President Biden announced Monday he is renominating Trump-era Republican Federal Reserve Chair Jerome Powell for a second term, defying complaints from progressives.
Biden nominated Lael Brainard, a Democrat, for vice chair. She will replace Richard Clarida, another Trump-appointed Republican.
Progressives had hoped Brainard would replace Powell at the no. 1 spot, as they insisted she more closely aligns with the president's robust economic agenda.
'I’m confident that Chair Powell and Dr. Brainard’s focus on keeping inflation low, prices stable, and delivering full employment will make our economy stronger than ever before,' Biden said in a statement.
'Together, they also share my deep belief that urgent action is needed to address the economic risks posed by climate change, and stay ahead of emerging risks in our financial system.'
The nominations now head to the Senate for confirmation.
Powell served as an assistant secretary and as undersecretary of the Treasury under President George H.W. Bush. President Obama appointed him to the seven-member Federal Reserve board, where he served until Trump appointed him to lead the Fed in 2018. Before that, he was an attorney and investment banker in New York City.
Progressives had hoped Brainard would replace Powell at the no. 1 spot, as they insisted she more closely aligns with the president's robust economic agenda
Both Powell and Brainard share the president's goal of maximum employment, with a slightly higher tolerance for inflation.
Biden insisted his pick was based on 'stability' and 'independence.'
Powell's renomination comes at a time of 6.2 percent year-over-year inflation, 0.9 percent in October alone. But the Labor Department said the economy added 531,000 jobs in October. The jobs report said the unemployment rate fell to 4.6 percent from 4.8 percent in September.
Powell announced earlier this month the Fed would start tapering emergency bond purchases beginning Nov. 15, and end them altogether by mid-2022. He insisted the Fed still has no plans to raise ultra-low interest rates designed to drive the economy out of the pandemic.
Throughout the pandemic, the Fed bought $80 billion in Treasuries and $40 billion in housing-backed securities each month, swelling its balance sheet from to $8.6 trillion from $4.4 trillion.
Powell, who long insisted inflation would be 'transitory,' now seems less certain about when it will die down.
'We continue to believe that our dynamic economy will adjust to the supply and demand imbalances,' he said. 'It is very difficult to predict the persistence of supply constraints or their effects on inflation.'
Supply chains 'will return to normal function but the timing of that is highly uncertain.'
He said: 'We remain attentive to risks and will ensure that our policy is well positioned to address the full range of plausible economic outcomes.'
Powell has bypassed much of the blame for inflation on Capitol Hill, where Republicans have Biden's costly economic agenda in their cross hairs. Many endorsed Powell's renomination. But in recent weeks, some have criticized Powell as too slow to recognize the persistence of inflation.
Under Powell's watch in March 2020, the Fed intervened in the US economy to mitigate repercussions from COVID-19 within financial markets, including up to $2.3 trillion in lending to support households, employers, and state and local governments.
But lead critic Sen. Elizabeth Warren unleashed on Powell in late September, calling him a 'dangerous man.'
The Massachusetts Democrat argued that Powell weakened the US banking system by rolling back financial regulations that were enacted after the 2008 financial crisis.
'Over and over, you have acted to make our banking system less safe, and that makes you a dangerous man to head up the Fed, and it's why I will oppose your re-nomination.'
In 2019, the Fed weakened rules that ensure that firms have adequate cash to meet their obligations by lowering liquidity requirements for banks. The guidelines were put in place after the 2008 crisis.
Other progressives led by Ocasio-Cortez and fellow Squad members Reps. Rashida Tlaib and Ayanna Pressley accused Powell of not caring enough about climate change.
'Under his leadership the Federal Reserve has taken very little action to mitigate the risk climate change poses to our financial system,' they wrote in a letter, later adding: 'Secondly, under Chair Powell the Federal Reserve has substantially weakened many of the reforms enacted in the wake of the Great Recession.'
Treasury Sec. Janet Yellen had supported Powell's renomination.
A separate position of vice chair for supervision, a bank regulatory post, remains vacant, along with two other slots on the Fed's board. Those positions will be filled in early December, the president said.
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