Some Senate Democrats are urging President Biden to re-appoint Federal Reserve Chairman Jerome Powell for a second term, suggesting that replacing him could erode the institution’s independence.
Why it’s important: The public support of centrist Democrats has the potential to rejoin an accredited figure to help the country navigate the huge economic success of the coronavirus pandemic. Powell has just completed what some called a summer audition.
- “I like Powell; I think he’s a good guy. I think he deserves another term, “Senator Jon Tester (D-Mont.), A member of the Senate Banking Committee, told Axios.
- “Trump tried to politicize it and [Powell] he pushed back, “Tester said of the former president.” You don’t want to politicize the Fed. This is a bad direction to follow. “
- “The current president has earned our trust and respect,” said Sen. Ben Cardin (D-Md.) “If he is nominated, I will surely support him. I am not looking for any change.”
Leading the news: Although the mandate of the Fed chair expires in early 2022, the president is expected to make a decision this fall, in part to give financial markets time to digest their election.
- Powell also likes Republicans, who prefer to hold the current presidency rather than allow Democrats to replace him with someone more liberal.
- “He has had a firm hand,” said Senator Thom Tillis (RN.C.). “And in these times of uncertainty, I think it would be a successful nomination.”
- “If President Powell ran, he would have a strong vote on the Republican side,” said Tillis, also a member of the Banking Committee.
The overview: Biden’s decision on Powell will unfold in a challenging political and economic environment, with COVID-19 still in a rage and supply chain disruptions leading to higher prices.
- Congress must also fund the government before Oct. 1 and raise the debt limit by the end of the month.
- Meanwhile, some Democratic economists suggest that inflation may not be as temporary as the White House claims.
- “On the net, the Delta variant is likely to be inflationary,” former Treasury Secretary Larry Summers told Axios. “It looks like the economy is facing a substantial set of risks over a longer period of time.”
Flashback: During his first year in office, Trump fired Janet Yellen, then Fed chairman, in favor of Powell.
- The former president pressured Powell to lower interest rates to bolster the economy, claiming he had the power to fire him if he did not.
- Powell protected the independence of the Fed and worked closely with Congress to provide extraordinary support to the economy in the early days of the pandemic, gaining goodwill on both sides.
But, but, but: Not all Democrats are there.
- Senator Sherrod Brown (D-Ohio), chairman of the Senate Banking Committee, told Axios that he is not “totally in favor” of Powell, but that he has not made any decision on whether he should be replaced.
- “I strongly agreed with Powell on several things and disagreed with others, in terms of stronger positions on climate and regulation,” Brown said.
- “I’ve already talked about my concerns about their approach to regulation,” Senator Elizabeth Warren (D-Mass.) Told Axios. “It is important that the president of the Federal Reserve be a careful regulator of this country’s largest financial institutions.”
Some Republican senators they also blame Powell, in part, for rising prices.
- “Inflation is a cruel tax that affects everyone,” Sen Ted said. Cruz (R-Texas) told Axios. “And for whatever reason, President Powell has been reluctant to directly acknowledge or address the growing threat of inflation.”
- “On the other hand, if Biden replaced Jay with a left-wing Democrat who was advocating billions, new taxes and billions of spending deficit, it would be an even worse result.”