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Biden’s Fed choice: follow Trump’s path or ignore the Dem

“Brainard and Biden come from similar wings of the Democratic Party,” said Jeff Hauser, director of the progressive Revolving Door Project, which opposes Powell. “Brainard is just a better bet to naturally and independently come to a place similar to the Biden administration than Powell.”

Some progressives urge the president to choose his own person, rather than stick with the outgoing president, as Trump did in 2018 when he broke a long-standing practice by ousting then-president Janet Yellen, a Democrat, in favor of Powell.

The choice of who will lead the central bank when Powell’s term expires in February is one of the most crucial personnel decisions Biden will make in his presidency, with the Fed playing a central role in helping the economy come out of it. the pandemic as job growth weakens and supply chain disruptions threaten the recovery.

The administration did not say when a decision would come, but a White House official said it would be made “in due course”.

Powell aligned with Biden and the Democrats on the Fed’s most important and ambitious policy: keeping borrowing costs low so more Americans benefit from the recovery. “It went beyond even where someone like Janet Yellen went,” said Sarah Binder, professor of political science at George Washington University and Fed policy expert.

Brainard, a doctor of economics who served as Clinton’s White House adviser and under-secretary of the treasury to the Obama administration, was one of the few Democrats to remain in a Senate-confirmed position throughout the Trump presidency with his seat on the board of the Fed. It has the tacit support of many progressives.

She argued that the Fed should be more cautious about raising interest rates without any sign of dangerous levels of inflation – a policy formalized under Powell – before any of the other central bank policymakers. It’s something her allies point to as proof that she deserves the top post – although it has drawn criticism from some Republicans.

“People who say Powell is great really say Lael is great,” said a former Obama official with close ties to Brainard and the Progressives.

She has been a trusted advisor to Powell on monetary matters, while investors have also gotten a good feel for her thinking over the years through her public remarks.

“Markets still assume it will be Powell but could live with Lael,” said Mohamed El-Erian, president of Queens College Cambridge and chief economic adviser to financial giant Allianz.

Over the past four years, she has built her credibility with the progressive wing of the Democratic Party by opposing the decisions of those appointed by Trump more than 20 times, including the rescinding of regulations imposed on the big banks after the 2008 financial crisis.

But she’s not entirely a darling of the left, either. During her stays in the Clinton White House and the Treasury Department under Obama, she promoted some free trade policies that activists despise. This backdrop has led many of the same groups that now tacitly support her bid for the Fed’s presidency to oppose the prospect of her becoming Treasury Secretary under Biden.

Brainard also angered some people during Biden’s transition last fall when stories began appearing in national media that positioned her as a favorite for the top Treasury post. Although she was not mentioned in these stories, some on Biden’s transition felt that she and her team were orating them and did not appreciate the public campaigning for the job.

His bid for the Fed chairmanship, on the other hand, was much more subdued. Brainard told her allies that an open competition between her and Powell wouldn’t be good for the Fed and that the two worked well together, according to the former Obama official.

She declined to comment on this story through a Fed spokesperson.

Brainard could face a deadly battle in the Senate, unlike Powell, who would likely win the support of most Republicans and moderate Democrats. Some Democratic lawmakers have already spoken publicly in favor of the outgoing president.

“As our economy continues to recover from one of the greatest economic crises in our history, we need a firm hand behind the wheel – and President Powell has been just that,” said Senator Jon Tester ( D-Mont.) In a press release. . “He has served as a non-partisan manager of the economy while skillfully helping guide our economy through this crisis, and he has proven that he will not give in to political pressures on either side of the aisle.”

Republicans, in turn, are already gearing up to oppose a Brainard nomination, whether for president or one of the No.2 positions at the central bank, according to GOP advisers. While Democrats control the Senate, Republicans could drag out its confirmation, which the White House may want to avoid for fear of disrupting markets.

While Brainard easily cleared his 2014 confirmation to the Fed board with the backing of 11 GOP senators, most of those lawmakers are now gone; only the Senses remain. Susan Collins (Maine), Mike Crapo (Idaho), Lisa Murkowski (Alaska) and Rob Portman (Ohio).

Leading Republicans plan to rekindle paperwork issues Brainard had when she was appointed to the Treasury Department in 2009, such as failure to disclose overdue tax payments and errors on legal forms for her domestic workers. , according to GOP aides who say this shows she wasn’t coming up with the Senate Finance Committee.

“The paperwork for a role from over a decade ago is not going to” sink Brainard’s appointment, said Isaac Boltansky, director of policy research for Compass Point Research & Trading. “But that touches on the larger issue here, namely, does the White House really want to fight tooth and nail over the economy’s most important financial position?”

Indeed, with committees evenly divided by party, Republicans for months withheld the choice of Biden to head the Consumer Financial Protection Bureau.

But Dennis Kelleher, head of Better Markets, a group that advocates for tighter banking regulation, pointed to Republican support for Powell as a reason for skepticism about his ability to fit into the Biden administration’s agenda. .

“The point of a four-year term is that the political process and elected members of the public decide who will head the country’s most important financial and economic governing body,” he said. “I find it hard to believe that in a country of 320 million people, there isn’t a single Democrat more or better qualified for the job than Jay Powell.”

Alex Thompson contributed to this report.

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