The GOP's Fed warning

Senate Republicans are warning President Biden not to nominate Lael Brainard, currently a Fed governor, to replace Federal Reserve Chair Jerome Powell — hinting she could face a difficult confirmation process.

Why it matters: With a 50-50 Senate locked in a dangerous standoff over the debt ceiling, the president has to decide how much political capital he’s willing to expend by passing over Powell, a Republican nominated by former President Trump, to put his own stamp on the Fed.

• Banking committee Republicans are seizing on the current economic uncertainty, with the U.S. staring at a potential debt default and supply chain disruptions from COVID-19, to force Biden to renominate Powell.
• “I wouldn’t vote for her,” Sen. Richard Shelby (R-Ala.) told Axios. "She’s too liberal. You’d have a tough confirmation fight.”
• “It’s a concern for us, just because you have Jay Powell who is experienced and has proven himself to be a very good leader,” said Sen. Mike Rounds (R-S.D.). “I think she’s a bit more liberal in terms of her view of a proactive Federal Reserve."

Driving the news: Biden faces an October laden with political risks and economic uncertainty — with big deadlines in the middle of the month.

• The Treasury Department will run out of money to service its debt on Oct. 18. The president warned Monday of a "meteor headed to crash" into the economy.
• The term for the Fed’s vice chair for bank supervision, a powerful position currently held by Trump appointee Randal Quarles, expires on Oct. 13.
• The chair’s own term expires in February 2022, but presidents typically nominate someone months ahead of time to allow financial markets to process the news.

What they're saying: The White House says it doesn’t feel pressured by the calendar.

• “The president will continue to engage with his senior economic team in a careful and thoughtful process to appoint a Federal Reserve chair in a timely manner,” a White House official told Axios.

The big picture: After an extraordinary 18 months of combating the economic impacts of COVID-19, the Federal Reserve has been buffeted by allegations that some of its officials, including Vice Chair Richard Clarida and two regional presidents, profited from bank policy decisions.

• Sen. Elizabeth Warren (D-Mass.) has asked Gary Gensler, chair of the Securities and Exchange Commission, to “determine if any of these ethically questionable transactions may have violated insider trading rules.”

• “It makes sense to investigate this and to consider whether the existing rules are adequate," Sen. Pat Toomey (R-Pa.), the ranking member of the Senate Banking Committee, told reporters Monday evening.

Between the lines: While renominating Powell is not without political risk — Warren announced her opposition to a second term in a Senate hearing last week, calling him a “dangerous man” — some Democratic senators have also indicated they support renominating him. The stakes also are high for the president.

• Biden's pick, if confirmed, would largely control the macroeconomic dials heading into the 2022 midterms and the president’s potential re-election campaign in 2024.
• "Biden has a historic and unique opportunity to appoint at least four and maybe five members of the Fed board,” said Dennis Kelleher, the president and CEO of Better Markets, a nonprofit that works to monitor financial institutions.
• “He has to decide whether he wants to be transformational or incremental.”