Senate GOP signals they’ll help bail out Biden’s Fed chair
Republicans are signaling that they will help bail out Jerome Powell if he’s renominated to lead the Federal Reserve amid opposition and skepticism from progressives.
The burgeoning fight over who will lead the nation’s central bank comes as Powell’s four-year term runs out in February. Fed watchers anticipate President Biden could make an announcement in late October or November in order to set up an early 2022 confirmation vote for another four-year term.
Powell has strong backers, including Treasury Secretary Janet Yellen. But he’s facing a curveball in the form of a stock trading scandal that has poured fuel on calls from progressives for Biden to shake up the culture at the Federal Reserve by changing its top leadership.
GOP senators, in part driven by concern that a Powell replacement would be more liberal, are making it clear they will help put up the voters to confirm him to a second term.
“Most of the people I’ve talked to on the Republican side support his renomination. I can’t think of one person who opposes him,” said Sen. John Kennedy (R-La.).
Sen. Chuck Grassley (R-Iowa) said he would support Powell and that he thought there would be enough GOP votes to overcome any Democratic defectors.
“The reason I would support him — it isn’t because I agree with the way he’s handled the inflation issue,” Grassley said, “but the alternative would be much worse.”
Though nominations only require a simple majority to get confirmed by the Senate, Powell will need help from Republicans as there are likely to be Democratic defections in the evenly split chamber.
Powell will face at least one Democratic “no” vote in the Senate Banking Committee after Sen. Elizabeth Warren (D-Mass.), who opposed Powell’s nomination in 2018, became the first Democratic senator to come out against him.
“Renominating you is gambling the next five years of a Republican majority on the Fed board and a Republican chair who has regularly voted to deregulate Wall Street won’t drive this economy off a financial cliff again,” Warren said, referring to the 2007-08 financial crisis.
Sen. Jon Tester (D-Mont.), another Democrat on the committee, has said that he’ll support Powell, touting his ability to maintain the “independence” of the Federal Reserve. But other Democratic senators, including Banking Committee Chairman Sherrod Brown (D-Ohio), haven’t tipped their hand yet on if they will support Powell.
The Banking Committee is evenly split between Republicans and Democrats, meaning Powell will need GOP votes given Warren’s opposition and could need additional help if other Democrats on the panel come out against him.
More than half of the GOP senators on the panel have said that they would support Powell, giving him a potentially comfortable margin to work with.
“I’ve disagreed with him before … but as much as any person on God’s green earth, Jay Powell held together the world economic system after the shutdown and he had to do it with bailing wire and duct tape and spit,” said Kennedy.
Sen. Mike Rounds (R-S.D.), another member of the Banking Committee, added that he thinks Powell has “done a very good job under very trying times.”
“I would be very comfortable with him having an additional term,” Rounds said.
In addition to Kennedy and Rounds, GOP Sens. Thom Tillis (N.C.), Steve Daines (Mont.), Mike Crapo (Idaho), Jerry Moran (Kan.) and Kevin Cramer (N.D.) are each on the Banking Committee and have indicated that they would support Powell if he’s renominated.
Powell is also expected to need GOP help to get confirmed on the floor. Though Warren is the only Democratic senator, for now, that has said she will oppose Powell, he’s sparked opposition from progressives, who are urging Biden to select someone else.
Part of the headache for Powell stems from the independent actions of two presidents of Fed reserve banks and Fed Vice Chairman Richard Clarida, all of whom conducted financial trades approved by ethics officials in early 2020.
The Federal Reserve’s internal watchdog will review the financial transactions amid growing backlash over how the officials managed their portfolios amid the pandemic. The Office of Inspector General, the bank’s independent ethics investigator, will determine if the moves were in line with internal ethics rules and federal law.
Warren, who had already announced she wouldn’t support Powell, doubled down on her criticism in the wake of the news, claiming that it showed Powell had “failed as a leader.”
But while the scandal has revived questions among progressives about giving Powell another term, their concerns run deeper.
Democrats have praised Powell for boosting the Fed’s focus on maximizing employment, standing up to former President Trump’s constant attacks and leading efforts to stabilize the market throughout the pandemic.
But the party is divided over whether Powell’s employment-driven approach to monetary policy is worth the cost of future regulatory rollbacks. Brown has urged Powell to stop deregulation until Biden names his Federal Reserve picks. He’s also earned frustration from climate hawks, including Sen. Sheldon Whitehouse (D-R.I.).
Progressives are eager for Biden to put his own stamp on the Federal Reserve, including replacing Powell with someone more liberal. Up to four seats on the seven-person Fed board, including Powell’s, will likely be open by February.
They’ve rallied around Fed board member Lael Brainard as an ideal successor for Powell. She’s also been floated for the vice chair position if Biden renominates Powell to lead the Federal Reserve.
It’s not just progressives. Sen. Joe Manchin (D-W.Va.) urged Powell earlier this year to draw down economic stimulus over inflation concerns, and Sen. Bob Menendez (D-N.J.), another member of the Banking Committee, has questioned Powell about diversity at the Federal Reserve.
Powell could be at risk of losing additional Democratic votes on the Senate floor. He was confirmed as chairman in 2018 in an 84-13 vote, giving him a wide margin of approval. But nine of the 13 “no” votes were from Democrats.
Sens. Richard Blumenthal (D-Conn.), Cory Booker (D-N.J.), Dianne Feinstein (D-Calif.), Ed Markey (D-Mass.), Jeff Merkley (D-Ore.), Warren and Bernie Sanders (I- Vt.), as well as then-Sen. Kamala Harris (D-Calif.), voted against Powell in 2018.
Blumenthal has since indicated that he would support Powell if he’s nominated to a second term, but other previous Democratic “no” votes haven’t yet tipped their hand.
Powell could get confirmed to a second term despite opposition from some progressives as long as there is enough GOP support to keep him above 50 votes and Harris, now vice president, breaks a tie in his favor.
Some top Republicans are keeping their powder dry, citing concerns over inflation.
Asked if he could support Powell, Sen. John Thune (S.D.), the No. 2 Senate Republican, said he would “consider it” if Powell is renominated.
“I’m really worried about the Fed’s views on inflation particularly early on. They were really discounting it. So I’d want to think about it and maybe ask him some questions,” he said. “I know in one interaction I had with him when I asked about that they really downplayed it, and I think it’s a much more serious issue.”
Sen. Pat Toomey (Pa.), the top Republican on the Banking Committee, and Sen. Richard Shelby (Ala.), the second-ranking Republican on the panel, haven’t said if they would support Powell.
“I supported him before. … Wait and see if he’s nominated and go from there. We could do a lot worse,” Shelby said. “The inflation bothers me, and what he says about inflation bothers me.”
But Shelby added that there were some alternatives to Powell being “floated around” that would “scare a lot of people.”
Sylvan Lane contributed.