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**AUGUST 25, 2021**

Kuttner on TAP

Biden Should Retire Fed Chair Jay Powell

****

The battle comes to a head this week, with Biden's decision expected
around Labor Day. The pro-Powell case boils down to three contentions.
He's been good on monetary easing. As a conservative Republican, he
helps protect Biden from the charge of being soft on inflation. And
he'd be confirmed overwhelmingly.

But the case against Powell is stronger. The Fed also does financial
regulation. Here, Powell has been terrible-just what you'd expect of
a conservative Republican who used to be a partner with the private
equity Carlyle Group.

As Fed chair, Powell has increased the concentration of the financial
industry, and has worked to weaken the none-too-strong protections of
the Dodd-Frank Act.

The alternative is Fed governor Lael Brainard, the lone Democrat on the
Fed. When Brainard was being touted for Treasury secretary, I was
lukewarm about her
.
But she has become a regulatory titan and would be light-years better

than Powell.

As Dennis Kelleher of Better Markets points out
,
there is a connection between monetary policy and regulatory policy.
Powell's version of a loose monetary policy was simply to throw cheap
money at financial markets. In the absence of stronger regulatory
strictures, zero-interest-rate money increased speculative-bubble
activity on Wall Street.

A Powell reappointment would be out of sync with all of Biden's
excellent regulatory appointments

to date. Personnel is policy.

But the clincher for naming Brainard over Powell is the domino effect.
Right now, the Fed's board of governors has four conservative
Republicans, one pro-regulation Democrat in Brainard, and two vacancies.

If Biden reappoints Powell, the Fed keeps its working majority of four
regulatory conservatives close to Wall Street. But if Biden replaces
Powell as chair, then the majority flips to at least 4-3 in favor of
much tougher financial regulation, since Powell would almost surely
leave the Fed entirely. Likewise the ultraconservative Randy Quarles,
whose term as vice chair for supervision expires in October.

The Powell camp has been pitching the idea, as a sop to liberals, of
naming Brainard as Fed vice chair for supervision. But the Fed chair
sets the agenda and runs the place. A vice chair for supervision at odds
with the chair would have no power.

If Brainard replaced Powell, two candidates for other Fed seats are
former Fed governor Sarah Bloom Raskin and Lisa Cook, an eminent African
American economist at Michigan State who worked in the Biden transition.

This would give the Fed three strong, progressive women, and perhaps
more. The contention that Powell would be confirmed by nearly all Senate
Republicans is a good argument for

**not** reappointing him. Republicans love Powell because he is such a
force for deregulation.

Biden has the chance to appoint the most progressive and diverse Fed
ever. He shouldn't blow it.

~ 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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