(Bloomberg Opinion) -- In 2009, President Barack Obama took a short break from his summer holiday on Martha’s Vineyard to tap then-Federal Reserve Chair Ben Bernanke for a second term. Joe Biden, by contrast, is more likely to interrupt his Thanksgiving dinner to perform the same duty.
The White House has been prevaricating for months over whether to give Jerome Powell, the current central bank chief, a second term. The prolonged deliberations — indecision, put less charitably — come at a tricky time for the American and global economies. The delay is starting to raise questions.
In the latest twist, Bloomberg News reported late Monday that Biden interviewed Lael Brainard, a Fed governor seen as tough on bank regulation, for the top job. She has long been viewed as the most plausible alternative to Powell, but more likely to become one of two vice chairs.
That Brainard still remains a serious contender for the big prize, at this point, is unusual. If she's tapped, a confirmation fight awaits in the Senate. It's getting late for questions to be hanging over the most consequential job in monetary policy. In the global arena, the Fed is first, second and third among equals. Not only is the dollar the world's reserve currency and the U.S. economy the biggest, but when markets seized up early in the pandemic, it was the Fed that eased a shortage of greenbacks and prevented a global funding crisis.
Isn't there plenty of time, given that Powell's four-year term runs until early February? Far better to get the choice right, one may argue. Sure. But confirmation hearings require time for posturing, backbiting and legislative scheduling. The past four Fed chair nominations were all announced by this point on the calendar.
It's unclear to me that prolonged delays will achieve much. Powell and Brainard have been known quantities for ages. What information is available now that wasn't weeks or months ago? They aren’t strangers to Washington, nor the confirmation process. Brainard's views on financial regulation are well-established. On interest rates, her outlook doesn’t differ wildly from Powell's. She hasn't dissented from a Federal Open Market Committee decision since being appointed by Obama in 2014. If anything, she would be lean toward being more reluctant to raise interest rates than Powell. It doesn't seem plausible that a change in economic direction or worries about inflation explain the delay.
It’s possible that Biden wants to send to Congress a slate of candidates for a range of senior jobs at the Fed. In addition to the corner office, the White House needs to fill a handful or empty seats on the Board of Governors in the coming months, including vice chair and vice chair for supervision. If Biden opts for Powell, the thinking goes, the president needs to surround him with a kind of Praetorian Guard, likely to attract support from progressives and critics who say the central bank isn't sufficiently diverse. Liberal groups have never been hugely enamored of Powell, who was appointed by Donald Trump. (This conveniently overlooks the fact that he was an Obama appointee to the Board of Governors, from which Trump elevated him.)
Like all presidents, Biden wants to leave his mark on the Fed. A package of candidates, however, has its limitations. Sending one would signal that important parts of the Democratic Party consider Powell a weak nominee who needs to be embedded with others. But this view isn't particularly fair. While Powell hasn't been perfect, he has steered the economy through one of the roughest patches in a century and presided over the development and implementation of a new policy framework aimed at delivering lower interest rates for longer. If his reward is a second term, just give it to him. If he’s to be replaced, that decision could have been reached well before now.
Even if Biden announces a group of nominees, that doesn't mean they will be voted on as a package in the Senate, where Democrats have a razor-thin margin. Don't expect Republicans, a number of whom have endorsed Powell, to just go along with all these choices. I doubt many have forgotten Brainard's donations to Hillary Clinton's presidential campaign, for which she was rightly criticized. While legal, the contributions were unconventional, given that the Fed strives to be seen as politically independent. And don’t underestimate the power of the banking lobby, which might see Brainard as trouble.
While the U.S. and global economies have bounced back from the sharpest downturn since the Great Depression, the pace of recovery is cooling significantly. The easy laps are done. Whoever helms the Fed come February will inherit the process of withdrawing quantitative easing and navigating a path to higher rates that incurs minimal disruption, all the while acknowledging elevated inflation. Covid-19 is still raging. Another setback is entirely conceivable. Just get on with it, Joe. Don't let the perfect be the enemy of the good.
This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.
Daniel Moss is a Bloomberg Opinion columnist covering Asian economies. Previously he was executive editor of Bloomberg News for global economics, and has led teams in Asia, Europe and North America.
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