Climate hawks pressure Biden to replace Fed chair
Environmentalists are pressing President Biden to factor in the Federal Reserve’s record on climate change under Jerome Powell when he decides whether to renominate the central bank’s chairman for a second term.
After a summer of brutal heat domes, forest fires, and torrential storms capped off by Hurricane Ida, progressive lawmakers and activists are urging Biden to wage an offensive on climate change through the Fed.
“The status quo does not work. The status quo is what has led us to this moment. We have to take a different road if we want to save ourselves,” said Tracey Lewis, a policy analyst with environmental activist group 350.org, which has called for Powell’s replacement.
Unlike its counterparts in the United Kingdom and European Union, the Fed had tiptoed around the discussion of the financial risks of climate change until shortly after Biden’s election in November. The Fed has since joined the Network for Greening the Financial System, an international coalition of central banks and financial regulators focused on climate-related risks, and established two internal committees to study how climate issues intersect with the bank’s responsibilities.
Powell, however, has ruled out imposing climate-related bank stress tests similar to those in development in the U.K. and Europe. He has also refused to use the Fed’s immense power to steer funding away from fossil fuels and toward renewable energy, which many climate hawks consider essential to the fight against climate change.
“We are not climate policymakers here who can decide the way climate change will be addressed by the United States. We’re a regulatory agency that regulates a part of the economy,” Powell, a Republican, told lawmakers during a February hearing, one year out from when his term expires.
But with time now a key factor in the fight against climate change, environmental advocates are jumping into the debate over Powell’s future and insisting Biden must nominate someone willing to turn the Fed against the fossil fuel industry, instead of giving Powell another four years at the helm.
Climate activists protested the Fed’s unwillingness to go further into the battle in Jackson, Wyo., last week, where Powell was scheduled to deliver a speech at the bank’s annual policy summit before it was switched to a virtual format.
A coalition of 22 progressive and environmental groups also sent a letter to Biden this week urging him to nominate Fed officials “willing to make enemies of those who destabilize our planet.”
While those groups did not directly call for Powell’s replacement, a group of progressive Democratic lawmakers — including Rep. Alexandria Ocasio-Cortez (N.Y.) — made an explicit case to ditch the Fed chief in a Monday statement.
“We urge President Biden to re-imagine a Federal Reserve focused on eliminating climate risk and advancing racial and economic justice,” the lawmakers wrote, imploring the president to “use this opportunity to appoint a new Federal Reserve Chair.”
Sen. Sheldon Whitehouse (D-R.I.), a climate hawk and one of the 84 senators who voted to confirm Powell in 2017, called for the Fed chairman to be replaced if he doesn’t step up his efforts to fight climate change.
“If Powell still wants to find ‘middle ground’ between the warnings of science and the lies of the fossil fuel industry, he has to go,” Whitehouse tweeted.
While liberals have griped about the Fed’s rudimentary steps on climate issues for more than a year, Powell’s positions on climate change have been the recent focus of progressive debate over his nomination, with Biden expected to make a decision within weeks.
Powell’s opponents on the left have argued that renominating him would fly in the face of Biden’s “whole-of-government” approach to fighting climate change.
Biden has appointed several high-ranking economic officials who have promised to take unprecedented steps to raise awareness of climate risks and drive funding toward a sustainable future.
Treasury Secretary Janet Yellen, Powell’s predecessor at the Fed, has called climate change an existential threat to the U.S. that requires fundamental economic shifts driven by the federal government. She has also raised the prospect of tougher climate-related financial rules imposed through the Financial Stability Oversight Council, a powerful panel of regulators she chairs as Treasury secretary.
Securities and Exchange Commission Chairman Gary Gensler has also launched efforts to specify and tighten rules regarding the disclosure of climate-related risks by companies and investment funds.
Up to four seats on the seven-person Fed board, including Powell’s, will likely be open by February. Most liberal activists and progressive policymakers want Biden to nominate central bank officials more in line with Yellen and Gensler’s views on the environment.
Biden nominees “could really start to change where the Fed goes,” said Alexis Goldstein, financial policy director at the Open Markets Institute, a progressive nonprofit that has not taken a position on Powell’s reappointment.
“From a policy perspective, it’s things like looking at capital requirements, looking at risk weights, thinking about the ways that climate risk impacts financial stability,” she continued.
“We just want them to actually translate that into more than just acknowledgements. We want to translate it into policy changes.”
Progressives who want Powell replaced have coalesced around Fed Governor Lael Brainard (D), who also supports ample stimulus but with stronger financial regulations, as his ideal successor. Former Fed Governor Sarah Bloom Raskin (D) is also frequently floated as a potential vice chair of supervision, the leader of the board’s regulatory work.
While Biden has nominated several fiercely progressive economic officials, the president and White House officials have repeatedly stressed the importance of the Fed’s independence when asked about his plans for Powell’s seat.
Powell is largely aligned with Biden on keeping up support for the recovering economy despite high inflation. His work to cement that view as a pillar of the Fed’s approach has endeared Powell to many on the left and could help him secure another term amid surging COVID-19 cases.
The rampage of the delta variant has created alarming uncertainty over whether the recovery can keep pace during the new stage of the pandemic. Many of Powell’s supporters argue that removing a steady hand devoted to full employment, even for a nominee with similar views, is an unnecessary risk for Biden to take.
“Powell has the political capital on both sides of the aisle to get the new framework to the finish line,” said David Beckworth, a senior research fellow at the libertarian-leaning Mercatus Center, who has praised the Fed’s new approach.
Powell would likely survive another confirmation vote if renominated, needing only 51 votes from a Senate split evenly between Democrats and Republicans. But if Biden opts for a more progressive nominee under pressure from the left, Beckworth suggested that Republicans — who have blasted the Fed for even addressing climate change — could derail his pick.
“I really think progressives and other critics of Powell under-appreciate what this new push, this new framework really does for the very issues they’re concerned about,” he said.