When Brad Sherman, a Democrat in the California House of Representatives, called on President Joe Biden to reappoint Jay Powell as chairman of the Federal Reserve, he told a lot about his party. What people believe in private.

“I have experienced two economic crises in Parliament: 2008 and 2020. The situation in 2020 is much better,” Sherman told the Financial Times. “Reassure people when we deal with others Coronavirus disease And to some degree inflation It’s a good idea. “

The Democrats have at least opened the door for Powell to stay for another four years when his current term expires in February. This is because the Biden administration has deliberated on key Fed appointments in the coming weeks.

Randal Quarles’s term as Vice Chairman of Banking Supervision will end in October, and there is one vacancy left on the board of directors. These are all difficult problems that Biden must solve with his economic team. When CNBC asked her on Friday whether she would recommend Powell for re-election, US Treasury Secretary Janet Yellen said that she would “discuss” this issue with Biden, but was satisfied with the central bank’s performance.

“I respect the Fed very much. It is important for them to make independent judgments about what is appropriate. I think, you know, the Fed is doing a good job,” she said.

The renewal of the chairmanship of the Federal Reserve has always been an important moment for the US President. But traditionally, even the central bank governor of the White House opposition party has received at least one nod. Ronald Reagan reappointed Paul Walker, Bill Clinton reappointed Alan Greenspan twice, and during the financial crisis, Barack Obama reappointed Ben Bernanke. Donald Trump broke the precedent. He chose to promote Powell, a Republican brought into the Fed by Obama, who succeeded Janet Yellen as Fed chairman when her term ended in early 2018.

Some Democrats—especially the progressives in the party—believe that Biden should do the same and put his own, determined mark on the leadership of the U.S. Central Bank. But they have been trying to find where Powell can be blamed: he guided the Fed to adopt a highly accommodative and dovish response to the pandemic, and formulated a new policy framework that promised to postpone pre-emptive interest rate hikes and pursue full employment more thoroughly. past.

In addition, he publicly supports the adoption of a strong fiscal response to the coronavirus crisis in 2020, and has shown more sympathy than usual for the Fed chairman’s influence on the impact of Fed policy on ordinary Americans. One aspect that Democrats continue to criticize Powell is that he is too tolerant of banks.

The Democratic Chairman of the Senate Banking Committee, Sherrod Brown, said at a meeting: “The Fed has removed important safeguards to make it easier for the largest banks to push up their share prices and increase their tremendous influence in our economy. “A hearing was held with Powell on Thursday. But Brown, as the key voice on Capitol Hill, did not ask Powell to succeed Powell, but confirmed him by voting for the first time.

Some observers on Capitol Hill said that the dilemma facing left-wing Democrats is whether there is a candidate who can replace Powell who can be at least as dovish as the current Fed chairman without distracting Congress from their biggest priorities. Strength-to advance Biden’s remaining $4 trillion economic agenda.

“I just don’t know if there will be enough motivation to argue about whether President Biden should re-nominate Powell, or whether he should go elsewhere,” said Megan Pennington, a former Democratic assistant to the Senate, now in Hamilton Place Strategies in Washington. Of a consulting company.

A possible deal between the Progressive Democrats and the White House may be for Powell to continue to be the chairman of the Federal Reserve, while Fed governor Lael Brainard, who has stricter financial regulations, replaces Quarles as vice chairman of supervision. .

For vacant seats on the board of directors, many Democrats are pushing people of color to increase ethnic diversity for the Fed’s top executives: Brown supports Michigan State University professor Lisa Cook. But whether this arrangement will work may depend on how Powell will perform in the next few months, because when the Fed starts to slow down its $120 billion in asset purchases per month, he will steer the start of the process of rising inflation and shrinking.

Many investors, economists and market strategists said it was prudent for Biden to re-elect Powell. “Whether you like it or not, stability is what the market seeks,” said Padhraic Garvey, head of regional research for the Americas at ING.

Roberto Perli, a former Fed staff member and director of global policy research at Cornerstone Macro, said Powell’s re-election would be a “safer path.”

“The market is already skeptical about the Fed’s commitment to the new framework, and may question whether the potential new chairperson has the ability to steer the committee in a direction consistent with the new framework. The result is likely to be an increase in interest rates,” he said.

Sherman ignored Powell’s accusations on the grounds of supervision, saying that as far as “prudential solvency” is concerned, things are going quite smoothly. “The only thing you can criticize is that the bank made too much money-between being angry at the bank for making too much money and worrying that they will be closed or need bailout, I will accept it,” he said.

As a member of the House of Representatives, Sherman will not vote on the chairman of the Federal Reserve. He “doubts” Powell will receive a second term, but “will not bet on this” and warned his colleagues that if the re-election fails, next year’s midterm elections will have a negative political impact.

“The first thing on the progressive agenda is the election of the Democratic Party… Economic uncertainty is not a good way to achieve this goal,” he said.


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