Dodd and Frank call on Biden to renominate Powell to chair the Fed

We believe the national interest will be best served by President Biden reappointing Jerome Powell to chair the Federal Reserve System.

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. Reappointing Mr. Powell will provide strong support for this essential step.

We are not predicting a diminution of the Fed’s independence. Whatever one thinks of the rule that presidents should not tell the Fed what to do, it is clear that Mr. Powell is a believer — as Donald Trump discovered to his dismay. In fact, this is very much why Powell’s explicit refutation of the economic argument against the Biden plan carries so much weight.

His denial that excessive inflation is either imminent or inevitable given current Fed policy comes from a Trump appointee (as chair, although not initially as a governor) not previously known as a liberal and/or a subscriber to the “deficits don’t matter” school. And it is wholly implausible to accuse Powell of either greasing the skids for a slide into socialism or of repudiating his intellectual integrity to advance a Democratic President’s political fortunes.

This is profoundly important in both the short and long terms.

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.

The same point applies with even greater force from a longer perspective.

We have never believed in sacrificing important values in the name of bipartisanship. In 2009-10, when right-wing Republican leadership blocked our efforts to adopt legislation to forestall future financial crises on a bipartisan basis, we adjusted to the need to build the necessary legislative support entirely from Democrats rather than weaken essential provisions. 

But where we can establish — or in this case reestablish — a consensus on fundamental principles to provide a better framework for constructive debate, without damaging compromises, we should try to do so.

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.

First, 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.

Second, we are convinced that facing a Biden-appointed vice chair for supervision, having only a one-vote majority on the board, and hedged in (pun intended) by Biden appointees to every other regulatory position, it is wholly implausible that Powell would initiate controversial deregulatory steps while he continues to focus on the economy.

Finally, as to climate change: Nothing a Fed led by a liberal Biden replacement could do on its own would be nearly as important in dealing with this issue as the substantive provisions in the legislative package that the reappointment of Powell would facilitate.

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.

Chris Dodd served as a Democratic U.S. Senator from Connecticut for a 30-year period from 1981 to 2011 and was the former chairman of the Senate Banking Committee.

Barney Frank represented Massachusetts in the U.S. House of Representatives for 16 terms (1981-2013) and was chairman of the House Financial Services Committee from 2007 to 2011.