President Joe Biden on Monday announced his intent to renominate Jerome Powell to a second four-year term as Federal Reserve chair.
Biden also will nominate Fed Gov. Lael Brainard to one of the central bank's two vice chair roles — but not necessarily the bank supervision position to which rumors had most closely linked her. Monday's White House announcement indicated that slot, held until last month by Fed Gov. Randal Quarles, has yet to be filled — indicating Biden may intend to install Brainard as vice chair of monetary policy, a role Fed Gov. Richard Clarida will vacate in January.
That leaves open three posts on the central bank’s board of governors: the vice chair of supervision role, the seat Quarles is occupying until he leaves the Fed next month, and an at-large position has been open since before the Biden administration began.
Biden intends to announce nominees for those roles in early December, the White House said, adding he is committed to boosting the diversity of the central bank’s board.
Monday’s moves put to rest months of speculation regarding Powell’s future at the Fed. His renomination as recently as this summer was thought a certainty. But financial disclosure forms in September revealed that two regional Fed presidents — Eric Rosengren in Boston and Robert Kaplan in Dallas — traded stocks last year while also helping to set monetary policy, a practice that met the Fed’s code of ethics but raised concerns around potential conflicts of interest. Rosengren and Kaplan resigned.
The scandal deepened when further disclosures found Clarida moved between $1 million and $5 million from a bond fund into stock funds one day before Powell signaled the Fed might cut interest rates.
The Fed responded last month by barring its board governors, 12 regional presidents and senior staff from buying individual stocks, holding investments in individual bonds or agency-backed securities, or entering into derivatives.
The quick action wasn’t enough to sway lawmakers such as Sen. Elizabeth Warren, D-MA, who earlier called Powell a “dangerous man to head up the Fed,” adding that the stock-trading scandal indicates the central bank chief had “failed as a leader.”
However, more than half of the 12 Republicans on the Senate Banking Committee have said they would vote to confirm Powell if Biden were to renominate him. At least one Democrat, Sen. Jon Tester of Montana, has come out as a Powell supporter. And Treasury Secretary Janet Yellen has also signaled support for a second Powell term.
The Senate confirmed Powell to his first term in 2017 by an 84-13 vote. And 68 of the senators who confirmed Powell then are still serving, according to The Wall Street Journal. Brainard was confirmed to her current role 61-31.
Brainard had been seen as Powell's chief rival for the Fed's top spot. Biden reportedly interviewed both on Nov. 4. While Brainard and Powell often haven't aligned on bank regulation — Brainard opposed looser capital and liquidity requirements, the easing of stress tests, and modifications to the Volcker Rule regarding proprietary trading — the two generally agree on monetary policy. Brainard, however, is seen as more of a hawk on the impact of climate change.
“[Powell has] made clear to me a top priority will be to accelerate the Fed’s effort to address and mitigate the risk that climate change poses to our financial system and our economy,” Biden said Monday afternoon at a public appearance with Powell and Brainard, where the president defended his picks as a buoy of stability for the central bank.
“Why am I not picking fresh blood or taking the Fed in a different direction?” Biden said, according to The New York Times. “I believe we need to do everything we can to take the bitter partisanship of today’s politics out of something as important as the independence and credibility of the Federal Reserve.”
Powell and Brainard's comments Monday centered on inflation.
“We know that high inflation takes a toll on families, especially those less able to meet the higher costs of essentials like food, housing and transportation,” Powell said, according to CNBC. “So we use our tools both to support the economy and a strong labor market and to prevent higher inflation from becoming entrenched.”
Brainard, meanwhile, said she is “committed to putting working Americans at the center of [her] work at the Federal Reserve."
"This means getting inflation down at a time when people are focused on their jobs and how far their paychecks will go," Brainard said Monday.
Key lawmakers on the Senate Banking Committee signaled their support Monday for Biden's Fed picks. "I look forward to working with Chair Powell, Dr. Brainard, and President Biden to stand up to Wall Street on behalf of workers, small businesses, and communities across the country and make our economy work for everyone,” the panel's chairman, Sen. Sherrod Brown, D-OH, said in a statement.
The committee's ranking member, Sen. Pat Toomey, R-PA, was decidedly less effusive.
“While I have strongly disagreed with Chairman Powell’s decision to continue the Fed’s emergency accommodative monetary policy — long after the economic emergency had passed — Chairman Powell’s recent comments give me confidence that he recognizes the risks of higher and more persistent inflation and is willing to act accordingly to control it. I look forward to supporting his confirmation," Toomey said. “While I have concerns about regulatory policies that Governor Brainard would support as Vice Chair, I look forward to meeting with her to discuss these and other matters.”
Warren, too, issued a statement Monday indicating her position on Powell had not changed but that she would support Brainard as vice chair.
"Powell’s failures on regulation, climate, and ethics make the still-vacant position of Vice Chair of Supervision critically important," Warren said. "This position must be filled by a strong regulator with a proven track record of tough and effective enforcement — and it needs to be done quickly."
Warren is not alone among Democrats opposed to a Powell-led Fed. Sens. Jeff Merkley of Oregon and Sheldon Whitehouse of Rhode Island issued a statement Friday — revealing Powell as Biden's nominee before the move was officially announced — saying they oppose Powell for his stance on climate change.
“President Biden must appoint a Fed Chair who will ensure the Fed is fulfilling its mandate to safeguard our financial system and shares the Administration’s view that fighting climate change is the responsibility of every policymaker," the senators wrote. "That person is not Jerome Powell."
Sen. Mark Warner, D-VA, however, told Bloomberg the nominees represent a "great one-two punch."
“In Jay Powell, we not only have continuity, we have someone that the markets are comfortable with, we have someone that both Democrats and Republicans alike respect,” he said.
The certainty appeared to be an assurance outside of politics.
“Although this decision likely wasn’t an easy one for the President, this should be greeted positively from markets,” Ryan Detrick, chief market strategist for LPL Financial, told Bloomberg in an emailed statement. “We know what we will get from Mr. Powell and this is one less worry now.”