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President Biden Will Keep Trump Appointee Powell As Fed Chair

President Biden Will Keep Trump Appointee Powell As Fed Chair

President Joe Biden said Monday he is nominating Jerome Powell for a second four-year term as Federal Reserve chair, endorsing his stewardship of the economy through a brutal pandemic recession in which the Fed’s ultra-low rate policies helped bolster confidence and revitalize the job market. President Biden also said he would nominate Lael Brainard, the lone Democrat on the Fed’s Board of Governors and the preferred alternative to Powell among many progressives, as Vice Chair. Powell was nominated to the Board of Governors in 2012 by President Barack Obama, and subsequently nominated as chair by Donald Trump, confirmed in each case by the United States Senate.

The President’s decision boosts continuity and bipartisanship at a time when surging inflation is burdening households and raising risks to the economy’s recovery. In backing Powell, President Biden brushed aside complaints from progressives that the Fed has weakened bank regulation and has been slow to take account of climate change in its supervision of banks.

Next year, the Fed is widely expected to begin raising its benchmark interest rate, with financial markets pricing in at least two increases. If it moves too slowly to raise rates, inflation may accelerate further and force the central bank to take more draconian steps later to rein it in, potentially causing a recession. Yet if the Fed hikes rates too quickly, it could choke off hiring and the recovery. If confirmed, Powell would remain one of the world’s most powerful economic officials. By either raising or lowering its short-term interest rate, the Fed seeks to either cool or stimulate growth and hiring, and to keep prices stable. Its efforts to direct the U.S. economy, the largest in the world, typically have global consequences.

For months Powell was the favorite to be reappointed, but a vigorous campaign by environmental and public interest groups in support of Brainard clouded the picture in recent weeks. Critics, including Sen. Elizabeth Warren (D-MA), argued Powell had loosened bank regulations that were put in place after the 2008-2009 financial crisis. And two other senators expressed opposition to Powell last week because they said he was insufficiently committed to using the Fed’s regulatory tools to combat global warming.

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Brainard, meanwhile, cast 20 dissenting votes against financial rule changes in the past four years. In March 2020, she opposed a regulatory change that she said would reduce the number of reserves large banks were required to hold to guard against losses. She has also spoken more forcefully than Powell on ways the Fed can confront global warming.

President Biden still has the opportunity to fill three more positions on the Fed’s Board of Governors, including the vice chair for supervision, a top bank regulatory post. Those positions will be filled in early December, the President said.

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