The Washington Post
Keep Mr. Powell at the Fed
Mr. Biden should rise above the dangerous campaign against the chair.
PRESIDENT BIDEN must decide soon whether to renominate Federal Reserve Chair Jerome H. Powell to a second four-year term, over the heightening opposition of some progressive Democrats and activists.
Mr. Biden should ignore the opponents. Failing to renominate Mr. Powell would repeat one of the mistakes President Donald Trump committed when, in 2018, he refused to tap the Barack Obama-appointed Janet L. Yellen to a second term. Though he installed Mr. Powell, who has done an excellent job, Mr. Trump — who viewed the Fed as a partisan plaything — broke the stability and continuity of Fed leadership across presidential administrations, an important norm.
Mr. Biden should instead emulate Mr. Obama, who in 2009 renominated George W. Bush-appointed Ben Bernanke for his second term atop the Fed. Only after Mr. Bernanke stepped aside did Mr. Obama tap Ms. Yellen. As other presidents before him, Mr. Obama sent the message that the central bank should remain insulated from politics and that competence in advancing the Fed’s core missions would be the primary qualification to lead the institution.
Doing so again should not be a hard call. Just as Mr. Bernanke oversaw the Fed’s extraordinary campaign to rescue the nation from the 2008-2009 financial crisis, Mr. Powell has deployed similar measures to prop up the economy during the coronavirus pandemic. But more than Mr. Bernanke, Mr. Powell has stressed the importance of pursuing full employment, the half of the Fed’s dual mandate that some critics have complained the central bank neglected previously. Mr. Powell’s latest move, signaling a cautious “taper” of the Fed’s $120 billion monthly bond-buying program as the banking sector and the broader economy emerges from the covid crisis, came with assurances the central bank would continue to keep interest rates low to promote hiring and growth. After decades in which the Fed focused on restraining inflation, many progressives have welcomed the change in emphasis Mr. Powell has overseen. Meanwhile, he maintains support among key Republicans.
Some on the left complain that Mr. Powell has not used the Fed’s regulatory powers as aggressively as they would like, particularly on climate change. They argue that the central bank should incorporate climate considerations into the stress testing they apply to banks and make lending to fossil fuel companies more difficult. They favor replacing Mr. Powell with someone more likely to agree with them.
This would be bad for the Fed and bad for the climate. As the Atlantic’s Robinson Meyer argues, fighting climate change would be much easier in a growing economy in which people feel as though the energy transition is not coming at the cost of their jobs. It will also require potentially vast amounts of government spending, which Mr. Powell’s interestrate policies would help enable. The best thing the Fed can do to help the planet is focus on its actual job: create the conditions for national economic prosperity so Congress has the fiscal and political capacity to enact policies that tackle major issues such as global warming.
Sen. Jon Tester (D-mont.), who sits on the Senate Banking Committee, stood up last Wednesday to the shortsighted calls for Mr. Powell’s ouster. The Fed “should not be involved in the political footballs thrown around on Capitol Hill,” he said. “That’s the reason I want Jerome Powell. He’s proven he can maintain the independence of the Fed.” Can Mr. Biden?