Biden sidesteps the Fed fight and disappoints progressive allies

President BidenJoe BidenRittenhouse says Biden defamed his character when he linked him to white supremacists Man charged with threatening Congress sentenced to 19 months in prison 91 House Democrats ask Senate to expand immigration protections in the U.S. bill Biden expenses PLUS dodged a battle for the Fed’s leadership by disappointing progressive allies and sticking with Jerome Powell, who Donald trumpDonald Trump Rittenhouse Says Biden Slandered His Character By Linking Him To White Supremacists Night Health Care: White House Touts Vaccination Rate For Feds Trump Backs Hogan Challenger In Maryland Governor Race MORE nominated as Fed chairman four years ago.

Senate aides predict that Powell will easily have enough votes to secure confirmation for a second term at the top of the US central bank. And they warned that Biden would have had a much tougher fight on his hands had he chosen Lael Brainard. , the only Democrat of the seven members. board and the favorite of several progressives.

“You are going to get huge votes for him. I think it’s going to be an easy road, ”said a Democratic aide to the Senate.

The aide said choosing Brainard to replace Powell would have risked an all-out battle that could have ended in defeat if the Republicans managed to convince Sens. Joe manchinJoe Manchin Progressive or moderate, Senate Democrats must advance Biden’s agenda Jeffries says ‘the integrity of our democracy’ is at stake without federal voting rights legislation The Hill’s Morning Report – Presented by ExxonMobil – The Case Arbery, Biden’s spending bill each test justice’s views MORE (DW.Va.) or Kyrsten CinemaKyrsten SinemaPoll shows that Sinema’s popularity falls further among Arizona Democrats. Progressive or moderate, Senate Democrats must advance Biden’s agenda. (D-Ariz.) To vote with them.

The president offered an olive branch to progressives by nominating Brainard to replace Richard Clarida as vice president.

“Powell is the obvious smart choice when it comes to an administration that doesn’t need an evil fight,” added the assistant. “Powell is the much easier path and Powell is a Republican who can speak to a 50-50 Senate about inflation. He’s an easier messenger for the president. “

The sitting Fed chairman secured a victory last week when Manchin, a key Senate vote, said he was “looking very favorably” on Powell after the two discussed inflation and quantitative easing, two issues Manchin identifies. as major concerns.

Senate Republicans have made rising inflation a major political issue in recent months, and some Democratic strategists see Powell as a better messenger to respond to criticism about the price hike because he is a Trump appointee.

But Powell’s election further deflates progressives. They’re already disappointed that Biden’s Build Back Better agenda has stalled in Congress and that top priorities like the Clean Electricity Performance Program, a national paid family leave program, and expanded Medicare dental and vision benefits have been eliminated or are in danger of being eliminated. .

“I think it’s a big problem,” said Jeff Hauser, executive director of the Revolving Door Project, a liberal advocacy group that reviews those appointed by the executive branch. “The chairman of the Federal Reserve is in charge of implementing [the] Dodd-Frank [Wall Street reform law] and a whole host of financial regulation laws and we don’t trust Jerome Powell on those issues at all. “

“He agreed with [Fed Board member] Randal Quarles, a Trump appointee, undermined Dodd-Frank’s implementing regulations quite significantly and broadly, and has been extremely reluctant to urge financial institutions to adequately take into account the climate crisis and later effects that we will see in terms of financial instability ”, he added.

Biden’s progressive allies, including Sen. Elizabeth warrenElizabeth Warren On the money – Biden stays loyal to Powell despite pressure Senators call for Smithsonian museums for women and Latinos to be built on the National Mall Warren to oppose Powell for new Fed term, citing ‘flaws ‘of regulation MORE (D-Mass.), Who called Powell “a dangerous man to lead the Fed,” expressed disappointment on Monday, with some of them warning that Biden might come to regret the decision.

“It is no secret that I oppose the appointment of President Jerome Powell, and I will vote against him,” Warren said in a statement Monday, warning that his nomination makes it especially important that the Senate also confirm Brainard as vice president of the Fed and appoint a strong regulator to replace Quarles as vice president of supervision.

“I will support the President’s nomination of Lael Brainard as Vice President. Powell’s failures in regulation, climate and ethics make the still-vacant position of Vice President of Oversight of utmost importance. This position must be filled by a strong regulator with a proven track record of strict and effective enforcement, and it must be done quickly, “he said.

However, Warren observed in an interview with Bloomberg TV in August that much of the central bank’s power resides with the president.

“The problem is that the chairmanship of the Federal Reserve is where power is concentrated,” he said. “It is the president who decides what policies to follow. It is the president who decides when to call a vote ”.

Progressives argue that Powell’s election undermines the Democratic Party’s long-term goal of controlling Wall Street and curbing the dangerous risk-taking that led to the 2008-09 financial crash.

They also caution that Powell’s reluctance to use the Fed to prepare the US economy for the potentially devastating impacts of climate change is shortsighted, although Powell is believed to have softened his aversion to letting the Fed’s decision-making be influenced by climatic considerations.

“President Biden’s new nomination for President Powell doubles down on Wall Street’s reckless deregulation and dangerous distraction in weather-related threats to the financial system, flouting Biden’s own government-wide approach to stopping climate threats.” said David Arkush, managing director of the Citizen Public Climate Program.

“As the 2008 financial crisis showed, the irresponsibility of financial regulators doesn’t seem terribly dangerous until the catastrophe suddenly materializes. That’s the path Powell has put us on, ”he said.

By electing Powell to serve another term as president, Biden made the safest political decision in the short term.

Stock markets rebounded and senators on both sides of the aisle issued statements indicating that Powell will slide through the upper house.

Chairman of the Senate Banking Committee Sherrod BrownSherrod Campbell Brown On the money – Biden stays with Powell despite pressure Biden renames Powell as Fed chairman, nominates Brainard as vice chairman Rubio says bank watchdog Biden chooses a ‘communist’ MORE (D-Ohio) and Sen. Pat toomeyPatrick (Pat) Joseph ToomeyBlack Women Seek To Build On Achievements In Upcoming Election Watch Live: Republican Senators Present New Infrastructure Proposal Sasse Reprimanded By Nebraska Republican Party For Impeachment Vote MORE (R-Pa.), The highest ranking member of the Banking panel, both praised the decision to rename Powell as chairman.

“President Jerome Powell has led our economy through a historic pandemic, and under his leadership and that of President Biden, unemployment has decreased and workers are seeing increased bargaining power,” Brown said in a statement.

He touted Brainard as someone who has “spent his life fighting for a stronger and fairer economy.”

Toomey said he hopes to support Powell’s confirmation, saying he “acted swiftly and took extraordinary and necessary steps to help stabilize financial markets and the economy” during the outbreak of the pandemic in 2020.

The senior Republican senator said he disagreed with Powell’s decision to continue the Fed’s emergency accommodative monetary policy long after the economy stabilized, but expressed hope that he could control inflation.

“President Powell’s recent comments give me confidence that he recognizes the risks of higher and persistent inflation and is willing to act accordingly to control it,” he said.

Desmond Lachman, principal investigator for the American Enterprise Institute, said Biden’s choice of Powell over Brainard “was a prudent choice.”

He said electing Brainard, the Fed’s only Democrat, “would send a very bad signal to the markets because what it would do is send a signal. [of] politicizing the Fed. “

Lachman, who previously served as managing director and emerging markets economic strategist at Salomon Smith Barney, said financial markets may have interpreted Brainard’s selection as a sign that the Fed would prolong the accommodative policy for political reasons, which could fuel concerns about inflation.

“You better stick with the horse you have in the race,” he said.

But Lachman said Powell is by no means a perfect candidate.

“It has let inflation get too hot. It has allowed the stock market and the housing market to overheat too much, so it has its problems, “he added.

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