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Why Biden chose Powell – POLITICO

There was also no overwhelming case to fire Powell, although the frightening spike in inflation offered a potential way out. Democrats arguing for change wanted someone tougher on banking regulation, the environment, and economic inequality, but there is little distance between Powell and Brainard on monetary policy, a president’s primary focus. from the Fed.

Perhaps the main reason for all: the path to confirm Biden’s other finalist, Brainard, a stalwart Democrat, seemed thorny at best in the face of potentially strong opposition from the GOP and even some apprehension from moderate Democrats in the Senate, that favor Powell.

In the end, Biden did what many of those close to him expected: it took him longer than expected to arrive at a reasonable, moderate decision that thrilled few people but carried limited risk.

“The president made a strong statement about the importance of continuity and not injecting extra uncertainty when there is already a lot of it,” said Jason Furman, professor at Harvard and former senior economic adviser to the president. Barack Obama, who has close ties to the Biden White House. “He believes in institutions and likes the idea that there is at least one corner in Washington that isn’t incredibly politicized.”

In announcing his decision on Monday afternoon, flanked by Powell and Brainard, whom Biden picked as Powell’s No.2, the president praised the current president for his work during the pandemic.

“We have made tremendous progress in this country. First and foremost, our economy creates jobs, lots of jobs, ”Biden said. He called the progress “a testament” to the Fed’s performance.

Still, he added warnings about inflation and, revealingly, noted that Powell had promised to make climate change a priority for the central bank, one of the main criticisms some progressives had leveled at the operator. historical.

The president also spoke of the need for continuity and stability at the Fed at a very sensitive economic time. Powell acknowledged that rising prices for gasoline, housing and many other items are taking a “toll” on families.

That toll – including a 6.2% price hike in October alone – is one of the biggest risks for Democrats midway through and in the 2024 presidential election. And at least some top Democrats Close to the White House had hoped Biden would have moved on to the Fed, blaming Powell for inflation and installing a chair more pro-Democrats like Brainard. This view is shared by some on Wall Street.

“I think it’s a major political mistake to rename Powell,” said Wall Street analyst Richard Bernstein of Richard Bernstein Advisors. “Now Biden owns the inflation.”

The argument that Biden could have made Powell the scapegoat over inflation did not win in part because most White House members believe the president will be criticized by Republicans for more prizes. high no matter who runs the central bank, and Brainard’s policies would have been, if anything, more accommodating on interest rates.

Progressives were divided over the nomination, with some campaigning to try to convince Biden to dump Powell.

“It is infuriating that Biden is renaming Powell, a man who does not share Biden’s view on issues ranging from financial regulation and the climate crisis to financial sector consolidation and cryptocurrency,” Jeffrey Hauser said. , executive director of the Revolving Door Project. “Biden’s apparent hope that Powell’s reappointment will earn him bipartisan economic praise,” he said, “is as naive as believing that a bipartisan vote on infrastructure would bolster his poll numbers.”

Others, like Rep. Pramila Jayapal (D-Wash.), Who chairs the Congressional Progressive Caucus, praised the Fed chairman. “Mr. Powell has demonstrated an unprecedented commitment to full employment during his first full term as Fed chairman,” she said in a statement.

By choosing Powell, the White House will avoid yet another battle with Congress and instead can focus on the remainder of Biden’s nearly $ 2 trillion social spending plan, which administration officials say will energize the left, boost productivity and reduce inflation. Biden was unwilling to spend political capital to try to get Brainard confirmed for the presidency.

And on key monetary policy issues, Powell and Brainard are little different. They both favor keeping rates low to stimulate hiring and economic activity even if inflation continues to accelerate for a few months as the economy tries to emerge from the Covid-19 pandemic. All of Brainard’s dissenting votes against Powell at the Fed have been on banking regulation.

Republicans, meanwhile, plan to hammer the president and his party on high prices no matter what.

“The Fed has an emergency policy long after the emergency is over, and that’s its biggest problem,” said Larry Kudlow, director of the National Economic Council under Trump and now host of Fox Business. “We are moving from pandemic inflation to monetary policy inflation and I think the Fed is way behind schedule. They risk 1970s-style inflation and the need for multiple rate hikes next year. “

A senior White House official attributed the long delay in the Fed’s decision to competing issues. “We did a lot of things. Lots of priorities, ”said the official, who declined to be identified by name because he was not authorized to speak officially.

The official added that in the end, Powell’s performance in the job simply warrants another tenure in Biden’s view.

“We have come through this historic crisis without a financial crisis and with the Federal Reserve playing its role in helping the economy get on the road to full employment as quickly as possible,” the official said.

Victoria Guida contributed to this story.

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