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Biden to Nominate Jerome Powell for Second Term as Federal Reserve Chairman
Reappointment signals policy continuity with central bank leader who remains popular among lawmakers; Lael Brainard to be nominated as vice chairwoman
Updated Nov. 22, 2021 4:46 pm ET
President Biden said he would nominate Federal Reserve Chairman Jerome Powell to a second term leading the central bank, opting for continuity in U.S. economic policy despite pushback from some Democrats who wanted someone tougher on bank regulations and climate change.
Mr. Biden said he would also nominate Fed governor Lael Brainard as vice chairwoman of the central bank’s board of governors. Prominent liberals like Sen. Elizabeth Warren (D., Mass.) had warned the president against picking Mr. Powell, and progressive groups mounted a last-ditch campaign to pressure the president to tap Ms. Brainard for the top job.
The announcement caps months of behind-the-scenes deliberations by Mr. Biden and his senior aides over one of the world’s most important economic policy posts at a time of high inflation and intraparty divisions.
The president’s decision reflected a desire by Mr. Biden to maintain stability at the central bank amid public concerns about high prices for everything from groceries to fuel, administration officials said. Mr. Biden’s advisers said they want to focus much of their attention on passage of their social spending and climate legislation and believe Mr. Powell will more easily win Senate confirmation, despite objections from progressives.
“Put directly: at this moment both of enormous potential and enormous uncertainty for our economy, we need stability and independence at the Federal Reserve. Jay has proven the independence that I value in a Fed chair,” Mr. Biden said at the White House on Monday.
Stocks rose modestly after the White House announcement and ended the day little changed. The S&P 500 slipped 0.3%, while the Dow Jones Industrial Average advanced less than 0.1%. The tech-heavy Nasdaq Composite Index lost 1.3%. Yields on benchmark 10-year Treasury notes rose to 1.625% from 1.535% Friday. Yields move inversely to bond prices.
Of the 84 lawmakers who voted to confirm Mr. Powell four years ago, 68 are still in office, equally split between the two party caucuses. Several lawmakers of both parties expressed support for Mr. Powell on Monday, including Sens. Sherrod Brown (Ohio) and Pat Toomey (Pa.), the top Democrat and Republican on the Senate Banking Committee, which will vote on the nomination.
In recent weeks, Mr. Powell, a Republican, and Ms. Brainard, a Democrat, emerged as Mr. Biden’s only two candidates for Fed chair. They met with Mr. Biden separately at the White House on Nov. 4, and the president spoke with them about his decision on Friday, according to a person familiar with the matter. Mr. Powell was backed for the job by several members of Mr. Biden’s economic team, including Treasury Secretary Janet Yellen, who served as Fed chairwoman from 2014 to 2018.
The president’s advisers are eager to avoid a drawn-out confirmation process that distracts from Mr. Biden’s broader legislative agenda. Throughout the deliberations, Mr. Biden’s team kept in regular contact with senators and their staffs to get their input, according to a person familiar with the process. He met at the White House with Ms. Warren on Nov. 9 to discuss the matter, and the president and his staff regularly briefed Mr. Brown, the person said.
The president, in his remarks at the White House on Monday, said Mr. Powell told him that he would make accelerating the Fed’s efforts to address the risks that climate change pose to the U.S. financial system a priority. “He’s also underscored the importance of the Fed taking a more active role in the months and years ahead in making sure that our financial regulations are staying ahead of emerging risks, be they from innovations and cryptocurrency or the practices of less regulated nonbank financial institutions,” Mr. Biden said.
Mr. Powell said he would work to address inflation.
“We will use our tools both to support the economy and a strong labor market, and to prevent higher inflation from becoming entrenched,” he said at the White House event. “Other key priorities include vigilantly guarding the resilience and the stability of the financial system, addressing evolving risks from climate change and cyberattacks, and facilitating the modernization of the payment system while protecting consumers.”
Ms. Brainard, in brief remarks, said, “I’m committed to putting working Americans at the center of my work at the Federal Reserve.”
Mr. Biden can put his stamp on the central bank with three additional appointments. There is already one vacancy on the Fed’s seven-member board of governors, and Fed Vice Chairman Richard Clarida’s term as governor will expire in January. The four-year term of the vice chair of bank supervision, previously held by current Fed governor Randal Quarles, expired in October and he plans to retire around the end of the year. Mr. Biden will announce those nominations in early December, the White House said Monday, likely prompting renewed efforts by progressive Democrats to influence the president’s picks.
Because some progressives were disappointed by Mr. Powell’s nomination, the White House faces greater pressure over who it chooses to fill those vacancies. They are especially focused on ensuring that the next vice chair of bank supervision is committed to tougher bank regulation and addressing climate change.
“While Jay and Lael bring continuity and stability to the Fed, my additions will bring new perspectives and new voices,” Mr. Biden said of his pending picks for the remaining Fed positions. “I also pledge that my additions will bring new diversity to the Fed, which is much needed and long overdue in my view.”
Ms. Warren reiterated her opposition to Mr. Powell’s nomination on Monday and said she would support Ms. Brainard’s nomination for vice chairwoman. She said the vice chair of bank supervision nomination is critically important.
“The position must be filled by a strong regulator with a proven track record of tough and effective enforcement—and it must be done quickly,” Ms. Warren said.
Two other progressive Senate Democrats, Sens. Jeff Merkley of Oregon and Sheldon Whitehouse of Rhode Island, said they would oppose Mr. Powell’s nomination.
Mr. Powell faces an especially delicate economic challenge as the recovery from the Covid-19 pandemic and the government’s response have sharply boosted demand and disrupted global supply chains, sending inflation to its highest levels in more than a decade.
He will have to lead his colleagues in the coming months through a debate over how soon to raise rates. The danger for the Fed is twofold: Officials don’t want to overreact by raising interest rates and cooling down the economy if supply-chain bottlenecks repair themselves over time. But they also don’t want to underreact as wages rise, fueling a more traditional inflationary cycle.
Mr. Biden’s announcement on Monday removes a key source of uncertainty over who might have to manage such a pivot should officials conclude that it is warranted.
Mr. Powell, 68 years old, is seen by supporters inside the administration and in markets as a steady hand whose extensive, personal outreach helped restore bipartisan support for the central bank one decade after its reputation was badly bruised by the 2008 financial crisis. Mr. Powell, a former private-equity executive, was named to the Fed’s seven-member board 10 years ago by then-President Barack Obama and elevated to the chairman’s post four years ago by then-President Donald Trump.
The political support Mr. Powell cultivated proved valuable throughout his term as chairman—first, when he faced steady attacks in 2018 and 2019 from Mr. Trump for raising interest rates, and later, when he led a rapid, aggressive response to douse a global financial panic triggered by the coronavirus pandemic in March 2020.
