President Joe Biden has renominated Federal Reserve Chairman Jerome Powell for a second term as the head of the central bank, a sign of the administration’s approval of Powell’s leadership through the COVID-induced economic crisis.
Questions had loomed over whether or not Biden would want to replace Powell. Fed Governor Lael Brainard, a favorite among progressives for spearheading Fed work on climate-related risk, had also been considered by the administration and reportedly visited with the White House in the days leading up to the announcement. Biden has nominated Brainard as vice chair of the Board of Governors of the Federal Reserve System.
“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,” said a White House statement announcing Powell’s nomination. “President 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.”
Treasury Secretary Janet Yellen said Powell’s renomination will allow the economy to “continue to benefit from his stewardship.” Senators on both sides of the aisle applauded the Biden administration for the picks, with Senate Banking Committee Chairman Sherrod Brown (D-Ohio) saying he “look[s] forward to working” with Powell in a second term. The committee’s top Republican, Pat Toomey of Pennsylvania, said he will support Powell’s confirmation.
Powell will now face the Senate Banking Committee for renomination before facing the full 100-member Senate for approval. Before the Biden administration made its pick, Sen. Elizabeth Warren (D-Mass.) had said she would not support a Powell renomination, citing bank regulatory rollbacks implemented under his chairmanship.
Opposition could also come from the other side of the aisle, where GOP Sen. Rick Scott of Florida noted that he would not support Powell if the Fed does not act faster to tamp down inflationary pressures.
Still, Powell has had a record of securing bipartisan support through several administrations. A Republican by affiliation, Powell was confirmed to the Fed Board as governor during the Obama administration, securing a 74 to 21 vote in 2012. When Trump tapped Powell to replace Janet Yellen as the head of the Fed, Powell easily won confirmation in an 84 to 13 vote.
His confirmation hearing may be different this time around.
Powell is in the midst of an unprecedented test for the central bank: determining if high inflationary prints through the economic reopening will lead to runaway inflation. Americans are noticing rising prices at the store, raising questions about whether or not the central bank’s policies of near-zero interest rates and bond buying are to blame.
The Fed has insisted that the price pressures are due to factors like limited semiconductor production and choked up shipping routes, which policymakers blame on COVID-induced restrictions at global production sites and ports.
“We understand the difficulties that high inflation poses for individuals and families, particularly those with limited means to absorb higher prices for essentials such as food and transportation,” Powell said at a press conference on Nov. 3. “Our tools cannot ease supply constraints.”
Powell could also face fire for an ethics scandal that engulfed at least two senior officials. Through 2020, the heads of regional Fed outposts in Boston and Dallas made a number of personal financial transactions while they were voting on policy actions that moved markets.
Both of those Fed presidents, Eric Rosengren and Robert Kaplan, resigned from their roles. Powell also moved to tighten the Fed’s ethics rules to ban all active trading, effectively only allowing holdings of diversified investment vehicles. The Fed chair has committed himself to repairing any reputational damage made to the central bank.
“We are where we are. It happened and we just have to deal with it forthrightly and transparently and own it and step up to meet this moment, I’m totally committed to doing that,” Powell said on Nov. 3.
The Senate will have to move relatively quickly to confirm Powell, since his term as Fed chair expires in February. There are three other vacancies on the Fed Board that the White House could fill, including a vice chair for supervision.