Moderate Democrats back reappointment of Trump-appointed Fed chair Powell
Some Senate Democrats are urging President Biden to reappoint Federal Reserve Chairman Jerome Powell for a second term, suggesting that replacing him could erode the independence of the institution.
Why it matters: Public support from centrist Democrats has the potential to cinch reappointment for a figure credited with helping the country navigate the huge economic hit of the coronavirus pandemic. Powell's just completing what some termed a summer audition.
- “I like Powell; I think he's a good guy. I think he deserves another term,” Sen. Jon Tester (D-Mont.), a member of the Senate Banking Committee, told Axios.
- “Trump tried to politicize it and [Powell] pushed back," Tester said of the former president. "You don't want to politicize the Fed. That's a bad direction to go.”
- “The current chairman has earned our confidence and respect,” said Sen. Ben Cardin (D-Md.) “If he's nominated, I'm certainly going to support him. I'm not looking for a change.”
Driving the news: While the Fed chair’s term expires in early 2022, the president is expected to make a decision this fall — in part to give financial markets plenty of time to digest his choice.
- Powell also is liked by Republicans, who prefer keeping the current chair rather than enabling Democrats to replace him with someone more liberal.
- “He's had a steady hand,” said Sen. Thom Tillis (R-N.C.) “And in these uncertain times, I think it'd be a wise nomination.”
- "If Chair Powell were put forth, he’d have a strong vote on the Republican side," said Tillis, also a member of the Banking Committee.
The big picture: Biden’s decision on Powell will play out in a challenging political and economic environment, with COVID-19 still rampaging and supply chain disruptions leading to higher prices.
- Congress also has to fund the government by Oct. 1, and raise the debt limit later in the month.
- Meanwhile, some Democratic economists are suggesting that inflation might not be as temporary as the White House claims.
- "On net, the Delta variant is likely to be inflationary," former Treasury Secretary Larry Summers told Axios. "It does seem like the economy is facing a substantial set of risks for a longer period of time."
Flashback: During his first year in office, Trump jettisoned then-Fed Chair Janet Yellen in favor of Powell.
- The former president then pressured Powell to lower interest rates to bolster the economy, claiming he had the power to fire him if he didn't.
- Powell protected the Fed's independence and worked closely with Congress to provide extraordinary support to the economy in the early days of the pandemic, earning goodwill in both parties.
But, but, but: Not all Democrats are on board.
- Sen. Sherrod Brown (D-Ohio), chairman of the Senate Banking Committee, told Axios he’s not “totally supportive” of Powell but hasn’t made a decision about whether he should be replaced.
- “I very publicly agreed with Powell on a number of things, and disagree on others, in terms of stronger positions on climate and on regulation,” Brown said.
- "I have spoken already about my concerns about his approach to regulation," Sen. Elizabeth Warren (D-Mass.) told Axios. "It is important that the chairman of the Federal Reserve is a careful regulator of the largest financial institutions in this country."
Some Republican senators also blame Powell, in part, for rising prices.
- “Inflation is a cruel tax that impacts everybody,” Sen Ted. Cruz (R-Texas) told Axios. “And for whatever reason, Chairman Powell has been reluctant to acknowledge or squarely address the growing threat of inflation.”
- “On the other hand, if Biden were to replace Jay with a left-wing Democrat who advocated for trillions and new taxes and trillions of deficit spending, that would be an even worse outcome.”