On November 22, local time, US President Biden nominated Powell for a second term as Chairman of the Federal Reserve. Infographic. Photo/ICphoto
On the morning of November 22, local time, US President Biden announced the nomination for the next Fed chairman, and the current chairman Jerome Powell was nominated for re-election. This means that the Powell 2.0 era is about to begin.
"The stability and independence of the Fed is needed"
The Federal Reserve is actually a uniquely American central banking system, established in late 1913 and known for its independence and stability relative to the federal government and partisan politics. Until 2017, successive Fed chairmen were re-elected for at least one term.
But this record was broken in 2017 by the maverick Trump: he was dissatisfied with the persistence of then Fed Chairman Yellen in insisting on the interest rate hike cycle, breaking the convention to let Yellen, who only served one term, "give way" to Powell, who was elected to the Fed Board of Governors despite being a political enemy, but coincided with himself on the issue of "injecting liquidity".
However, this new version of the "BoLe and Maxima Story" was soon full of fragments: after taking office, Powell insisted on "orderly water injection" according to the rhythm determined by the Federal Reserve, rather than being willing to bow to the "flooding" of the impatient president, and the angry and corrupt Trump soon opened fire on the media and online social platforms, naming and scolding "stupid Fed and Powell".
To this day, he often calls Powell "the worst appointment in my four-year tenure." But the vast majority of the public does not think so, and even believes that Powell's management of the Federal Reserve has allowed the US economy to barely stabilize under the impact of successive storms.
Speaking of Powell, he took a classic North American political and business elite's "revolving door" path: a legal professional, first as a lawyer, then in finance, and in 1992 became the deputy minister in charge of domestic finance in the George W. Bush administration's Treasury Department. In 2012, he was nominated by Obama to join the Federal Reserve Board, and in 2017, he was nominated by Trump to succeed Yellen, and was officially inaugurated on February 5 of the following year.
Announcing his nomination for Powell's re-election, Biden said the U.S. "needs the stability and independence of the Fed," and he spoke of the Fed's positive role in stabilizing markets and supporting the economy during the pandemic, saying "this is a testament to the Fed" and attributing it to Powell's "steady and decisive leadership."
Why is the U.S. media surprised?
After Trump broke the practice of "the Fed chairman for at least one consecutive term", before the nomination was announced, the suspense of "who is the next Fed chairman" has been hotly debated for several months, and the first popular candidate is not Powell, but Brainard, who is also nominated as vice chairman of the Fed and currently a fed governor. Therefore, as soon as the candidate was selected, many American media generally used the term "unexpected" to describe it.
The reason for this speculation is that Biden has repeatedly accommodated the so-called "progressive" opinions in the Democratic Party represented by Warren, who has repeatedly questioned the fed under Powell's unwillingness to "strengthen supervision" and complained that it continues to insist on maintaining extremely low interest rates, resulting in a perennially low inflation rate in the United States.
One of the reasons why the "progressives" attacked Powell, and many observers believed that Powell would most likely not be re-elected, was that "if he is not of my race, his heart will be different": Powell is a hardcore Republican like a fake.
Although the Fed is known for its "independence" and cross-party nominations are commonplace, the recent confrontation between the two parties has been fierce, and it is inevitable that the "progressives" in the Democratic Party will talk about Powell's partisan colors. The Fed Board of Governors has been a "bridgehead" for the Republican establishment in recent decades, and Brainard, who is keen to peddle the concept of "digital currency", is the only Democrat on the board.
This time, however, Biden has rarely chosen the latter between "partisanship" and "pragmatism." Some analysts argue that Powell is steadfast in his "two fundamental missions" of "maximizing employment" and "keeping inflation stable" in choosing the former first.
This choice is shared by the U.S. market and the majority of the two parties, and biden supports it. As he put it, in this troubled autumn, it is better to choose stability than risky change. To this end, Biden even did not hesitate to "carry hard" in the case of explicit dissent from "progressives" such as Warren.
Powell, supported by a majority of key figures in both parties, was easy to approve and an important consideration option for his nomination. Powell's predecessor, the current Treasury secretary, Yellen (Democrat), bluntly said that he had proposed to Biden to "re-elect Powell", on the grounds that "an experienced and trustworthy candidate should be chosen at this time."
On January 25 this year, the U.S. Senate voted to confirm the nomination of Secretary Yellen, who is not only the first female Fed chair in the United States, but also the first female Treasury secretary. Video/ Beijing News Our video "World" column
Due to Trump's maverick behavior, the phenomenon of either-or in the US political arena in recent years has intensified. This time Biden rarely does not give the "progressive" face on the issue of the Fed chairman nomination, whether it is a systematic strategic change, or "only this time is not an example", it needs to be carefully observed.
The challenges remain
But this does not mean that Powell's second term will not be severely challenged.
For example, how the Fed "withdraws" from the special subsidies implemented during the epidemic to effectively stabilize inflation without affecting economic growth is still an imminent test. Powell has always declared that "inflation will naturally fall after the situation stabilizes such as the epidemic", and the doubtful American people will soon see whether his prediction has come true and rate him.
In addition, the "progressives" have repeatedly introduced political and even party topics such as "climate change" and "income equality" into the Fed's monetary policy level, posing an unprecedented challenge to the "independence" and "stability" that the Fed has always flaunted.
Biden can't "push and block" every time, in fact, he nominated Powell for re-election at the same time, but also promoted Brainard's position and role, which can be seen as compensation for the "progressives".
In fact, the Fed still has a number of vacancies, including a vice chairman, and if Biden continues to "compensate" in this way, the "independence" and "stability" cherished by the Fed and Powell himself may be more strongly impacted.
Beijing News special writer | Tao Short Room (Columnist)
Edit | Xu Qiuying
Proofreading | Chen Diyan