Brad Sherman, a California Democrat at the House of Representatives, was speaking out in secret when he called on President Joe Biden to replace Jay Powell for a second term as Federal Reserve.
“I have had two financial problems in Congress: 2008 and 2020. And 2020 was very well managed,” Sherman told the Financial Times. “Encouraging people during our time Covid disease and some degree of swelling it would be a good idea. ”
Democrats, at least, are leaving the door open for Powell to continue for another four years now ending in February. This comes as talks are intensifying within Biden’s management over the Fed’s general election in the coming weeks.
Randal Quarles’ position as deputy chairman of the banking system expires in October, and there is one chance left for the board of directors. These are the pieces that Biden have to deal with his financial team. Asked by CNBC on Friday if he would accept Powell for a second term, US Secretary of State Janet Yellen said he had “discussed” the issue with Biden but was pleased with the central bank’s performance.
“I have a lot of respect for the Federal Reserve. And it is important for them to make their own decisions about what is right and what is wrong. I think, you know, the Fed has done a good job, ”he said.
The reorganization of the Fed’s seats has been a major milestone for the US president. But as usual, even the leaders of the central bank opposition parties in the White House have accepted it once and for all. Ronald Reagan re-elected Paul Volcker, Bill Clinton re-appointed Alan Greenspan, and Barack Obama fired Ben Bernanke another time during the financial crisis. It was Donald Trump who was disillusioned when he decided to promote Powell, a Republican who was brought to the Fed by Obama, to replace Janet Yellen as Fed Fed when her term expired at the end of 2018.
Some Democrats – especially the progressive part of the party – believe Biden should do the same and position himself, firmly in the leadership of the US central bank. But they have been struggling to find fault with Powell: he has led the Fed to help fight the epidemic, and to establish a new system that promises to continue to grow and function more efficiently than ever before.
In addition, he publicly supported the strong economic response to the coronavirus crisis in 2020, and expressed more sympathy for others than is often the case with Fed officials over the central bank’s policies on ordinary Americans. One side of Powell’s opposition from Democrats is that he is too lenient in the banks.
“Money has restored much-needed security, enabling major banks to withdraw their money and strengthen their financial strength,” Sherrod Brown, a Democratic chairman of the Senate banking committee, told Powell on Thursday. But Brown, who is key to Capitol Hill, did not call Powell’s place again and voted to confirm him for the first time.
Some Capitol Hill observers say the problem for the rest of the Democrats is that if there is a candidate to replace Powell who can defend the guarantee, he should be as useless as the Fed’s chairman, without interfering with Congress’s demands – boosting $ 4tn of Biden’s financial affairs.
“I don’t know if there will be enough fighting for President Biden to change Powell or if he goes elsewhere,” said Meghan Pennington, a former Democratic Senate ally, now in Hamilton Place Strategies, an aide in Washington.
The possible alliance between the advancing Democrats and the White House could see Powell remain in the Fed’s seat while Lael Brainard, the Fed’s finance minister, is taking Quarles’ place as second in command.
In the open seat on the board, many Democrats are pushing for a black man, adding colors to the Fed’s top bronze: Brown is backing Lisa Cook, a professor at Michigan State University. But whether the plan works will depend on Powell’s performance in the coming months, as he manages inflation and commencement of inflation as the Fed begins to cut its $ 120bn a month on purchases.
Many advertisers, economists and market experts say it would be wise for Biden to offer Powell another term. “Whether you like the idea or not, stability is what the markets will look like,” said Padhraic Garvey, chief of U.S. regional research at ING.
Roberto Perli, a former Fed official and head of international research at Cornerstone Macro, said Powell’s appointment could be a “safe bet”.
“Companies, which are already in doubt about the Fed’s commitment to the new system, may have doubts about the possibility of a new chair leading the committee in the new direction, and the result could be a huge interest,” he said.
Sherman dismisses Powell’s criticism for legitimate reasons, saying “smart wisdom” things had gone well. “The only thing you can argue with is that banks are making more money – and amid the frustration that banks are making more money and worrying about being closed or in need of a refund,” he said.
As a House member, Sherman will not have a vote in the Fed seat. “Suspicious” Powell gets a second term but “does not bet on the house” and warns his colleagues of the negative consequences of political elections in the middle of next year if the appointment fails.
“The first step forward is to elect Democrats… Economic instability is not the best way to achieve this,” he said.
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