President Joe Biden settled months of speculation on Monday with a pick to lead the Federal Reserve that left-wing groups said would open the White House to Republican criticism.
Americans for Financial Reform, a group advocating for stricter regulation of Wall Street, among other financial sector reforms, called Biden’s choice of incumbent Chairman Jerome Powell, a Republican who was selected for the Fed’s Board of Governors by former President Barack Obama and elevated to chairman by former President Donald Trump, “a major disappointment.”
“Republicans are not going to give Biden any points for retaining Powell. And, if anything, they’ve lost the ability to scapegoat Powell for an economy that the American people are unhappy with,” said Jeff Hauser, director of the left-leaning Revolving Door Project and a frequent thorn in the White House’s side.
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Calling the move short-sighted and “bizarrely naive,” Hauser said the Biden White House had misjudged the draw of Republican support for Powell’s prospects heading into an election cycle amid record-high inflation.
“The Biden team is underestimating two forces. First, Republicans will use the Powell confirmation process as an opportunity to attack the Biden administration on inflation,” Hauser said. “The second thing that I’m pretty confident the Biden team is underestimating is the ongoing fallout from the Fed ethics scandal.”
Inflation reached a 30-year high in October, increasing 6.2% over the last year. Hauser said he does not blame Powell for inflation and disagrees with the critique that eyes massive government spending as the culprit. National Republican Senatorial Committee Chairman Rick Scott, Florida’s junior senator, has raised such criticism already.
“I suspect you’re going to see Jerome Powell’s record used against Joe Biden pretty quickly,” Hauser said. “Everyone’s focused on [Pennsylvania Republican Sen.] Pat Toomey, who’s retiring, and his support for Powell. But I think it’s much more indicative of the politics of the Fed that Rick Scott has been extremely critical.”
Powell’s oversight of the Fed during trading scandals involving two regional bank presidents could prove additionally problematic, Hauser said. Powell has been accused of his own “trading scandal,” including by the Revolving Door Project, following a report that he sold between $1 million and $5 million worth of stock from a personal account in October 2020 shortly before the market fell.
While Powell has garnered broad bipartisan support and was last confirmed in an 84-13 vote, liberals in the Democratic Party have campaigned for Biden to pick someone else.
“President Biden must appoint a Fed chair who … shares the administration’s view that fighting climate change is the responsibility of every policymaker,” Rhode Island Sen. Sheldon Whitehouse and Oregan Sen. Jeff Merkley, both Democrats, said in a Friday statement. “That person is not Jerome Powell.”
The former private equity executive is opposed by a third Democrat, Massachusetts Sen. Elizabeth Warren, who called Powell “a dangerous man” for his support in loosening some bank regulations.
Biden moved to reject some of the charges himself on Monday.
“Why am I not picking fresh blood?” Biden asked in remarks at the White House on Monday. He answered his rhetorical prompt asserting, “We need stability.”
Biden argued that Powell was aligned with his administration’s economic vision, including low interest rates and a push toward maximum employment.
He also garnered support from several key votes, including Ohio Sen. Rob Portman, a Republican, and Montana Sen. Jon Tester, an important Democratic vote on the evenly split Senate Banking Committee.
Hauser suggested that left-leaning Democrats had held their fire but that the hearings could expose Powell to new criticism. Breaking with liberal senators, House Progressive Caucus Chairwoman Pramila Jayapal backed Powell in a statement on Monday and said she hoped Powell would be confirmed quickly.
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Biden’s spending plan had helped protect Biden’s pick from liberal scrutiny, Hauser argued. “The existence of Build Back Better has served to run interference for Jerome Powell.”
He said that Democrats, “instead of using their political chips on the Fed fight, are placing them on priorities within the Build Back Better bill,” legislation Jayapal was active in shaping. The nearly $2 trillion bill passed the House last week and now heads to the Senate.
