By Ann Saphir and Trevor Hunnicutt
(Reuters) – President Joe Biden should keep Jerome Powell at the helm of the Federal Reserve for another four years to build confidence in an improving economy that still faces significant risks, Senator Steve Daines said in a letter to the president on Thursday.
“Changing the top leadership at this sensitive time could foster uncertainty across the financial system and undermine our economic recovery,” Daines, a Montana Republican, wrote.
His letter was the first formal call for Powell’s reappointment from a member of the Senate Banking Committee, which votes on U.S. central bank nominees before they are considered by the full Senate.
Renominating Powell, whose term expires in February, “would send a strong signal to households, businesses, and consumers that the head of the Federal Reserve continues to enjoy broad bipartisan support, and will act as necessary to achieve its dual mandate of price stability and maximum employment,” Daines wrote.
After the coronavirus pandemic last year prompted widespread shutdowns, the Powell-led Fed slashed its benchmark overnight interest rate to near zero and began a massive bond-buying effort credited with heading off a financial crisis and paving the way for a rapid economic rebound.
“Having a steady presence at the head of the Federal Reserve would go a long way toward providing the public with confidence that the nation’s central bank is prepared to combat any potential obstacles to a full and robust recovery,” Daines wrote.
Biden’s advisers say he has not yet decided whether to reappoint Powell, an investment banker and lawyer picked by former Democratic President Barack Obama to join the Fed’s board of governors in 2012. Powell took the reins of the Fed in 2018 after being nominated for the top job by then-President Donald Trump, a Republican.
Several Biden aides have said they regard Powell’s macroeconomic stewardship and outlook positively, and Biden said last week that his experts, who agree with Powell that recent high inflation readings are likely to be transitory, “trust” the Fed to take action if needed.
Daines’ letter suggests Republicans are still solidly behind Powell and could ease the confirmation process. The full Senate is split evenly between the two parties, with Democratic Vice President Kamala Harris casting the deciding vote when necessary.
Much also depends on the view of Democrats, who control the gatekeeper banking committee under the leadership of Senator Sherrod Brown, who along with fellow Democratic Senator Elizabeth Warren has been critical of Powell’s record on banking regulation.
Brown has also indicated he’d like to increase diversity on what is now an all-white Fed board, though not necessarily by changing out the Fed chief. The board currently has one vacant seat out of seven, and two more spots could open up in coming months as Randal Quarles’ term as vice chair for supervision ends in October and Richard Clarida’s position as vice chair ends in January.
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A White House official said last month that Biden would soon be engaging his senior economic team in “a careful and thoughtful process” about Fed appointments.
Another administration official said Biden is eager to use his appointments to ensure fair banking and market regulation, and that they would be considering Fed openings as a group.
Powell has his share of critics, including members of the climate activist group 350.org, who are calling on Biden to nominate a “climate leader” to replace Powell and who plan to protest against Powell’s leadership during the Fed’s annual central banking conference next week in Jackson Hole, Wyoming.
The group wants Biden to nominate Fed Governor Lael Brainard to take Powell’s role, Michigan State University economic professor Lisa Cook for vice chair and Sarah Bloom Raskin, a former Fed governor, for vice chair of supervision, the group’s senior policy analyst Tracey Lewis said.
Cook, who was a point person on the Fed for Biden’s transition team, is Brown’s top choice for the open board seat.
Not all progressives are against Powell.
In an essay last week for the left-leaning Roosevelt Institute, Mike Konczal credited Powell with an “overhaul” at the Fed that puts more emphasis on achieving full employment.
“One of the crucial battles this year for those who want to see a more equitable and just economy is ensuring that the changes Powell put into motion over the past several years become embedded in the everyday policy and practices of the Federal Reserve,” he wrote.
(Reporting by Ann Saphir in San Francisco and Trevor Hunnicutt in Washington; Editing by Dan Burns and Paul Simao)
