Dodd, Frank urge Biden to reappoint Powell

The architects of the Dodd-Frank Wall Street reform law on Monday urged President Biden to reappoint Federal Reserve Chairman Jerome Powell despite opposition from progressives over his support for loosening key provisions of that legislation.

In a Monday op-ed for The Hill, former Sen. Chris Dodd (D-Conn.) and Rep. Barney Frank (D-Mass.) argued that Powell’s reappointment would give Biden “strong support” to pass a multitrillion-dollar infrastructure and social services plan — what they called the “most important issue facing us today.”

“We believe the national interest will be best served by President Biden reappointing Jerome Powell to chair the Federal Reserve System,” Dodd and Frank wrote. 

Biden is expected to announce within weeks whether he will re-nominate Powell for another four-year term leading the Fed before his current stint expires in February. While Powell has broad bipartisan support, liberal lawmakers and activists are deeply divided over whether he should be reappointed.

Powell, a Republican appointed to the Fed by former President Obama and elevated to chairman by former President Trump, is largely aligned with the White House’s view on inflation and employment. Both Biden and Powell have expressed concerns about pulling back support for the recovering economy too quickly in response to rising inflation and expect most of the recent rise in price growth to reverse relatively soon.

Powell’s liberal supporters argue that his fierce support for full employment gives bipartisan credibility to Biden’s views while helping the Fed cement a transformational new approach to its mandate.

Dodd and Frank added that reappointing Powell would give Biden crucial political cover to advance his legislative economic agenda amid growing Democratic in-fighting.

“The most important issue facing us today is the enactment of President Biden’s comprehensive program responding not just to the ravages of COVID-19 but to the underlying social and economic problems that have exacerbated its effects,” the wrote. “Reappointing Mr. Powell will provide strong support for this essential step.”

Immediately, for moderate Democrats, Powell offers both a much bigger shield against conservative accusations of fiscal irresponsibility than the same actions coming from a newly appointed liberal. It also provides reassurance for those genuinely worried about rising prices,” they continued.

Biden and congressional Democrats are racing to finish off a package of up to $3.5 trillion in spending on infrastructure, health care, housing and social services while also funding the federal government and raising the debt ceiling. 

Liberals who support Powell say Biden shouldn’t squander valuable Senate floor time and political capital on replacing a well-respected official in sync with the White House on employment issues. 

Powell’s critics from the left counter that his support for relaxing rules imposed under Dodd-Frank, along with his unwillingness to push the Fed deeper into the fight against climate change, make his monetary policy views irrelevant.

But the namesake authors of the legislation disagree.

“Of course macroeconomic policy is not the only item within the Fed’s jurisdiction, and we acknowledge that Powell did implement some relaxation for the financial industry — but we do not believe this outweighs the case for reappointing him,” they wrote.

Under Powell, the Fed has streamlined bank capital requirements, overhauled a ban on certain risky investments with bank capital and loosened stress-testing requirements originally imposed under Dodd-Frank. 

“These were not major attacks on the legislation, and nothing in Powell’s performance contradicts his assertion that he supports the basic framework we put in place,” they wrote.

Dodd and Frank also argued that Biden could shift the Fed toward stronger regulations with a progressive nominee for vice chair of supervision, a spot that opens in October, and make a far bigger impact on climate change through the sweeping Democratic spending plan.

“We wish that we were in a world in which the Biden-Pelosi-Schumer team had votes to spare. But since we are not, sacrificing the strong support that the reappointment of Jerome Powell will provide for the analysis that undergirds Biden’s package for marginal gains on a left pressing issue is a luxury this country cannot afford,” they wrote.