the Economy, however, is that the actions of the Fed chairman were not enough. They point to the central bank’s emergency program for states and cities last year, which ultimately granted loans to just two borrowers – Illinois and the New York City transit system. They argue it’s because the Fed didn’t make the terms as generous as a separate program for corporate borrowers.
The group also cites Powell’s resistance to taking more responsibility in addressing the wealth disparity between whites and other racial groups. Just last week he reiterated that he didn’t think it made sense for Congress to be part of the Fed’s official mandate.
âFrom a racial justice standpoint, Powell has just been terrible,â said Saqib Bhatti, ACRE’s co-executive director.
The Fed declined to comment for this story.
An influential coalition of labor and community groups known as the Fed Up Campaign has yet to officially call for Powell’s replacement, but they have laid out a plan by which he should be judged. He calls on the Fed to target the racial unemployment gap and expand the types of borrowers the central bank helps during crises.
Fed Up Campaign Director Benjamin Dulchin said Powell “has done some good things,” but “there is a lot more to do and do if the institution is pushed to stretch.”
The central bank chief has also been criticized for delaying in making climate change a priority in his supervision of banks. Environmental groups criticized him for the Fed’s particular support for oil and gas companies as it struggled to ensure that companies in all sectors could borrow cheaply during closures due to the pandemic.
Since progressives are particularly unhappy with banking deregulation under Trump, one possible route would be for the White House to replace Fed watchdog Randal Quarles with a more aggressive regulator, while keeping Powell in his role. .
But criticism of Powell’s regulatory record could also pave the way for another Fed board member Lael Brainard, who has dissented nearly two dozen times against such measures.
Brainard is hardly a progressive darling; she served in the Clinton White House and Obama’s Treasury Department, where she pursued certain trade policies that angered the left.
But even activists who may not be openly pushing for Brainard’s appointment as Fed chairman prefer her to Powell, given that she has been okay with him on rate policy and stronger, at theirs. opinion, on regulatory matters.
âShe did better at the Fed than she did at the Treasury,â Hauser said.
Other potential picks like Sarah Bloom Raskin, former Fed governor and former Assistant Secretary of the Treasury, or Spriggs are more likely to spark excitement from the left. Another name that has been mentioned is Raphael Bostic, a black economist who runs the Atlanta Fed.
A Democrat close to the White House said Powell should not be underestimated.
âI think in January, when they put it together, they thought they would replace Powell. I don’t really think they mean it now, âthe Democrat said. âAnd I can’t imagine that once they’re in the room together, Biden will be the first person in history who doesn’t immediately like Jay Powell. Because it is impossible not to love him. Biden is going to have a hard time firing him.
If the economy continues to accelerate and markets continue to rise – with inflation under control – dumping a popular Fed chairman, even one appointed by a GOP chairman, will be particularly difficult to do. .
Powell is a reassuring presence on Wall Street for his consistently easy monetary policy and his refusal to even suggest that the Fed may begin to withdraw efforts to flood the system with liquidity in the wake of the Covid-19 pandemic.
Even stories suggesting that Powell could be close to being released could upend the markets. A recent CNBC investor survey found 76% believe Biden will re-appoint Fed chairman.
Senior officials do not publicly commit to Powell’s future. In a recent POLITICO virtual event, Jared Bernstein, a member of Biden’s Council of Economic Advisers, did not engage on the issue or endorse Powell.
âNeither yes nor no at this point,â he said. He added that it is “a process that we have to go through before we even start talking about it.”
Before the election, however, Bernstein had enthusiastically praised Powell: “I have a hard time coming up with all the positive adjectives I can think of for Jay Powell’s work,” he said during an interview in September.
When the call is made, it will come from the highest level of the West Wing, the President himself and Chief of Staff Ron Klain. Senior economic advisers including Treasury Secretary (and former Fed Chairman) Janet Yellen, National Economic Council director Brian Deese, Council of Economic Advisers chairwoman Cecilia Rouse, and stimulus plan czar Gene Sperling are also likely to influence the decision.
Central to the decision is whether Powell’s role as a full-employment cheerleader is best served with him in the job, given his extensive work throughout his tenure to establish relationships and credibility on both sides of the aisle.
âThere is always the possibility that you get the person who is the absolute dream from a progressive standpoint, but then you end up with more backlashâ than the Fed had under Powell, said Kathryn Judge, a professor at Columbia. Law School. “There is always the danger that by winning the battle, you lose the war.”