Is Jerome Powell's Tenure as Fed Chairman in Jeopardy?

by Wall Street Rebel | Michael London | 09/14/2021 11:34 AM
Is Jerome Powell's Tenure as Fed Chairman in Jeopardy?

While Powell's monetary policy is popular, several progressive Democrats in Congress and the White House are critical of his regulatory approach.


President Joe Biden is confronted with a difficult decision and considerable divides among his own followers.  If he should reappoint Jerome Powell as chairman of the Federal Reserve when his term ends early next year or whether he should pick a replacement who is more closely aligned with the Democratic policy agenda is up for debate.

Powell supporters believe that he has shown an extraordinary level of commitment to creating a strong labor market that will result in improved working conditions for American workers in recent years.

The arguments against his reappointment include being too lenient in his supervision of banks and other financial institutions. He has not shown a strong enough commitment to utilizing the Federal Reserve's authority to fight climate change, among other things.

According to one change theory, when a political party wins the president and the Senate (however narrowly), it should choose people who are wholly committed to the party's agenda and will work hard to see it through to completion, regardless of their political affiliation.

Mr. Biden may seek a firebrand candidate for the Federal Reserve chairperson, wagering that the nominee would be confirmed in a tightly split Senate while simultaneously guiding the nation's central bank toward a more active posture on a broad range of liberal objectives.

Mr. Powell's reappointment would correspond to the polar opposite concept of change.

Appointees with the experience and political abilities to make urgent policy changes seem logical and acceptable, rather than terrifying, are highly valued in this version of the tale.

Adopting this method, according to the argument, will allow for more active policy action.

Furthermore, it may strengthen it in the face of legal challenges and shifts in political control over the government.

Another prominent candidate for the job, Lael Brainard, would essentially divide the two approaches.

She has served as a Federal Reserve governor during the last seven years, working closely with Mr. Powell and other top bank officials.

Her lectures are carefully prepared, and her points of view are solidly within the mainstream of economics.

Although a Democrat, she made contributions to Hillary Clinton's presidential campaign in 2016. She has spoken out against many of the proposals to loosen bank regulations that Trump appointees have championed.

She has also expressed public worry about the economic ramifications of climate change.

Mr. Powell, a 68-year-old Princeton graduate who formerly worked as a dealmaker on Wall Street and a private equity executive, comes from a very different background and has a very different attitude.

After working in the George H.W. Bush administration, he was appointed by President Donald J. Trump to lead the central bank.

Over the last several years, he has also become a full-fledged convert to the religion of full employment, which he has practiced since.

Individuals from all walks of life in America, particularly historically disadvantaged ones, should be able to take advantage of new possibilities if the Federal Reserve allows the economy to run hot enough.

It is argued that Mr. Powell's mere presence — his reputation on both sides of the aisle in Congress and on Wall Street — would be beneficial to the administration's larger economic plan at a time when inflation is on the rise, and financial markets are erupting in elation.

Rather than being seen as a flaw, his lack of affiliation with Biden or even with Democrats, in general, becomes a selling point.

"Restoring civility and downplaying political tensions has been a part of the Biden mantra," said Sarah Binder, a George Washington University professor. She has written extensively on the Federal Reserve's role in American politics.

"It is somewhat fortunate for Biden because if he wishes to reappoint Powell, he may do so under the pretense of restoring the independence of the Federal Reserve, even though Powell is completely consistent with his monetary policy views."


                    Jerome Powell won't last as Fed chair: J.P. Morgan economist




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