Moderate Democrats support reappointment of Fed chairman appointed by Trump Powell



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Some Senate Democrats are urging President Biden to re-elect Federal Reserve Chairman Jerome Powell for a second term, suggesting his replacement could erode the institution’s independence.

Why is this important: Public support from centrist Democrats has the potential to land the reappointment of a figure credited with helping the country weather the massive economic blow from the coronavirus pandemic. Powell has just completed what some are calling a summer audition.

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  • “I love Powell; I think he’s a good guy. I think he deserves another term, ”Senator Jon Tester (D-Mont.), A member of the Senate Banking Committee, told Axios.

  • “Trump tried to politicize him and [Powell] pushed back, “Tester said of the former president.” You don’t want to politicize the Fed. This is the wrong direction to take.

  • “The current president has earned our trust and respect,” said Sen. Ben Cardin (D-Md.) “If he’s appointed, I will definitely support him. I’m not looking for a change.

Driving the news: As the Fed chairman’s term expires in early 2022, the president is expected to make a decision this fall – in part to give financial markets enough time to digest his choice.

  • Powell is also popular with Republicans, who would rather keep the current president than allow Democrats to replace him with someone more liberal.

  • “He had a steady hand,” said Sen. Thom Tillis (RN.C.). “And in these uncertain times, I think that would be a wise appointment.”

  • “If President Powell were proposed, he would have a strong vote on the Republican side,” said Tillis, also a member of the banking committee.

The big picture: Biden’s decision on Powell will play out against a difficult political and economic environment, with COVID-19 still raging and supply chain disruptions resulting in higher prices.

  • Congress is also due to fund the government by October 1 and raise the debt ceiling later in the month.

  • Meanwhile, some Democratic economists are suggesting inflation may not be as temporary as the White House claims.

  • “On the net, the Delta variant is likely to be inflationary,” former Treasury Secretary Larry Summers told Axios. “It appears that the economy faces a substantial set of risks for a longer period.”

Go back: In his first year in office, Trump dumped then Fed President Janet Yellen in favor of Powell.

  • The former president then pressured Powell to lower interest rates to support the economy, saying he had the power to fire him if he didn’t.

  • Powell protected the independence of the Fed and worked closely with Congress to provide extraordinary support to the economy at the start of the pandemic, winning goodwill on both sides.

But, but, but: Not all Democrats are on board.

  • Senator Sherrod Brown (D-Ohio), chairman of the Senate Banking Committee, told Axios he was not “totally in favor” of Powell but had not made a decision on his replacement.

  • “I very publicly agree with Powell on a number of things, and disagree on others, in terms of stronger positions on climate and regulation,” Brown said.

  • “I have spoken before about my concerns about its approach to regulation,” Senator Elizabeth Warren (D-Mass.) Told Axios. “It is important that the chairman of the Federal Reserve be a prudent regulator of the largest financial institutions in this country.”

Some Republican Senators also blames Powell, in part, for the price hike.

  • “Inflation is a cruel tax that affects everyone,” Sen Ted. Cruz (R-Texas) told Axios. “And for some reason, President Powell has been reluctant to acknowledge or outright address the growing threat of inflation.”

  • “On the other hand, if Biden replaced Jay with a leftist Democrat who argued for billions and new taxes and billions in deficit spending, it would be an even worse outcome.”

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