“Put directly, at this moment ... of both enormous potential and enormous uncertainty for our economy, we need stability and independence at the Federal Reserve,” Biden said, recalling Powell’s determination to stand up to Donald Trump’s meddling on interest rates. In doing so, Powell “successfully maintained the integrity and credibility of this ... institution” and won “support from across the political spectrum.”
Biden, on a bipartisanship high after the infrastructure bill passed, stressed: “I believe we need to do everything we can to take the bitter partisanship of today’s politics out of something as important as the independence and credibility of the Federal Reserve. This is vital to maintaining public trust in an independent institution like the Federal Reserve.”
Then there’s inflation, Biden’s biggest concern politically and economically. That made it far more important for Biden to choose a Fed chair with the strongest anti-inflation credentials possible and to defuse some (though certainly not all) criticism from the right.
Powell’s selection was likely cinched, ironically, when Sen. Elizabeth Warren (D-Mass.) made the outrageous claim that he is a “dangerous man” for failing to adopt financial reform she deemed necessary. It does not hurt Biden to distance himself occasionally from the left wing of his party, especially after helping to negotiate the Build Back Better package, which contains many progressive priorities. Biden’s nomination of Powell will likely lose a few votes from the left of his party, but he will gain a substantial majority in the Senate, countering the claim that he is the left’s puppet. He seems content to lose the vocal progressives’ votes so as to avoid a squeaker of a confirmation vote.
Biden did not stiff progressives entirely. He did elevate Brainard to vice chair, and he was careful to emphasize some of progressives’ favorite issues. “A top priority will be to accelerate the Fed’s effort to address and mitigate ... the risk that climate change poses to our financial system and our economy,” Biden offered. “[Powell has] also underscored the importance of the Fed taking a more proactive role in the months and years ahead in making sure that our financial regulations are staying ahead of emerging risks, be they from innovations in cryptocurrency or the practices of less regulated non-bank financial institutions.”
Powell also diplomatically gave a shout-out to progressives. After vowing to focus on inflation, Powell promised, “Other key priorities include vigilantly guarding the resilience and stability of the financial system, addressing evolving risks from climate change and cyberattacks, and facilitating the modernization of the payment system while protecting consumers.”
That was not enough to win over Warren or Sen. Sheldon Whitehouse (D-R.I.), but plenty of other strong progressives, including Rep. Pramila Jayapal (D-Wash.), Sen. Jack Reed (D-R.I.) and Sen. Sherrod Brown (D-Ohio), indicated their support for him. It also earned the administration at least a temporary bump in the stock market and widespread praise from financial experts and industry insiders.
If Biden’s goal in Powell’s selection was to reassure markets and inflation hawks while putting some daylight between him and the far left in his party, he succeeded. Now, he just needs to make sure the Fed helps snuff out inflation.