President BidenJoe BidenGoldman lowers growth forecast for 2022 after Manchin says no to BBB Biden’s never-ending dilemma: Dealing with Joe Manchin The day democracy nearly died MORE claims to have appointed Jerome Powell as Federal Reserve Chairman a strong desire to defend the independence of the Fed and to gain broad bipartisan support for its choice in an era of political division. The truth is more likely than Lael Brainard, Sen’s preferred choice. Elizabeth warrenElizabeth WarrenWarren, Booker Announce Landmark COVID-19 Cases Democrats Consider Hard Tactics To Outperform Parliamentarians On Immigration Senate Ends For Year, Pushing Back Build Back Better, MORE Voting Rights (D-Mass.), The so-called “Squad” of progressive House member and possibly Biden himself, lacked a voice to be confirmed. Rather than breathe a sigh of relief that a Brainard presidency has been avoided, senators who want a Fed free to fight inflation must also deny Brainard the vice-presidency.
Biden has made it clear what he wants from the Fed: easy money and an expansion of the Fed’s mandate to include climate change, among other progressive priorities. He left little to the imagination in announcing Powell’s re-appointment. After neglecting the Fed’s mandate for price stability, he proclaimed Powell a full-time man ready to use the power of the Fed to deal with the financial and economic risks associated with climate change. Biden then added insult to injury by giving Brainard equal billing and making fun of his credentials.
Brainard, for his part, has proven to be an enthusiastic ally in the Biden administration’s efforts to reuse the Fed. A longtime Fed insider and persistent aspirant to a higher position, she has taken clear stances in favor of easy money and explicit Federal Reserve involvement in climate change policy. Brainard led the charge to raise the Fed’s inflation target from its previous 2% cap to a more flexible 2% average inflation target over time, a revision that has proven essential to l passive approach of the Fed to rising inflation this year. She has also taken the lead in calling on the Fed to join the fight against climate change, giving three official speeches on the subject since Biden was elected president.
The campaign for a Brainard presidency has almost succeeded. A timely escape from a obscure business disclosure her form at the Fed gave her candidacy much needed momentum and brought her within a hair’s breadth of nomination. This leak, which led to the resignations of Fed chairmen Eric Rosengren and Robert Kaplan and nearly cost Powell the presidency, should serve as a wake-up call to anyone still naive enough to believe the Fed is immune from serious political machinations.
While Powell barely survives a ruthless campaign to topple him, the fight for control of the Fed only escalates. Powell will stay, but his allies withdraw and leave the ship. Richard Clarida’s tenure as Fed vice-president ends in january and Randal Quarles has resigned shortly after the end of his term as vice-chairman of oversight, although his 14-year term on the board of directors does not expire until 2032. With the pre-existing vacancy on the board of directors, this leaves to Biden three vacant seats on the seven-member Fed Board of Governors.
Biden’s first news Fed candidate, Richard Cordray, seems to debunk the idea that Biden wants to keep the Fed above the political fray. Cordray is not only a progressive technocrat, he is a progressive politician who has stood for election several times, as a member of Congress, attorney general and attorney general before an unsuccessful attempt to become governor of the Ohio. He was also Warren’s choice to be the first chief of the Consumer Financial Protection Bureau, a post for which he was confirmed after controversial hearings and despite almost united Republican opposition.
Vigorous opposition to Cordray’s appointment to the Fed is inevitable. His appointment seems almost calculated to provide a circus at the Willow Omorova so Brainard’s more serious confirmation hearing as vice president attracts less attention. The strategy of naming the unconfirmable radicals to pave the way for less flamboyant but equally radical candidates has worked for the Biden administration. Candidates like Omorova will fail, but opposing them makes Republicans feel like they’re doing something, while the Biden administration is successful in upholding candidates who get less attention.
Rather than fight Cordray and give Brainard a pass, senators who would not support her for the presidency should also oppose her elevation to vice president. Brainard isn’t just another governor on the board. She is one of the most talented economic decision-makers of her generation in the eyes of the progressive movement. She is not ready for another position on the board of the Fed. She was appointed to join President Powell and New York Fed Governor Williams as the third member of the Fed’s troika made up of key decision makers. Senators who want an independent Fed free from the influence of Warren and the Squad should vote against it.
Keeping Brainard out of the Fed’s inner circle should end the progressive campaign for Fed control and help Powell mobilize voices to raise rates and contain inflation. With inflation close to 7% and the fed funds rate still stuck at zero, Powell will need all the independence of the Fed to be successful.
Sean Fieler is chairman of the American Principles Project advocacy group and chairman of Equinox Partners, a Connecticut-based hedge fund.