GOP senator urges Biden to renominate Jerome Powell

Sen. Steve Daines (R-Mont.) asked President Biden to renominate Federal Reserve Chairman Jerome Powell in a Thursday letter as the White House mulls an opportunity to reshape the central bank.

Daines urged Biden to renominate Powell, a Republican who former President Trump elevated to chairman and whose term leading the Fed expires in February, “[i]n order to promote continued economic stability” with the U.S still recovering from the COVID-19 pandemic.

“Doing so would send a strong signal to households, businesses, and consumers that the head of the Federal Reserve continues to enjoy broad bipartisan support, and will act as necessary to achieve its dual mandate of price stability and maximum employment,” Daines wrote.

“In contrast,” he continued, “changing the top leadership at this sensitive time could foster uncertainty across the financial system and undermine our economic recovery.”

Powell has chaired the Fed since 2017. Since then, he’s won broad bipartisan praise for leading the bank’s successful efforts to stabilize financial markets in March 2020 and standing up to Trump’s incessant attacks before the emergence of the pandemic.

Biden has stayed mum on his plans for Powell’s seat, saying only that he respects and wants to preserve the Fed’s independence. The White House and Fed have been aligned on their approaches to inflation and the recovery, with both expressing confidence that price increases will settle as the economy normalizes.

Powell would likely sail through another confirmation vote if Biden renominates him. Democrats have applauded Powell for cementing the Fed’s focus on maximizing employment and Republicans have praised his support for streamlining certain bank regulations. 

Powell, who was initially appointed to the Fed in 2012 by former President Obama, has also endeared himself to lawmakers through calls and visits to Capitol Hill. The Fed chief spoke with Daines over the phone for 30 minutes on Feb. 9, according to Powell’s calendar.

Biden is facing intense pressure from some progressive economists, advocates and environmentalists to replace Powell with someone much further to the left. 

Liberal activists have criticized the Powell Fed for including the fossil fuel industry in pandemic emergency lending programs available to most U.S. businesses of a certain size, refusing to impose climate stress tests for banks and loosening financial rules imposed after the 2007-09 crisis.

Influential Senate Democrats — including Senate Banking Committee Chairman Sherrod Brown (Ohio) and Sen. Elizabeth Warren (Mass.) — have also refused to say whether they think Powell should be renominated. While both have praised Powell’s monetary policy stances, the financial sector hawks have blasted his regulatory agenda, which has largely been shaped by Fed Vice Chair of Supervision Randal Quarles.

Other progressive policy minds have suggested Biden keep Powell instead and replace Quarles with a much more aggressive regulatory chief, such as Fed Governor Lael Brainard or former Fed Governor Sarah Bloom Raskin. Powell’s supporters on the left say progressives cannot take the benefit of a Republican pushing a long-held liberal goal for granted, nor should they assume a more liberal pick could carry the mantle as effectively.

“We have a Fed chair in Jerome Powell who has openly embraced full employment, one of the most important items on progressives’ agenda for many decades. It is hard to imagine that we would not want to keep him there,” wrote Dean Baker, senior economist at the liberal Center for Economic and Policy Research, in a June op-ed.

Quarles’s term as vice chair of supervision ends in October, but the Trump appointee hinted that he would stay on the Fed board as a governor through at least the end of 2021. The Fed chair, vice chair and vice chair of supervision each serve a four-year term in that position concurrently with a term of up to 14 years as a member of the board of governors.

While Powell could stay on the Fed as a governor if Biden declines to renominate him, he would likely resign from the board altogether. Treasury Secretary Janet Yellen, Powell’s predecessor, stepped down from the Fed after Powell began his term leading the bank.

Biden will also be able to choose a new Fed vice chairman in January once Richard Clarida’s term expires and has yet to nominate someone to fill a vacant seat on the Fed board left unfilled by Trump.