President Joe Biden has not commented on Jerome Powell continuing at the head of the Fed, but behind the scenes, Democrats are far from agreeing on a second term for the head of the US central bank.
Traditionally, the Fed chairman gets a second four-year term. But Republican President Donald Trump broke that tradition by naming Powell in place of Janet Yellen, current secretary of the Treasury.
Powell’s supporters argue that the US economy needs stability to continue to recover. They also don’t want to politicize the Fed. And Powell, although appointed by Trump, knew how to maintain the independence of the governing monetary policy institution.
Amidst the uncertainties, “a consistent and coherent Federal Reserve is essential,” said Democrat John Yarmuth, chairman of the House Budget Committee recently.
Senator Jon Tester insisted in an interview with The Wall Street Journal on Wednesday that it is important not to politicize the central bank.
Powell’s work at the head of the bank during the economic crisis caused by the pandemic is widely praised. At the onset of the crisis, it immediately lowered interest rates to zero to encourage consumption and investment, and took steps such as systematically purchasing assets such as Treasury bonds to ensure markets had sufficient liquidity.
But to his detractors, Powell has shown restraint on issues like climate change — which is not among the Fed’s mandates — or racial equality.
“We urge President Biden to reinvent a Federal Reserve focused on eradicating climate risks and promoting racial and economic justice,” urged five Democratic House lawmakers.
“We need a leader who takes bold and decisive steps to eliminate the climate risk,” Alexandria Ocasio-Cortez, Rashida Tlaib, Ayanna Pressley, Mondaire Jones and Jesus Garcia said in an Aug. 31 statement.
The most likely candidate if Powell, whose term ends in February, is not re-elected is Lael Brainard, the only Democratic Fed governor, a fervent supporter of stringent banking and front-line climate change regulations that “present major risks to financial stability,” he said in November.
His name was considered last year for the Treasury.
So far, Biden’s intentions are unknown. Her spokeswoman, Jen Psaki, questioned in recent weeks about the matter, declined to comment.