In response to reports that Trump was considering firing or demoting Powell because of the level of interest rates, some Republicans rushed to his defense—a rare occurrence in the Trump era. In an interview on Bloomberg Television at the time, Republican Senator Patrick Toomey warned it would “a very, very bad idea” to try to remove Powell.
Powell’s wooing of lawmakers isn’t reserved for fellow Republicans. He has impressed progressives with his frankness in owning up to Fed mistakes that may have slowed progress on jobs growth.
Progressive Exchange
In a July 2019 exchange with New York Representative Alexandria Ocasio-Cortez during a House Financial Services Committee hearing, the then-freshman legislator asked Powell if the Fed hadn’t repeatedly botched its estimates of the level at which unemployment would begin to provoke inflation. Powell took the sting out of her line of questioning by bluntly responding: “Absolutely. I think we’ve learned that it’s substantially lower than we thought.”
Powell’s strengthened relationship with Republicans on Capitol Hill and the trust he enjoys on Wall Street have helped make it easier for him to more aggressively pursue employment gains and worry less about longer-run inflation than any Fed chair in more than 50 years.
Democrats like Senate Banking Committee Chairman Sherrod Brown, who fault him for rolling back some post-crisis banking regulations, acknowledge they like him personally, and the two have dined together. Almost all agree he’s handled monetary policy well and shepherded financial markets through a period of chaos at the outset of the Covid-19 pandemic.
Powell has met both with skeptics like Senator Elizabeth Warren as well as moderate senators of both parties in what Brown sees as an obvious attempt to keep his chairmanship. Many senior Democrats in interviews with Bloomberg News have said they would vote to confirm Powell for another term.
Republicans are also lining up to back him as the best choice they could plausibly get from the Biden administration.
That said, he still needs the endorsement of key senators on the Banking Committee tasked with confirming the next chair. Brown and Warren have both advocated for more restrictions on banks, including their stock buybacks, even as they and other Democrats have praised Powell’s monetary policies. Neither Warren nor Brown has publicly named a preferred candidate to lead the Fed.
Despite the lift that Yellen’s recommendation gives Powell, Biden has gone with the less obvious choice before. Another leading candidate is Fed Governor Lael Brainard, whom Biden considered for Treasury secretary before settling on Yellen.
The president’s need for a bipartisan political win could prompt him to pick Powell as chair and separately add more liberal nominees for other openings on the board.
Besides Powell, Biden also has the opportunity to replace the vice chair for supervision, who oversees bank regulations, a position now held by Randal Quarles, whose replacement could mollify some liberal senators; the vice chair, a post now held by Richard Clarida, and an open seat on the Fed board.
“If Powell gets another term as Fed chair, Governor Brainard is a clear favorite to be tapped for the Fed’s vice chair/supervision role,” Kevin Cummins, chief U.S. economist at NatWest Markets, wrote in a note to clients Monday.
This article was provided by Bloomberg News.