In appointing Jerome Powell yesterday to a second term as Federal Reserve Chairman, President Biden has chosen the conventional route – and in the process has left many climate activists and advocates disappointed.
But observers said it was in itself remarkable that the weather played a role in the debate over who should run one of the most powerful financial institutions in the United States. And they urged Biden to fill other open Federal Reserve positions with climate-focused economists.
“Powell’s failures in regulation, climate and ethics make the still vacant post of vice president of oversight of critical importance,” Senator Elizabeth Warren (D-Mass.) Said in a statement. . “This position needs to be filled by a strong regulator with a proven track record of strict and effective enforcement – and it needs to be done quickly.”
Biden’s decision to ask Powell to return as president represents, in a sense, a return to tradition. It revives a long-standing practice – abandoned by the Trump administration – in which presidents retain their predecessor’s Fed chairmen to ensure policy continuity and central bank independence.
But it also flies in the face of what progressives and climate hawks have been saying for months: that Biden should ditch Powell – who is often described as a laggard on climate issues – and elevate Fed Governor Lael. Brainard, who has a doctorate in economics and is an outspoken supporter of climate risk mitigation (Climate wire, December 21, 2020).
Instead, Biden said he would call on Brainard to be the next Fed vice chairman, Powell’s second in command. Biden said the leadership of the two candidates during the COVID-19 pandemic – when the country was “hemorrhaging jobs” and financial markets panicking – contributed to his decision.
“I have said before that we cannot just go back to where we were before the pandemic, we need to better rebuild our economy, and I have no doubts that President Powell and Dr Brainard are focused on keeping inflation at. low prices, stable prices, and full employment will make our economy stronger than ever, âBiden said in a statement.
Biden also noted that climate change was a factor in his choice. The recognition marks a significant shift for the United States, where previous administrations and regulators, including Powell, have been criticized by activists for acting too slowly to address climate vulnerabilities in the financial sector.
At a White House press event yesterday afternoon, Biden said Brainard and Powell share his belief that global warming deserves urgent action. Biden added that Powell in particular has made it clear that he will prioritize accelerating the Fed’s climate work.
âExtreme weather conditions have cost our economy over $ 600 billion over the past 10 years. We need to make sure our financial system can withstand climate change and is ready to switch to clean energy, âBiden said. âThe Fed must be a leader among central banks around the world to deal with climate-related financial risks. ”
Path to confirmation
Powell is expected to garner enough support from the Senate to win the job again. In 2018, after former President Trump broke tradition and appointed Powell to replace Fed Chairman Janet Yellen, Powell was confirmed by a large majority: 84-13.
While progressives such as Warren and Sens. Sheldon Whitehouse (DR.I.) and Jeff Merkley (D-Ore.) Have said they will oppose Powell’s nomination, with scores of lawmakers on both sides of the aisle signaling they will back him.
Among them: Sens. Sherrod Brown (D-Ohio) and Patrick Toomey (R-Pa.), Chairman and Senior Member of the Senate Committee on Banking, Housing and Urban Affairs.
Despite disagreement on a myriad of issues – including whether it is appropriate for the Fed to focus on climate risk – the duo in separate statements hailed Powell’s efforts to stabilize the economy amid the pandemic of coronavirus.
“Fed Chairman Powell has led our economy through a historic pandemic, and under his leadership and that of President Biden, unemployment has gone down and workers are seeing their bargaining power increase,” Brown said in a statement.
Toomey, for his part, said that while he disagreed with some of Powell’s decisions, he was confident the Fed chief recognized the risks of high inflation and would work to l ‘to prevent.
Other committee members, including Senators Bill Hagerty (R-Tenn.), Kevin Cramer (RN.D), Mark Warner (D-Va.) And Tina Smith (D-Minn.), Also indicated in comments statements or posts on Twitter that they would support Powell’s confirmation.
While Hagerty and some other lawmakers have not weighed in on how they would vote for Brainard, Toomey and Cramer both said they were concerned about his track record at the Fed and the regulatory measures it might support. But the two stopped before saying how they would vote.
When former President Obama first appointed Brainard to the Fed’s board in 2014, she was confirmed 61-31. Brown has signaled that he will support her for the job, as will Smith and Warner.
Leadership seats remaining
Warren, for his part, said the same. But she was also among those who noted that there were three vacancies at the Fed that Biden must fill – and that his decision to keep Powell in first place renders one of those seats empty, the vice chairman of supervision, even more crucial.
Created in the aftermath of the 2007-08 financial crisis, Congress created the role of ensuring the Fed more closely monitors emerging risks to financial stability. This includes the responsibility of overseeing the biggest banks on Wall Street.
But the post has been empty since mid-October, when the tenure of former vice president of oversight Randal Quarles ended.
Critics say the Fed under Powell and Quarles did the opposite of limiting risky behavior by the big banks – including watering down the Dodd-Frank Act’s rules on Wall Street reform and consumer protection that were aimed at to protect financial companies and the system as a whole from shocks.
As such, they say it’s critical that Biden pick someone who would reverse the script.
It “is essential that President Biden appoint additional members of the board, including the vice president of oversight, who will act to address climate-related threats to our economy,” said Ben Cushing, who leads the Sierra Club financial campaign.
Groups such as the Sierra Club, Public Citizen and 350.org have called Powell’s re-appointment a major disappointment on the grounds that he has been slow to recognize climate change as a systemic threat to US financial stability. They also took issue with Powell’s position that it is not up to the central bank to tackle climate change itself.
But lawyers have highlighted two positive sides.
First: the promotion of Brainard, a sign that more aggressive efforts around climate risks could be imminent. And second, that Biden still has a chance to call in a manager who is keenly attuned to the threats that the world’s biggest banks – which have also been seen as the biggest fossil fuel financiers – pose to the world. ‘Mondial economy.
Top of environmentalists’ wishlists: Sarah Bloom Raskin – an Obama-era Fed governor and Treasury Department official – and Lisa Cook, who was a senior economist on the Council of Economic Advisers during the Obama administration , among other leading roles.
Both are members of the Regenerative Crisis Response Committee, a group of academics and former government officials who have come together to inform the efforts of policymakers to address climate-related financial perils (Climate wire, May 21).
“All eyes are now on climate champions Sarah Bloom Raskin and Lisa Cook to fill the remaining leadership positions,” Justin Guay, who heads the Sunrise Project’s global climate strategy, tweeted yesterday. “They would fundamentally change the Fed’s stance on the climate in a powerful way.”
Biden said yesterday he would announce his choices for the other positions in early December.