Jerome Powell

Progressive Democrats Push to Oust FED Chairman Jerome Powell

Powell has received the approval of members of both parties for the monetary policy implemented to counteract the effects of the crisis and to focus the Central Bank’s efforts to reduce unemployment

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Jerome Powell’s future as chairman of the Federal Reserve (Fed) is being called into question by the progressive wing of the Democratic Party. Although President Joe Biden’s team of economic advisors appears to favor Powell, members of his party such as Senator Elizabeth Warren (D-MA) are pushing for him to be replaced by another candidate more akin to Democratic political pretensions.

Powell, who was appointed Fed Chairman during Donald Trump’s administration, has received the approval of members of both parties for the monetary policy implemented to counteract the effects of the crisis and to focus the Central Bank’s efforts to reduce unemployment.

Jerome Powell - Elizabeth Warren - El American
Democratic Senator Elizabeth Warren has criticized the soft position of Jerome Powell against commercial banks. (EFE)

Despite praise from some Democratic members, Warren came out in July to criticize Powell’s lax implementation of anti-bank regulations, a criticism echoed by Sen. Sherrod Brown (D-Ohio), chairman of the Senate Banking Committee.

Powell’s political affiliation does not play in his favor either, as the Fed chairman is a Republican. Although it has been seven months since Biden has been at the helm of the U.S., it is not certain that the president wants to continue to have at the head of the Fed a person appointed by his predecessor, and not a person appointed by himself and more akin to his political leanings.

LaLael Brainard, the progressives’ candidate to replace Jerome Powell as Fed Chairman

According to The Wall Street Journal, the most likely candidate to replace Powell is Lael Brainard, who is a member of the Fed’s Board of Governors, a former Treasury undersecretary for international affairs, and a member of the Democratic Party.

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Brainard appears to have the support of Elizabeth Warren, who spoke favorably of her in a Bloomberg interview, and even of the Senate Banking Committee itself, which is seeking to have the Fed chaired by a person with a tougher stance on U.S. banking regulation.

Aside from favoring tougher regulation of the banking sector, Brainard also advocates for financial and banking institutions to take a more active role in mitigating the economic effects of climate change, which would make her even more attractive for the position in the eyes of the progressive wing of the Democratic Party.

Jerome Powell still has allies in the Senate and the Administration

Still, there are those who question the wisdom of removing Jerome Powell from office, as the U.S. is in the midst of a Covid-19 health crisis, the economic recovery has caused inflation to exceed normal levels, public and private debt is at record highs, and the government is about to embark on two mega public spending plans that together will cost more than $4.5 trillion.

The Fed is also at a point where it will have to decide whether to continue with debt purchases or to stop policy in order to contain the effects of inflation somewhat. Several commentators, including economics professor and investor Nouriel Roubini, have commented that inflation may not be transitory, so new price hikes could be coming soon.

Estados Unidos experimenta una inflación inusualmente alta, producto de la recuperación económica y la política monetaria de la FED. (EFE)
The United States is experiencing unusually high inflation, a product of the economic recovery and the Fed’s monetary policy. (EFE)

For her part, Treasury Secretary Janet Yellen has on other occasions praised Powell’s work as Fed Chair, and has seconded the monetary policy decisions made by the central bank.

Powell is not without allies in the Senate either. The current Fed chair maintains relationships with most lawmakers from both parties, and 68 of the 84 senators who supported him during his 2018 confirmation are still in office. Having the support of the Republican Party, as well as a good portion of Democratic lawmakers it is possible that Jerome Powell will be reconfirmed as Fed Chairman.

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