Progressives make last-ditch attempt to sink Jay Powell’s renomination

Progressive lawmakers mounted an eleventh-hour attempt to persuade US Joe Biden to deny Jay Powell a second term as Federal Reserve chair, as the US president prepares to decide before Thanksgiving who will lead the central bank.

Democratic senators Sheldon Whitehouse of Rhode Island and Jeff Merkley of Oregon called on Biden not to reappoint Powell, citing the current Fed chair’s stance on climate-related risks and the US central bank’s capacity to more closely engage with those issues.

“Jerome Powell refuses to recognise climate change as an urgent and systemic economic threat,” they wrote in a statement on Friday.

“President Biden must appoint a Fed chair who will ensure the Fed is fulfilling its mandate to safeguard our financial system and shares the administration’s view that fighting climate change is the responsibility of every policymaker. That person is not Jerome Powell.”

The senators took issue with Powell’s past remarks that climate change “is really an issue that is assigned to lots of other government agencies, not so much the Fed”, and that the Fed was not and did not “seek to be climate policymakers”.

The senators’ statement represents the latest attempt by progressives to convince the Biden administration to choose new leadership for the Fed. Fed governor Lael Brainard has emerged as Powell’s closest rival, earning acclaim for taking a more proactive stance on how the Fed should engage with climate-related issues and pushing back against efforts during Powell’s tenure to ease rules governing the largest and most important US financial institutions.

Elizabeth Warren, the progressive Democratic senator from Massachusetts, made public her opposition to Powell in September, calling him a “dangerous man” for his regulatory record.

The Biden administration said on Thursday it would make a decision before Thanksgiving. In recent weeks, the window for an announcement has slipped multiple times, suggesting a tight race between the two leading candidates.

Powell is still considered the favourite, not least for his success in helping to rescue the US economy and financial markets from the brink at the onset of the global pandemic last year, and met Biden earlier this month. On the same day, the president separately met Brainard, who has served in her role since 2014 and has twice been considered the top contender to lead the Treasury department.

While Brainard has the backing of progressive Democrats, Powell, a Republican who was tapped in 2017 for the role by Donald Trump, has significant bipartisan support and is likely to have a much more expedient confirmation process.

Whoever Biden chooses will confront the issue of soaring inflation, which has surprised both the Fed and the White House in its magnitude and persistence. The Fed has already begun scaling back its asset purchase programme with plans to wrap up the stimulus by mid-2022. Whether interest rate increases will follow soon after is a decision that the next Fed chair will need to make.