Pressure Mounts on Biden Over Looming Choice of Fed Chair

U.S. President Joe Biden has until February to decide whether he wants to appoint Federal Reserve Board Chair Jerome Powell to a second term, but Democratic politicians and liberal-leaning activist groups are already pressuring the administration to pick someone more progressive to lead the nation’s central bank. 

While it may seem early for Washington power players to get wound up over the prospects of a possible replacement for Powell six months from now, the controversy speaks to the extraordinary importance of the job Powell holds. 

“The first thing to appreciate is just how powerful the role of the Federal Reserve chair is,” said David Wessel, director of the Hutchins Center on Fiscal and Monetary Policy at the Brookings Institution. “Whoever holds that job is the single most important economic policymaker in the world, which is why markets all over the globe hang on every adverb and raised eyebrow that comes from the Fed chair. So this is a big deal.” 

Most experts believe that a reappointment of Powell is the most likely outcome, but that is unlikely to stop activists’ attempts to persuade the Democratic president to move in a different direction. 

Fed structure 

The Federal Reserve Board comprises seven “governors” who are appointed by the president and serve overlapping terms of 14 years each. The president chooses the Fed’s chair, vice chair, and vice chair for supervision from among the sitting board members, appointing them to four-year terms. 

Former Democratic President Barack Obama appointed Powell, a Republican, to the board in 2012 to fill an open seat. Two years later, Obama reappointed him to a full term that will end in 2028. Former Republican President Donald Trump appointed Powell as chairman in February 2018. That term ends next February. 

Many Democrats and activist groups would like to see a Democrat replace Powell as chair. Most often mentioned as a candidate is Federal Reserve Governor Lael Brainard, a Democrat who was appointed by Obama. She previously served as the U.S. Treasury undersecretary for international affairs from 2010 to 2013. 

Accolades for monetary policy 

When people think of the Fed, most focus on its role in setting monetary policy: for example, determining interest rates and stimulating the nation’s economy. 

In his time running the Fed, Powell has received accolades from many Democrats for implementing monetary policy aimed at driving unemployment rates down as far as possible, even at the risk of increasing inflation, making him unpopular with some who advocate a more conservative approach. 

In practical terms, experts don’t believe that a Fed run by Brainard would have a monetary policy significantly different from Powell’s. 

Symbolism and substance 

In Wessel’s view, the Democrats have two points of contention in the debate over whether to replace Powell. The first, he says, is that Powell is a white male Republican.  

“It’s difficult for some Democrats to understand why the president should reappoint a white male Republican when there’s a highly qualified woman available for the job who is a Democrat,” he said. 

Second, on the more policy-oriented side, there are real differences between Brainard and Powell concerning the Fed’s role as a financial regulator. Beyond setting monetary policy, the central bank also plays an important role in the regulation of banks and financial institutions in the United States.  


Powell was generally friendly to the Trump administration’s efforts to roll back some of the regulatory burdens on banks imposed after the financial crisis of the late 2000s. Many of those rules required banks to hold more capital to protect against losses in the event of a repeat of the subprime mortgage crisis of 2007-2010 or some similar disaster. 

Brainard vocally opposed many of those Trump-era changes.  

This led to significant criticism of Powell by some of the most vocal members of the Democratic left, including Senator Elizabeth Warren of Massachusetts, who last month told Bloomberg TV, “My concern is that over and over he has weakened the regulation here. … We need someone who understands and uses the monetary policy tools and the regulatory tools to keep our economy safe. Let’s not forget what happened in 2008.”  

In the same interview, Warren praised Brainard, saying, “I read Lael Brainard’s dissents in many of the deregulatory actions the Fed has taken, and I have to say, they are strong and powerful dissents. She makes a good case for why it is the job of the Federal Reserve to be that cop on that beat and to make sure the largest financial institutions are not putting our economy at greater risk.” 

Activist groups 

On Monday, more than 20 activist groups — including Greenpeace USA, the Service Employees International Union and the Sierra Club — signed a letter drafted by the Revolving Door Project, which asked Biden to appoint a new Fed chair who would focus on a range of issues not typically associated with the central bank. 

The letter urged Biden to consider appointing Fed leaders — including the two vice chair positions — who would focus on issues such as climate change and systemic racism as well as the more typical concerns that drive the central banks. 

“We hope that these considerations factor into your decisions about the Federal Reserve during your Presidential term,” the letter said. “These will be among the most important personnel decisions you make during your presidency. We urge you to think deeply, systemically, and bravely as you weigh the path forward.” 

Signal possible in October 

The term of the Fed’s vice chair for supervision, currently Randal Quarles, will expire in October. Some observers have suggested that by placing Brainard in that role, Biden could appease Democrats who want stricter regulation of financial institutions. 

Because of the hierarchical structure of the Fed, however, the chair would effectively have the final say on any major changes to industry oversight, meaning that such a move would probably leave Biden’s left wing unsatisfied.  

Some say that it’s unlikely to happen, anyway. 

“One of the reasons that Joe Biden is president of the United States is because he himself is not a progressive, per se, despite the fact that he gets painted with that broad brushstroke,” said Mark Hamrick, senior analyst and Washington bureau chief for “I don’t think that … in his words or his actions, he has signaled that a harsher stance with respect to financial regulation is something that he’s staunchly in favor of.” 

Further, Hamrick said, it would be difficult for the Fed to function efficiently if the body’s leader and its top officer in charge of supervision weren’t on the same page. 

Return to ‘institutional norms’ 

Wessel said that one argument for reappointing Powell is that it would signal a return to consistency in the central bank’s leadership. Doing so, he said, would “restore the institutional norm that this is not a job that changes every time the White House changes.” 

A second argument, he added, is that by most accounts, Powell has done a good job on the Fed’s biggest task.  

For those who believe the most important thing that the Fed does is managing monetary policy, he said, the question is, “Why rock the boat when you got someone who the market seems to trust and who has some experience? Why make a change if you don’t have to?” 

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