President Joe Biden soon faces the same decision his most recent Democratic predecessors did: whether to reappoint a Federal Reserve chair put in that job by a Republican.
He hasn’t revealed his thinking, and aides say he has not begun the formal process of determining whether to seek a second term for Jerome Powell in the government’s most important economic policy job. But there’s reason to suspect he may follow the pattern set by Presidents Bill Clinton and Barack Obama when they renominated Alan Greenspan and Ben Bernanke, respectively.
The case begins with Powell’s commitment to using expansive monetary policies to support economic activity since the coronavirus pandemic hit early in 2020. He has maintained that view in the name of restoring lost jobs as the economy has returned to robust growth.
Of special significance at the moment, Powell’s view that the current burst of inflation will be only temporary tracks the view of Biden’s economic team – even though that team includes economists significantly more liberal than the onetime private equity executive. Asked last week about growing inflation concerns, one Biden economist told CNN: “I’m where Powell is.”
Biden signaled his comfort with their shared perspective in remarks at the White House touching on inflation earlier this week.
“As I made clear to Chairman Powell when we met recently, the Fed is independent,” the President said. “It should take whatever steps it deems necessary to support a strong, durable economic recovery.”
Powell was first nominated to a seat on the Fed’s Board of Governors by Obama when Biden served as his vice president. In November 2017, President Donald Trump nominated him to succeed Janet Yellen, now Biden’s treasury secretary, as chairman. Powell won Senate confirmation overwhelmingly, with lopsided support from Democrats and Republicans alike.
Powell’s professional background and selection by Trump will present an inviting target for some progressives such as Sen. Elizabeth Warren of Massachusetts – who voted against his confirmation as Fed chair and criticized him as too cozy with big banks at a hearing last week. But current Senate Banking Chairman Sherrod Brown, an Ohio Democrat, voted to confirm him, and some key Democratic constituencies, such as organized labor, have signaled their acceptance.
Moreover, Biden’s emphasis on bringing the country together wherever possible suggests a potential benefit from extending the tenure of a Republican-appointed chair whose views largely align with those a a Democratic administration. Democratic presidents, as reflected by the initial Fed chair picks of both Clinton and Obama, have felt a special need in recent decades to demonstrate moderation on economic management.
The ambition of Biden’s fiscal policy – now pending before Congress in $4 trillion worth of physical and human infrastructure proposals – may serve to augment that imperative. And the fact that Biden can make additional Fed appointments at the same time means he could balance Powell’s renomination with those of more progressive choices.
“I expect reappointment,” one outside source close to Biden’s team told CNN. So do 36 of 40 economists surveyed by Reuters last week.
Yet everyone interested in Biden’s choice will have to wait a while. Powell’s current term as chair ends in early 2022 and the decision-making process hasn’t reached the Oval Office.
“I do not know what the President will decide when the choice is put before him,” a senior administration official told CNN. “I do know it has not been put before him.”