Powell Gets Unlikely Boost With His Liberal Critics in Disarray

(Bloomberg) -- Liberal Democrats are publicly assailing Federal Reserve Chairman Jerome Powell’s record in an effort to persuade President Joe Biden not to give him a second term, but they aren’t yet lining up behind any one alternative to run the central bank.

New York Representative Alexandria Ocasio-Cortez, Michigan Representative Rashida Tlaib and other vocal House progressives, as well as nearly two dozen liberal groups, wrote separate memos this week criticizing Powell’s Fed without endorsing a replacement. Their silence on an alternative only serves to bolster Powell’s chances of renomination because it gives him more space to quietly campaign for the job without a clear opponent.

Biden is expected to announce his nominee for Fed chair and possibly a slate of Fed governors sometime this fall.

Some progressives back Fed Governor Lael Brainard for the top slot, said Jeff Hauser, executive director of the left-leaning Revolving Door Project. But no senator -- who would vote on a confirmation -- has publicly urged Biden to pick her over Powell. 

Brainard has instructed her supporters not to wage a campaign pitting her against Powell, said a former Obama official with ties to progressives and Brainard. The two have diverged on the Fed’s deregulation agenda. 

Even key lawmakers who have been critical of Powell -- such as Senate Banking Chairman Sherrod Brown, who will shepherd Biden’s nominee through the confirmation process, and Senator Elizabeth Warren -- are reticent to publicly push for someone else to lead the Federal Reserve. 

So far, Powell enjoys the public support of several senators in both parties, meaning he could lose some Democrats and still be confirmed in the evenly divided Senate. Left-leaning labor economists support his stance on full employment. Treasury Secretary Janet Yellen, a former Fed chair herself, has told White House aides she supports his reappointment.

Biden advisers are considering a recommendation to the president that he renominate Powell for a second term and elevate Brainard to be vice chair for supervision, the key regulatory post.

That would give Biden a Fed chair backed by Wall Street and members of both parties, and a banking regulator who would be influential in promoting Biden’s priorities on financial regulation, racial equality and climate change without enduring a bitter confirmation fight with a narrow win.

“This is not as clean as the Summers and Yellen fight,” said Jamal Raad, co-founder and executive director for Evergreen Action, a climate change advocacy group focused on the Fed nomination. “There are a lot of people who like the way Powell is trying to run a Federal Reserve that works toward full employment, which we haven’t see in a while. No one will hate Powell as much as they hated Larry Summers.”

Raad worked for Senator Jeff Merkley when the Oregon Democrat and other key Democratic senators opposed Summers’ 2013 nomination for Fed chair under President Barack Obama. Summers pulled his own name from consideration that September, and Obama settled on Yellen for the top Fed job the next month.

While Brainard is the clear main competitor to Powell, she hasn’t always pleased progressives, who helped kill her run at Treasury secretary earlier this year because of her past advocacy for free trade deals.

Ocasio-Cortez and other progressive House members who have no vote on the nominee on Monday urged Biden to dump Powell from the Fed but did not offer other names for the job. 

Also on Monday, 22 liberal organizations, organized by the Revolving Door Project, wrote Biden to urge him to appoint a Fed chair who focuses on climate change, systemic racism and other progressive priorities. They did not directly suggest any candidates for the job, but the letter carried a warning that Brainard as vice chair for supervision would still have to answer to Powell. 

“We encourage you to remember that the Fed is a hierarchical institution, in which the Vice Chair and Vice Chair for Supervision wield considerable agenda-setting power, but are ultimately deferential to the Chair’s initiatives,” they wrote. “Therefore, for your policies to be successfully implemented, these three leaders must all be aligned behind the same policy vision.”

A small group that includes Yellen, chief of staff Ron Klain and National Economic Council Director Brian Deese, is managing the selection process, according to a person familiar with the process.

A White House official said Biden will carefully and thoughtfully engage with his senior economic team to appoint a Federal Reserve chair in a timely manner. The official added the president will appoint the candidate he thinks will be the most effective implementing monetary policy. 

One scenario pitched in opinion pieces and blogs by some Powell foes would be to name Brainard as chair to signal a renewed focus on regulation and a broader Fed agenda more in line with Biden’s. They would then want progressive favorites like Sarah Bloom Raskin, a former top Treasury official and Fed governor, and economist Lisa Cook for the board’s vice chairmanships. 

Neither Raskin nor Cook are seen as likely nominees for the Fed chair.

Hauser, who opposes Powell’s renomination, added that many progressive groups who prefer Brainard for the chair slot are holding their fire because they don’t want to get on the wrong side of the White House or the Fed. 

“Powell is the current chair and the betting market favorite,” he said.

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