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**JULY 28, 2021**

Kuttner on TAP

Replace Fed Chair Powell

****

Jerome Powell has resisted pressures to tighten money, on the correct
grounds that the uptick in reported inflation is the transitory result
of supply bottlenecks as the economy reopens. Powell has lately given
himself a little more wiggle room in the unlikely event that inflation
worsens.

The Fed ends a two-day policy meeting today. My sources say that any
policy shading will be mainly about starting to pull back on bond
purchases, but not on raising rates anytime soon.

As a former Wall Street guy who was appointed Fed chair by Trump, Powell
is presumably a liberal Democrat's dream-a loose-money Republican.

Powell's term as chair expires in February 2022. He'd like to keep
his job, and there is a Reappoint Powell lobby that stretches from Wall
Street to some progressives focused on cheap money, like Dean Baker.

As I wrote in a column yesterday, reappointing Powell would be a big
mistake
.
He is great on monetary policy but terrible on everything else the Fed
does, namely financial regulation and supervision, weakening Dodd-Frank,
economic concentration, and climate issues. The Democratic alternative
as chair, Fed governor Lael Brainard, is at least as good as Powell on
monetary policy and much better on everything else.

The premise of Democrats for Powell is that he gives Biden's policy of
tax, borrow, and invest "cover" with Republicans. But think harder:
Reappointing Powell provides no carryover benefit. (Query: Which
Republican will say, "Good old Joe Biden reappointed Powell. I guess
I'll vote for infrastructure after all."?)

Nor does Biden need any cover on monetary policy. Wall Street and
corporate America all want cheap money.

Another premise of the Powell bandwagon is that Powell would be easily
confirmed. But so would Lael Brainard, who was a centrist Democrat in
the Obama Treasury, and since being named to the Fed in 2014 has evolved

(like Biden) into more of a progressive.

One other clincher: If Biden reappoints Powell, a majority of Fed
governors will be Wall Street conservatives. But if Powell doesn't
stay chair, he likely quits the Fed. So does Randy Quarles, the truly
awful Fed vice chair for supervision. Two other seats are already open
or will soon be. By dumping Powell, Biden thus gets four nominees. So
the Fed goes from the current 4-to-1 pro-corporate, to 5-2 progressive.

Despite a spate of coordinated leaks that Powell's reappointment is a
done deal, it isn't.

~ ROBERT KUTTNER

Follow Robert Kuttner on Twitter

Robert Kuttner's latest book is
The Stakes: 2020 and the Survival of American Democracy
.

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