Biden Picks Powell to Lead Fed for a 2nd Term, Brainard Nominated as Vice Chair

Federal Reserve Chair Jerome Powell testifies during a Senate hearing at the Hart Senate Office Building in Washington, on Sept. 28, 2021. Kevin Dietsch/Pool via Reuters

President Joe Biden has picked Federal Reserve Chair Jerome Powell to serve a second four-year term at the helm of the central bank, while nominating Lael Brainard, the only Democrat on the Fed’s seven-member board, to serve as second-in-command at the Fed.

The White House announced Biden’s decision in a Nov. 22 release, ending weeks of speculation around who would be tapped to lead the Fed, with Powell and Brainard emerging in the final stretch as the two leading candidates. Biden was expected to announce a decision before Thanksgiving.

“America needs steady, independent, and effective leadership at the Federal Reserve so it can advance its dual goals of keeping inflation low and prices stable, as well as creating a strong labor market that broadly benefits workers with better jobs and higher wages,” the White House said in the release, adding that Biden has “full confidence in Powell and Brainard’s experience, judgment, and integrity to continue delivering on those mandates and to help build our economy back better for working families.”

Powell, a Republican, was appointed Fed chief by President Donald Trump and led the central bank’s response to the economic fallout from the pandemic. Last year, Fed policymakers dropped interest rates to near zero and set out on a massive asset-buying program, purchasing around $120 billion per month in Treasury and mortgage-backed securities.

Facing a surge in inflation, the Fed has started phasing out the asset purchases at a pace of around $15 billion per month. While central bank policymakers have said it’s not yet time for a rate hike, interest-rate futures market predict the Fed will start tightening in June 2022.

“Chair Powell has provided steady leadership during an unprecedently challenging period, including the biggest economic downturn in modern history,” the White House statement said, while hailing Brainard as “one of our country’s leading macroeconomists” who played a key role at the Fed and worked with Powell “to help power our country’s robust economic recovery.”

Brainard, a Harvard-trained Ph.D. economist, will take over as Fed Vice Chair from Richard Clarida, whose term expires Jan. 31, 2022.

The nominations next head to the Senate for confirmation.

“I look forward to meeting with Chair Powell and Governor Brainard during the confirmation process, and discussing financial innovation, the impacts of skyrocketing inflation, and other issues affecting the people of Wyoming,” Sen. Cynthia Lummis (R-Wyo.), said in a post on Twitter.

The U.S. Chamber of Commerce praised Powell’s reappointment and said it hopes the Senate will confirm his nomination quickly.

“Respected at home and abroad, Chairman Powell will continue to help the U.S. and our economic partners successfully navigate the lingering challenges from the pandemic,” U.S. Chamber of Commerce President and CEO Suzanne P. Clark said in a statement, urging Senators to “rapidly confirm Powell for a second term.”

Sen. Mitt Romney (R-Utah) took to Twitter to say he will vote for Powell’s confirmation, saying that while he disagrees with some of the Fed’s prior policies, Powell’s recent comments give him hope that “the Fed is ready to address the rising inflation we’re experiencing.”

Sen. Pat Toomey (R-Pa.), ranking member of the Senate Banking Committee said in a statement that he plans to back Powell’s confirmation.

“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.,” Toomey said in a statement.

Brainard, besides being widely seen as more dovish on monetary policy and as having stronger hand on bank regulation, has also advocated a more active role for the Fed in terms of climate change. She told a research conference in October that the Fed was developing climate-related scenarios for use in bank stress tests and endorsing the use of the Fed’s supervisory guidance to financial institutions to help them mitigate climate risk.

Federal Reserve Board Governor Lael Brainard speaks at the John F. Kennedy School of Government at Harvard University in Cambridge, Massachusetts, on March 1, 2017. Reuters/Brian Snyder

Powell, on the other hand, said in June that climate change does pose “profound challenges for the global economy and certainly the financial system” but rejected the idea that the Fed should take on a prominent role fighting the problem beyond assessing its potential impacts and associated risks.

“Climate change is not something we directly consider in setting monetary policy,” Powell said at a June panel discussion on how the financial sector might address climate risks.

“Central banks can play an important role in building an analysis ... to quantify the risks. ... But we are not and we don’t seek to be climate policymakers as such,” a role that should be left to elected officials, Powell said at the time.

Ahead of Biden’s decision on the Fed appointments, several progressive Democrat senators urged the president not to re-nominate Powell over to his reluctance to use the central bank’s tools to fight climate change.

Biden still has three vacant seats of the Fed’s Board of Governors to fill, including Vice Chair of Supervision, with the White House indicating the president plans to make the announcement in early December.