Biden's Fed pick puts progressives on notice
President Biden's nomination of Jerome Powell for a second term as chairman of the Federal Reserve shows Biden's willingness to stare down progressives to get his cherished Build Back Better legislation through the Senate and into law.
Why it matters: Inflation is threatening Biden’s $2 trillion social spending and climate package, and Biden wants to save his political capital with moderates for that fight.
Driving the news: Biden wasn’t willing to forsake Powell for a marginally more progressive candidate, like Fed governor Lael Brainard, simply to appease Sen. Elizabeth Warren (D-Mass.), who called Powell a “dangerous man” to his face in September.
- Instead, Biden named Brainard vice chair.
The big picture: Powell and Brainard, colleagues on the Fed, appear not to have substantially different views on inflation and how quickly to remove stimulus from the economy.
- Biden's move opts for continuity and an easy confirmation process over a symbolic fight that could have risked market turmoil.
What they are saying: Biden’s gambit appears to have worked, with important Senate Democrats, and Republicans, promising to confirm him.
- “I look forward to working with Powell to stand up to Wall Street and stand up for workers,” said Senate Banking Committee Chairman Sherrod Brown (D-Ohio).
- After clearing his throat about Powell and inflation, Pat Toomey (R-Pa.), the ranking Republican on banking, got behind him: “I look forward to supporting his confirmation,” he said.
- Former Treasury Secretary Larry Summers, a persistent Biden critic on inflation, was all praise today: “The institution is in good hands,” he tweeted.
The other side: Warren vowed to oppose Powell while promising to support Brainard.
- But her Powell criticism was muted, and she seemed more focused on fighting for a strong vice chair for bank supervision, which Biden didn’t fill today.
- “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 said.
What we're watching: Biden hinted that progressives may be more pleased with his future Fed picks, promising that diversity would be a key factor in filling three other positions.
- “While Jay and Lael bring continuity and stability to the Fed, my additions will bring new perspectives and new voices,” he said.
- Besides inflation, the Fed is confronting challenges traditionally outside its purview — from climate change to cryptocurrency regulation. Bloomberg News has deemed these “tricky economic problems” among the most complicated in the Fed’s 107-year history.