(Washington) Joe Biden could announce the name of the next president of the US central bank this week, a delicate choice because the Democrat wants to avoid another political battle in the Senate, which has the last word.
Will current Federal Reserve (Fed) Chairman Jerome Powell be back in February for a second four-year term? Or will he be replaced by Lael Brainard, the institution’s only Democratic governor?
Joe Biden “will not want to engage in a fight that he could lose,” said economist Steve Pressman in an interview with AFP.
Because the American president, who has just won a victory with the promulgation on Monday of his infrastructure investment plan, remains engaged in complicated negotiations with the Senate regarding his other plan, for social and environmental reforms.
However, once the name of the lucky winner is announced by the White House, it is this same upper house of Congress that will have to approve this choice or not.
“If Biden publishes Powell’s name today, most Republican senators will support his nomination. Powell would be easily approved in the Senate. For Brainard, it’s different, ”notes Jay Bryson, chief economist for Wells Fargo.
“Does President Biden want to take the risk of a big battle over his confirmation” when the subjects of tension are already numerous? he asks himself.
Consensual choice?
Jerome Powell and Lael Brainard were both received on November 4 by Joe Biden, according to US media.
For now, Jerome Powell “is considered the favorite,” says Jay Bryson.
The current Fed chairman enjoys comfortable support on both the left and the right. He had, moreover, been appointed governor of the Fed by Democrat Barack Obama in 2012, then promoted to president of the institution thanks to Republican Donald Trump in 2017.
Lael Brainard, approached last year to become Joe Biden’s secretary of the Treasury, however seems to have “succeeded better than expected” in his interview, according to the Wall Street Journal, citing people familiar with the matter.
But his profile is much less consensual and the Senate could refuse his appointment. A staunch defender of stricter banking regulation, she is notably supported by the left wing of the party, which wants the Fed to act more focused on climate risks and social and economic justice.
“The difficulty lies in the political aspect, not the economic one,” notes Steve Pressman.
In economic matters, “they are almost on the same wavelength,” he emphasizes, recalling that decisions are not taken by the President of the Fed alone, but by the entire Monetary Policy Committee, “It is really the vote of a group of people”.
Consolation prize
Lael Brainard is one of the monetary “doves”, in favor of low interest rates and support for the economy. Since the start of the COVID-19 crisis, Jerome Powell has also been in favor of an accommodating policy.
Mme Brainard could therefore, according to him, leave with the vice-presidency in charge of banking supervision as a consolation prize.
“What is important is that President Biden chooses someone experienced and credible,” Treasury Secretary Janet Yellen assured CBS on Sunday. “And there is a range of candidates,” she added.
So far, she has appeared to support the outgoing president, praising his “very good job as head of the Fed”, especially during the pandemic.
Janet Yellen was the first woman to head the Fed, but was not re-appointed for a second term, as tradition dictates. The disagreements were deep with Republican Donald Trump, then president, and he had removed her from the institution and replaced with Jerome Powell.
Besides Jerome Powell and Lael Brainard, four other governors are currently in office.
Joe Biden will also have to appoint three new governors at the Fed: one who will fill a vacant seat, another to replace Randal Quarles, appointed by Donald Trump and who will leave the Fed at the end of December following his resignation, and a last to replace Richard Clarida , also appointed by the former Republican president, and whose term expires at the end of January 2022.
The Democratic president thus has the opportunity to retouch the political color of the powerful Federal Reserve, but will also have to conduct tough negotiations.