Biden opts for stability with Powell as Fed pick, but progressives aren’t happy

In the lead-up to the nomination, Republicans and moderate Democrats argued for keeping Powell, saying that steady leadership and consistency were critical to control record-high inflation and a supply chain crisis crunch. But progressives pushed Biden to nominate Federal Reserve governor Lael Brainard instead, who is generally viewed as tougher on Wall Street, and more engaged in climate change regulation. 

Although Biden nominated Brainard to be the Fed’s vice chair, that might not be enough to placate the far-left faction of his party, who have threatened to vote against Powell and other facets of the Biden agenda just as the country faces a major spending and debt ceiling deadline as soon as next week. 

Senator Elizabeth Warren (D-Mass.) said Monday afternoon that she would not vote to confirm Powell, citing his “failures on regulation, climate and ethics.”

Warren has previously called him a “dangerous man to head up the Fed.” At a recent Senate hearing she said that he “regularly voted to deregulate Wall Street” and could “drive this economy over a financial cliff again.”

Senators Sheldon Whitehouse (D-RI) and Jeff Merkley (D-Or.) asked Biden to skip Powell because of his stance against evaluating climate-related risks. 

“Jerome Powell refuses to recognize climate change as an urgent and systemic economic threat,” they wrote in a joint statement Friday. “President Biden must appoint a Fed chair who will ensure the Fed is fulfilling its mandate to safeguard our financial system and shares the administration’s view that fighting climate change is the responsibility of every policymaker. That person is not Jerome Powell.”

Americans for Financial Reform, a progressive nonprofit organization, said that Monday’s decision was “a major disappointment to those of us who have fought for tougher regulation of Wall Street.”

They were joined by a group of 22 left-leaning economic, racial, labor, and environmental justice organizations including the Revolving Door Project, Open Markets Institute, Service Employees International Union, and the Soros Economic Development Fund, which spoke out against Powell’s potential nomination, saying that nominating a more progressive candidate like Brainard as vice chair would not be enough. 

“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. Therefore, for your policies to be successfully implemented, these three leaders must all be aligned behind the same policy vision,” the group wrote in a letter. 

Both Powell and Lael Brainard need 60 votes in the Senate to win confirmation.

Biden’s decision to pick Powell comes as many progressives have begun to publicly complain that they are being purposefully left out of Biden administration decisions, and then used as the scapegoat when things fall apart. 

Alexandria Ocasio-Cortez warned that Progressives would not back President Biden’s agenda and spending bill going forward, in a Sunday interview with the New York Times. The reconciliation bill has been significantly watered down from its original $3.5 trillion framework in order to gain the votes of moderate Senators Joe Manchin (D-W.V.) and Kyrsten Sinema (D-Ariz.), angering members of the far-left caucus. 

Ocasio-Cortez has also said that progressives were “unwelcome to pitch in” during Virginia’s gubernatorial race earlier this month, which Democrats lost. 

“Not a single person asked me to send an email, not even to my own list. And then they turn around and say, ‘It’s their fault,’” she told the New York Times.

President Biden was praised early in his presidency for his ability to navigate both factions of his party. But by nominating Powell, his grip on the left appears to be slipping.

Many Republicans and Democrats noted that Biden’s choice to nominate a Republican would mark the return of the long-standing norm of the Federal Reserve serving as an independent, largely apolitical institution. That changed under Trump when he openly politicized the Fed, arguing that the agency should be under his control. 

“Going with the less dovish candidate at a time when inflation is galloping is a safer choice,” Stephen Stanley, chief economist of Amherst Pierpont Securities, an investment firm, said in a statement. “Continuity at a time when the Fed faces potentially a very difficult stretch is safer than changing leadership now.”

Still, inflation has reached a 31-year high under Powell’s watch/. And while employment has improved significantly, he has many challenges ahead of him.