- President Biden tapped Fed Chair Jerome Powell to serve another four-year term on November 22.
- Powell piloted the Fed as it unleashed unprecedented aid during the pandemic and supported the US recovery.
- Though Powell enjoys bipartisan support, some Democrats have opposed his nomination and pushed for a more climate-focused chair.
Federal Reserve Chair Jerome Powell's performance before and throughout the COVID crisis was enough to win President Joe Biden's backing.
The president tapped Powell to serve a second term as the central bank's leader on Monday. Should Powell be confirmed by the Senate, he will serve another four-year term as the Fed's chairman and serve on the Fed's Board of Governors. The nomination comes ahead of the February 2022 deadline for Powell's first term and is among the last major nominations for the Biden administration.
"Chair Powell has provided steady leadership during an unprecedently challenging period, including the biggest economic downturn in modern history and attacks on the independence of the Federal Reserve," the White House said in a statement.
Biden also nominated Fed Governor Lael Brainard to serve as the central bank's vice chair. The president still has three seats to fill at the Fed, including vice chair for supervision. Biden will make those nominations starting in early December, according to the White House statement.
Powell's policies helped the US through the pandemic recession
The call for Powell to serve another four years signals approval within the White House for the Fed's pandemic-era strategy. Powell piloted the central bank as it embarked on unprecedented monetary easing as the country went into lockdown in March 2020. The Fed cut interest rates to historic lows, began spending billions to support markets, and established several emergency lending programs to aid businesses, cities, and borrowers through the recession.
Together, the efforts were largely regarded as successful in bolstering the frozen economy and keeping the financial system afloat. Yet at their onset, some questioned the Fed's need to take such actions. The central bank's pandemic response — namely its creation of emergency lending facilities — went beyond its playbook for previous recessions. Its purchases of Treasurys and mortgage-backed securities have also been criticized for inflating asset values and fueling an already red-hot housing market.
Still, Powell has mostly been praised for the Fed's pandemic-era actions. Low rates encouraged borrowing at a time when economic activity halted across the country. The asset purchases quickly eased market functioning, and while its lending programs weren't fully utilized, their creation helped lower borrowing costs further for struggling businesses and governments.
The nomination also endorses the Fed's approach toward reining in its vast policy support. The Federal Open Market Committee announced earlier in November it would begin tapering its monthly asset purchases this month and continue to do so in December. The schedule suggests the Fed's asset purchases could end in mid-2022, and that rate hikes could arrive either later next year or in 2023. After months of flooding the economy with cash, the Fed is shifting its focus to normalizing its policy and fighting off inflation.
How Powell won the Fed's top job
Powell was nominated to serve as Fed chair by President Donald Trump in November 2017 after having served on the central bank's Board of Governors. A former lawyer and investment banker, Powell bucked the precedent of Fed chairs coming from backgrounds mostly focused on economics. Yet he garnered bipartisan support early on, with the Senate confirming his nomination by an 84 to 13 vote.
It took just months for the relationship between Trump and Powell to sour. The president began questioning Powell's actions in August 2018, telling CNBC he was "not thrilled" by the Fed chair's decision to raise interest rates. The former president would continue to criticize Powell's actions throughout his term. Trump would go on to call the central bank's actions under Powell "destructive" and accuse the Fed of not doing its job "properly."
Powell frequently clarified that the Fed was apolitical and separate from the White House, and that its policy choices were never swayed by Trump or lawmakers.
Support for Powell hasn't been unanimous
Though approval of Powell's job has been widespread, some have raised concerns about the central banker's record. Sen. Elizabeth Warren is among the most prominent names opposing Powell's confirmation. The Massachusetts senator said in September she wouldn't back a second term, adding Powell is a "dangerous man" who did too little to regulate big banks.
"Your record causes me grave concern: over and over you have acted to make our banking system less safe," Warren told Powell during a Senate banking hearing. Sen. Sherrod Brown has also criticized the Fed chair's record on bank regulation.
Other progressives have voiced worries around the Fed chair's approach to economic equality and climate change. House Democrats including Alexandria Ocasio-Cortez wrote to Biden in August that, although Powell has made "positive changes" at the Fed, the president should nominate a candidate with a tougher stance against big banks and a greater focus on the climate crisis.
Still, Powell was the clear favorite ahead of his nomination. He has enjoyed bipartisan support throughout his tenure, and senators in both parties backed him for a second term ahead of Biden's nomination. Powell has "a proven record and he's a good man," Sen. Jon Tester told Insider on Wednesday, adding "he needs to be confirmed."
"I would be happy with Jay Powell if the President were to renominate him," Sen. Mitt Romney told Insider.
Brainard was also in contention for the top spot and shared views more aligned with left-wing Democrats. Brainard is generally viewed as more dovish, meaning she is more inclined to leave accommodative policy in place longer. Nominating Brainard could've signaled a greater push from Biden for full employment and less focus on curbing inflation.
With Powell getting another nod for the Fed's top job, Americans can anticipate a slow reversal from the easy money seen throughout the pandemic.
Joseph Zeballos-Roig contributed to this report.